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Corporate Governance at ECO2 Forests Inc. -
Principles, actions and reporting
Introduction
ECO2 Forests Corporate Governance
‘Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimized.’1At ECO2 Forests Inc., the Board’s corporate governance aims to encourage innovation and development, in order to meet the company’s objectives and to provide accountability and control systems commensurate with the risks involved. This charter is based on the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. It describes the responsibilities of ECO2 Forests’ board and senior executives:
- For ensuring that ECO2 Forests Inc. meets its objectives and purpose.
- For establishing sound financial and risk-management policies, and overseeing their implementation.
- For accounting to members (shareholders) and stakeholders for the performance and activities of the company.
Supporting Information
- ASX Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations, ASX, Sydney, 2003 Good Governance Principles, AS 8000-2003, Standards Australia International, Sydney, 2003
- OECD Principles of Corporate Governance, OECD, Paris, 2004
1 - Solid Foundations for Management and Oversight
ECO2 Forests' Board of Directors is responsible for supervising the affairs of the company. The board meets 12 times a year. It has between three and five directors, including the Chief Executive Officer. Directors are appointed for up to three years by the members and may be reappointed at the expiration of their term.
The Board has reserved some items for its collective decision-making and/or monitoring, in order to manage the direction and control of the company and to ensure that it is fully informed about key matters. Board approval is required for significant new business proposals, including major capital projects and transactions involving the acquisition or disposal of major assets.
Directors have access to the advice and services of the company secretary and may take independent professional advice, at ECO2 Forests’ expense, in connection with their duties as directors.
Directors bring independent judgement to bear on matters of strategy, performance, resources (including appointment of the chief executive officer and the company secretary) and standards of conduct. Directors are required to disclose any material interest in any matter relating to ECO2 Forests’ affairs.
When they are first appointed and before their first meeting, directors receive a package of information and a briefing on the company’s affairs and operations from the Chairman, CEO, COO or Company Secretary.
Responsibilities of the Board
The board is responsible for:
- Oversight of the company, including its control and accountability systems
- Appointing and removing the Chief Executive Officer
- Input into and final approval of management’s development of corporate strategy and performance objectives
- Reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct, and legal compliance
- Monitoring senior management’s performance and implementation of strategy, and ensuring that appropriate resources are available
- Approving and monitoring the progress of major capital expenditure and capital management
- Approving and monitoring financial and other reporting; communication with members about matters that may affect ECO2 Forests’ ability to achieve its objectives or financial targets.
Conduct of Meetings
ECO2 Forests’ By Laws document the requirements for:
- The calling and conduct of meetings
- Appointment of proxies
- Voting
- Appointment of alternate directors
- Chairing of meetings
- Written resolutions and minutes
- Keeping of accounts
- What constitutes a quorum.
Responsibilities of Senior Management
There is a clear division of responsibilities between the Board’s Chairman and the Chief Executive Officer.Reporting
This Corporate Governance Charter is to be published on the company’s external website.2 - Structuring the Board to Add Value
Independence of Directors
A director must give the board notice of any material personal interest in any matter relating to the affairs of ECO2 Forests, both at the time of appointment and at any time thereafter when such an interest may arise.A director with a material personal interest in a matter being considered at a directors’ meeting may not be present while the matter is being considered, nor vote on it, except as provided for in the Corporations Act 2001.
The Chairman is an independent director and is not an executive of the Company.
Role of the Chairman
The Board’s Chairman is responsible for leadership of the board, for the efficient organization and conduct of the board’s function, and for the briefing of all directors in relation to matters arising at board meetings. The chairman facilitates the effective contribution of all directors and promotes constructive relations between board members and between board and management.The roles of chairman and chief executive officer cannot be performed by the same person.
Corporate Governance Committee
The Corporate Governance Committee performs the functions of other companies’ Nomination Committee. Its responsibilities are to:- Assess the necessary and desirable competencies of board members
- Review board succession plans
- Evaluate the board’s performance
- Make recommendations to the members for the appointment and removal of directors.
The Corporate Governance Committee’s guidelines document its roles, responsibilities, composition, structure and membership requirements.
The Board acknowledges that the members are responsible for appointing directors (see ECO2 Forests’ By Laws). In order to assist the members on suitable candidates for appointment, the board has established a process of recommendation.
Reporting
Directors’ names, experience and expertise are published in the annual report, together with their term of office at that time.The names of members of the Corporate Governance Committee are published in the annual report, together with a record of their attendance at meetings.
3 - Promoting Ethical and Responsible Decision-Making
Code of Conduct
The Board has approved a code of conduct to guide directors and all ECO2 Forests staff on what they must do to maintain public confidence in ECO2 Forests’ integrity.The company’s Public Interest Disclosure policy sets out the responsibility and accountability of individuals at ECO2 Forests for reporting and investigating reports of unethical practices.
Reporting
ECO2 Forests code of conduct is published on the intranet. A hard copy is given to all new employees. The Public Interest Disclosure policy is also published on the intranet.4 - Safeguarding Integrity in Financial Reporting
The Board has a process for review and authorisation to ensure the truthful and factual representation of the Company’s financial position. This process includes:
- External audit
- Internal audit
- Review of the company’s annual financial statements by the Audit Committee.
Statements from Senior Executives
The Board requires the Chief Executive Officer and the Chief Financial Officer to state in writing to the Board that the Company’s annual financial reports present a true and fair view, in all material respects, of ECO2 Forests’ financial condition and operational results, and are in accordance with relevant accounting standards. This statement is called the Management Representation Letter and it is prepared annually in conjunction with the financial report.Audit Committee
The Board’s Audit Committee has at least one member who must be a non-executive director. The Chairman of the Board cannot be a member of the Audit Committee.The Audit Committee meets quarterly. Minutes of its meetings are submitted to the next available board meeting for information. Because the committee has no executive powers, matters for decision are referred to the Board. The responsibilities of the Audit Committee are documented in the Audit Committee’s Guidelines.
Reporting
The Board recognises that any system of internal control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The Audit Committee reports to the board on:- Whether ECO2 Forests ’s external reporting is consistent with committee members’ information and is adequate for members’ needs
- The committee’s assessment of management processes supporting external reporting
- The committee’s assessment of the performance and objectivity of internal auditing
- The results of its review of the systems for risk management and internal control.
5 - Making Timely and Balanced Disclosure
Procedures for Communicating with Stakeholders
ECO2 Forests is a listed company and will conform to all reporting requirements for such an entity. Where disclosure is warranted management determines whether a public announcement will be needed. The company secretary or the management delegate prepares or supervises the preparation of company announcements, to ensure that they are:- Timely
- Factual
- Complete
- Expressed clearly and objectively, allowing stakeholders to assess the consequences of the information when making decisions about their own business.
Reporting
There are no separately documented policies and procedures relating to public announcements.6 - Respecting the Rights of Shareholders
Procedures for Communication with Members
The Board has procedures for communicating with members to ensure that they have timely access to information about the company, including its financial situation, performance, governance and any sensitive matters that the members should be made aware of.Communication with members includes:
- Ad hoc verbal reports to the members’ offices by the Company Secretary
- Quarterly briefings by the Board’s Chairman, the Chief Executive Officer and the Company Secretary
- Half-year reports
- Annual reports
- Annual business plans
- Annual general meetings.
Reporting
See ‘Procedures for communication with members’, above.- Annual business plans
- ECO2 Forests ’s By Laws
7 - Recognizing and Managing Risk
Audit Committee
The Audit Committee plays a major role in management of risk and internal controls. It oversees:- The risk management system
- Preparation of the biennial risk review and its continuous monitoring (this review includes ECO2 Forests’ risk profile)
- Appointment of the internal auditors
- Preparation of the three-year Strategic Internal Audit Plan
- Preparation of the annual Internal Audit Plan
- Internal audits undertaken in accordance with the three-year Strategic Internal Audit Plan and the annual Internal Audit Plan
- Compliance and control systems.
The three-year Strategic Internal Audit Plan and the annual Internal Audit Plan direct the activities of the internal auditors in checking compliance with ECO2 Forests’ risk management policy and compliance and control system. Internal auditors report to the Audit Committee on completion of all internal audits conducted in the quarter.
Statements from Senior Executives
The statement given in the Management Representation Letter (referred to in section 4, Integrity in financial reporting) is based on a sound system of risk management and internal compliance and control, and one that implements the policies of the board and the Audit Committee.Reporting
The Biennial Risk Review, the three-year Strategic Internal Audit Plan and the annual Internal Audit Plan are all submitted to the Audit Committee for review and then to the Board for approval.Reports from the internal auditors are submitted to the Audit Committee for review. Information from these reports is used in a program of continuous improvement to update internal risk management and compliance and control systems.
Minutes of the Audit Committee are included on subsequent Board agenda.
8 - Encouraging Enhanced Performance
Performance Evaluation
The Corporate Governance Committee annually evaluates the performance of the board and the chief executive officer.Procedure for Induction
The company secretary has a documented procedure for preparing an induction package for new directors. The package and personal briefing covers:- ECO2 Forests’ financial, strategic, operational and risk management position
- Directors’ rights, duties and responsibilities
- The role of the board’s committees
- An inspection of examples of the company’s assets.
Continuing Education
For directors and key executives continuing education is vital. Opportunities for education about key developments in the company and in the industry are made available (though necessarily on an ad hoc basis).The Board has a policy of supporting continuing professional education (CPE) for directors.
Access to Information
The board is provided with extensive information before monthly meetings and further briefed by the CEO or other appropriate executives at meetings. A documented procedure itemizes the information that is to be prepared, the format for its presentation and the schedule for its dispatch to directors. Directors can and do ask for additional information to be provided, when necessary.Directors are entitled, in consultation with the chairman, to take independent professional advice at the company’s expense.
Company Secretary
All directors have access to the Company Secretary for information.The Company Secretary plays an important role in supporting the board, ensuring that board policy and procedures are followed, and coordinating the completion and dispatch of meeting agendas and briefing materials.
The company secretary is accountable to the Board, through the Chairman, on all governance matters.
The Company Secretary’s appointment or removal is confirmed by a board decision.
Reporting
The Corporate Governance Committee prepares an annual ‘evaluation of performance’ report for the board.9 - Recognizing the Legitimate Interests of Stakeholders
Conduct
As mentioned in section 3, the Board has approved a code of conduct for directors and staff. These are published on ECO2 Forests’ intranet site. Responsibilities to clients, customers and consumers are included in the code of conduct and the Public Interest Disclosure procedures.ECO2 Forests has several policies relating to employment practices (including health and safety and remuneration), and to environmental protection, which are published on the intranet.
ECO Forests Inc. can help answer any questions that you may have. With any investment, you should contact your personal financial advisor for advice. To have any other questions about the projects that ECO2 Forests Inc. is working on, please Contact Us.
1 ASX Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations, ASX, Sydney, 2003, p. 3.
