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The Board of Highlands Pacific is fully committed to the principle of best practice in corporate governance. The Company can ensure transparency and fair dealings with all stakeholders. Highlands takes an integrated approach to corporate governance to comply with the regulatory obligations associated with the two principal stock exchange listings in PNG and Australia.
In compiling this report the directors have referred to the Australian Securities Exchange (ASX) Corporate Governance Council’s “Corporate Governance Principles and Recommendations”, 3rd edition.
The Highlands Pacific Board has adopted the principles and recommendations and complies with them all except as identified below.
A summary of the following Highlands’ Corporate Governance policies can be obtained from the Company’s website:
Board Of Directors
Role & Responsibility of the Board
The Board has a formal Board Charter which sets out the responsibilities, structure and composition of the Board. It provides that the Board's broad function is to:
The Board has delegated to management the responsibility for implementing corporate strategies and managing the day-to-day operations of the Company in accordance with the guidelines set down by the Board.
Composition of the Board
The Board is to be constituted with a majority of Non-Executive Directors, including a Chairman who is independent.
The Company’s constitution provides that the number of Directors from time to time shall be the number determined by the Board, being a number not less than three, nor more than nine.
The Board should comprise Directors with an appropriate range of skills, experience and qualifications to enable it to perform its role to a high standard.
The table below details the balance achieved with the current Board composition in terms of skills required for the Company.
The Board currently comprises five Directors including four independent Non-Executive Directors and the Managing Director. The Board’s intention is to maintain a blend of qualifications, skills and experience of Directors, appropriate for the size and activities of the Company. The Chairman is a Non-Executive and independent member of the Board.
Each Director has the right to request Company assistance with any special professional development opportunities which that Director thinks would be of assistance in undertaking his or her duties as a Director of the Company. The Chairman has also arranged for all Directors to be included on the invitation list for Corporate Governance workshops periodically conducted by a law form and an accounting firm.
The Company’s constitution requires one-third of the Directors (rounded up to a whole number) to retire by rotation at each Annual General Meeting and no Director may be in office for more than three years without standing for re-election. Also a Director appointed during the year must stand for re-election at the next Annual General Meeting. Retiring Directors may offer themselves for re-election.
It is a policy of the Company that any Director over 72 years of age submits him or herself for re-election by the shareholders at each Annual General Meeting. Subject to maintaining the continuity of Board experience, a Non-Executive Director may not serve for more than 12 years.
The Nomination Committee is responsible for reviewing the Board’s membership and oversees the nomination of new Directors.
It is the view of the Board that the role of the Chairman and the Managing Director should be separate. The Managing Director is responsible for implementing corporate strategies and policies.
Independence of Directors
The Board recognise all Directors must act in the best interests of the Company and its shareholders as whole.
Directors of the Board are considered to be independent if:
Directors' access to professional advice
All Directors have the right to seek independent professional advice in regard to their duties. The Company will bear the expense of such advice, subject to the approval of the Chairman, which will not be unreasonably withheld. Any advice received by a Director is shared by all Directors.
The Board operates through a number of sub committees in addition to those committees set up specifically to oversee special matters or transactions.
The Board, as part of its program to achieve and maintain high standards of corporate governance, has established an Audit Committee to ensure the maintenance of an effective and efficient audit program and the effectiveness and reliability of the Company’s internal control and financial risk management system.
The Audit Committee is to comprise of at least three members with the majority of members being independent Non-Executive Directors. The Chair of the Audit Committee must be an independent Non-Executive Director and not Chair of the Board.
The role of the Audit Committee is documented in a charter approved by the Board and covers the following:
Current members of the Audit Committee are Mr M Carroll (Chairman - FCPA, MAICD); Mr B Philemon; and Mr D Wood (AO, BSc (Hons), MSc); all of whom are independent Non-Executive Directors. There were six meetings held during the 2015 year and all members attended meetings they were eligible to attend.
The purpose of the Remuneration Committee is documented in a charter approved by the Board and covers the following:
The Remuneration Committee is to comprise of at least three members with the majority of members being independent Non-Executive Directors. The Chair of the Remuneration Committee must be an independent Non-Executive Director and can be the Chair of the Board.
The Remuneration Committee meets once a year or more frequently if required in special circumstances. The Committee may obtain advice from external consultants regarding the appropriate level of remuneration for the senior executives and Non-Executive Directors.
An assessment of the performance of management in conjunction with the Managing Director did take place during the reporting year in accordance with the process detailed above.
Current members of the Remuneration Committee are Mr K MacDonald (Chairman), Mr D Wood and Mr M Carroll. There were three meetings held during the 2015 year and all members attended meetings they were eligible to attend.
The Directors’ Report to Shareholders details the structure of fees and payments to Non-Executive Directors and the Managing Director while the audited accounts further detail specific payments made during the year. The Non-Executive Directors are not entitled to any schemes for retirement benefits other than superannuation.
The role of the Nomination Committee is documented in a charter approved by the Board and covers the following:
The Nomination Committee normally meets once a year or more frequently if required in special circumstances. The Committee may obtain advice from external consultants if required.
Current members of the Nomination Committee are Mr K MacDonald (Chairman), Mr M Carroll and Mr J Gooding. There was one meeting held during the 2015 year and all members attended meetings they were eligible to attend.
Details of the nomination, selection and appointment processes are available on the Company website.
PNG Issues Committee
The committee meets on an adhoc basis to advise the Board on PNG issues. Members of the PNG Issues Committee are Mr J Gooding (Chairman) and Mr B Philemon.
Risk Oversight and Management
The effective identification of potential risks and the management of those risks is an important priority for the Board and management of Highlands Pacific. The Board recognises that as part of its commitment to good corporate governance, it is responsible for overseeing the establishment and implementation by management of the Group’s risk management system.
To effectively manage risk, Highlands has implemented a structured risk management framework that communicates its commitment to risk management, identify, assess and manage all forms of risk, and to train its people in the methods of risk management.
Fundamentally there are two important principles in risk management that are upheld within Highlands. These are:
The risk management system will require the completion of a risk register for corporate and other appropriate areas which is reviewed annually in full, in particular when significant changes and events occur, or new projects are undertaken and reported to the Board.
The Board, through the Audit Committee, is responsible for ensuring that there are adequate policies and procedures in place in relation to risk management, compliance and internal controls.
The Board does not consider the Company of sufficient size to warrant a dedicated internal audit function.
The Company, as a mineral exploration, development and production company faces inherent risks in its activities, including economic, environmental and social sustainability risks which may have a material impact on the business and the Company’s ability to create value for its shareholders. These risks are identified and managed through the process detailed above.
In accordance with ASX principles and recommendations, the Managing Director and the Chief Financial Officer are required to state that the integrity of the financial statements contained within this report is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board.
They are further required to state that the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all material aspects.
The Board can confirm that the above has been received from management, being the Managing Director and the Chief Financial Officer.
Code of Conduct
It is Company policy that the Directors, management and employees conduct their activities with honesty, integrity and high ethical standards.
A Code of Conduct is issued to all Directors and management, with a copy of the code being made available to employees as part of their induction to the Company.
The Code provides guidelines for the standards of behaviour required in relation to the following:
Dealing in the Company's Securities
Whilst Highlands Pacific encourages ownership of the Company by Directors, management and employees as a means of aligning their interest with shareholders' interest, detailed rules are in place regulating their ability to deal in the Company's securities.
The Company's policy stipulates that Directors, management and employees, including associates, must not deal in the Company's securities during a prohibited period. A prohibited period means any closed period:
Before trading, or giving instructions for trading in the Company's securities, a Director must:
Where the Chairman intends to trade in the Company’s securities, the Chairman must notify and obtain clearance in the abovementioned manner from at least one other Director and the Managing Director before trading, or giving instructions to trade.
In the case of any officer or employee, the person must notify and obtain clearance from the Managing Director before trading, or giving instructions for trading.
The Company recognises the policy is only a guideline and insider trading provisions of the Australian Corporations Act and PNG Securities Act must also be observed.
A copy of the Code and the trading policy are available on the Company website.
Disclosure and Shareholder Communication
The Board seeks to provide timely and relevant information to its shareholders and the broader investment community in line with its continuous disclosure obligations under the ASX and POMSoX listing rules.
Communication to shareholders can take the form of specific announcements, quarterly reports, or half-yearly and annual reports. All releases are posted on the Company’s website immediately after they are released to the ASX and POMSoX.
The Annual General Meeting also allows the Company to communicate with shareholders and all shareholders are encouraged to attend the meeting. The Company’s auditors are invited to attend and make themselves available for questions on matters relating to the Company and its performance.
Diversity and Inclusion Policy
The Company strives to create an inclusive culture in which differences are recognised and valued. By bringing together men and women from diverse backgrounds and giving each person the opportunity to contribute their skills, experience and perspectives, we believe that we are able to deliver the best solutions to challenges and deliver sustainable value for the Company and its stakeholders.
Diversity and inclusion for HPL means:
We believe that being a diverse and inclusive organisation improves outcomes and will help the Company to achieve its vision to create shareholder wealth through exploration, development and operation of its resource projects. The benefits include:
Our commitment to diversity and inclusion aligns with our values of accountability, respect, teamwork and integrity. Diversity and inclusion are supported at the highest levels in the Company, by the Board. The Board has established this policy and, together with other key management personnel, guides the development of diversity and inclusion strategy and reviews progress against measurable objectives and key programmes of work. The implementation of these objectives is overseen by the Company’s Board through the Managing Director and Chairman.
The Board has not yet set any measurable statistics in relation to diversity, having regard to the small number of its permanent employees at this stage in the Company’s development. Nevertheless, it is the Company’s policy to employ PNG Nationals wherever possible, and to promote and give opportunities to women.
As at the date of the 2015 Annual Report the following diversity statistics include: