ASX Corporate Governance Council's Principles of Good Corporate Governance and Recommendations

 

OM Holdings Limited (or “the Company”) is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve, the Company has turned to the ASX Corporate Governance Council’s second edition of its Corporate Governance Principles and Recommendations (August 2007). The ASX Listing Rules require the Company to report on the extent to which it has followed the recommendations published by the ASX Corporate Governance Council (“the Council”).

 

Where the Company’s corporate governance practices do not correlate with the practices recommended by the Council, the Company does not consider that the practices are currently appropriate for the Company due to the nature of the Company’s activities and its current operations.

 

To illustrate where the Company has addressed each of the Council’s recommendations, the following summary cross-references each recommendation with sections of the Corporate Governance Statement. Details of all of the recommendations can be found on the ASX’s website.

 

Introduction

OM Holdings Limited has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised below.

 

The following additional information about the Company's corporate governance practices is available from the Company upon request.

 

Explanations for Departures from Best Practice Recommendations

During the financial year the Company has complied with the majority of the eight Corporate Governance Principles and the corresponding Recommendations as published by the ASX Corporate Governance Council ("ASX Principles and Recommendations"), and as detailed below:

 

Role of the Board and Management

Council Principle 1: Lay solid foundations for management and oversight

Companies should establish and disclose the respective roles and responsibilities of the Board and management

Council Recommendation 1.1

Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions

 

The Company complies with this recommendation. Refer Section 1.1 of the Corporate Governance Statement.

Council Recommendation 1.2

Companies should disclose the process for evaluating the performance of senior executives

 

The Company complies with this recommendation. Refer Section 6 of the Corporate Governance Statement.

Council Recommendation 1.3

Companies should provide the information indicated in the Guide to reporting on Principle 1

 

The Company complies with this recommendation. Refer Sections 1.1 and 6 of the Corporate Governance Statement.

 

Composition of the Board

Council Principle 2: Structure the Board to add value

Companies should have a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.

Council Recommendation 2.1

A majority of the Board should be independent directors

 

The Board acknowledges that half of the Board at present is independent. Refer Section 1.2 of the Corporate Governance Statement.

 

While the Board strongly endorses the position that boards need to exercise independence of judgment, it also recognises (as does ASX Corporate Governance Council Principle 2) that the need for independence is to be balanced with the need for skills, commitment and a workable board size. The Board believes it has recruited members with the skills, experience and character to discharge its duties and that any greater emphasis on independence would be at the expense of the Board’s effectiveness.

 

The Board at present is made up of eight Directors of which five are Non-Executive Directors and include four which are independent.

 

Messrs Low, Toth and Ong are all Executive Directors whilst Messrs Raubenheimer, Tan, Wong and Teo are all Independent Non-Executive Directors within the ASX Corporate Governance Council’s guidelines. Ms Wolseley is a Non-Executive Director who is not viewed to be independent due to her shareholding position and she does provide company secretarial services to the Company.

 

In particular Mr Low is an initial founding Director of the Company and was a major force in the Company’s evolution and success and the technical, commercial and financial experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain in his position.

 

At present the Company believes that the individuals on the Board can make, and do make, quality and independent judgments in the best interests of the Company on all relevant issues. Directors having a conflict of interest in relation to a particular item of business must absent themselves from the Board Meeting before commencement of discussion on the topic.

Council Recommendation 2.2

The chairperson should be an independent director

 

The Company’s current Chairman, Mr Low is considered by the Board to not be independent in terms of the ASX Corporate Governance Council’s definition of independent director.

 

Refer Section 1.2 of the Corporate Governance Statement.

 

The Board considers that Mr Low’s position as Executive Chairman is appropriate given his world wide experience and specialised understanding of the global manganese industry. However the Board believes that Mr Low has the range of skills, knowledge, and experience necessary to effectively govern the Company and understand the economic sectors in which the Company operates. In addition, it should be noted that Mr Low is a substantial and longstanding shareholder of the Company and, as such, is able to clearly identify with the interests of shareholders as a whole.

Council Recommendation 2.3

The roles of chairperson and chief executive officer should not be exercised by the same individual

 

The Company complies with this recommendation. Refer Section 1.2 of the Corporate Governance Statement.

Council Recommendation 2.4

The Board should establish a nomination committee

 

The Board considers that the Company currently cannot justify the formation of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing Directors to enable identification or attributes required in new Directors. Where appropriate independent consultants are engaged to identify possible new candidates for the Board.

 

The Board acknowledges this does not comply with Recommendation 2.4 of the ASX Corporate Governance Guidelines. If the Company’s activities continue to increase in size, scope and nature, the appointment of a nomination committee will be reviewed by the Board and implemented if appropriate.

 

Refer Section 2.3 of the Corporate Governance Statement.

Council Recommendation 2.5

Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors

 

The Company complies with this recommendation. Refer Section 6 of the Corporate Governance Statement.

Council Recommendation 2.6

Companies should provide the information indicated in the Guide to reporting in Principle 2

 

The Company complies with this recommendation. Refer Sections 1.2, 1.4, 2, 3 and 6 of the Corporate Governance Statement.

Promote Ethical and Responsible Decision-Making

Council Principle 3: Actively promote ethical and responsible decision-making

Companies should actively promote ethical and responsible decision-making

Council Recommendation 3.1

Establish a code of conduct to guide the Directors, the chief executive officer (or equivalent), the chief financial officer (or equivalent) and any other key executives as to:

3.1.1  the practices necessary to maintain confidence in the Company’s integrity;

3.1.2  the practices necessary to take into account their legal obligations and the reasonable
          expectations of their shareholders;

3.1.3  the responsibility and accountability of individuals for reporting and investigating reports of
          unethical practices

 

The Company complies with this recommendation and has a Code of Conduct to guide the Directors and key executives. Refer Sections 1.1, 3.1 and 3.2 of the Corporate Governance Statement.

Council Recommendation 3.2

Disclose the policy concerning trading in Company securities by Directors, senior executives and employees

 

The Company complies with this recommendation. Refer Section 1.4.7 of the Corporate Governance Statement.

Council Recommendation 3.3

Companies should provide the information indicated in the Guide to reporting on Principle 3

 

The Company complies with this recommendation. Refer Sections 1.1, 3.1, 3.2 and 1.4.7 of the Corporate Governance Statement.

Integrity of Financial Reporting

Council Principle 4: Safeguard integrity in financial reporting

Companies should have a structure to independently verify and safeguard the integrity of their financial reporting

Council Recommendation 4.1

The Board should establish an audit committee

 

The Company complies with this requirement. Refer Section 2.1 of the Corporate Governance Statement.

Council Recommendation 4.2

The audit committee should be structured so that it:

 

• Consists only of non-executive directors;

• Consists of a majority of independent directors;

• Is chaired by an independent chair; who is not the chair of the Board;

• Has at least three members

 

The Company complies with this requirement. Refer Section 2.1 of the Corporate Governance Statement.

Council Recommendation 4.3

The audit committee should have a formal charter

 

The Company complies with this requirement. Refer Section 2.1 of the Corporate Governance Statement.

Council Recommendation 4.4

Companies should provide the information indicated in the Guide to reporting on Principle 4

 

The Company complies with this requirement. Refer Section 2.1 and 5.3 of the Corporate Governance Statement.

Make Timely and Balanced Disclosure

Council Principle 5: Promote timely and balanced disclosure of all material matters concerning the Company

Council Recommendation 5.1

Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

 

The Company complies with this recommendation. Refer Section 4.1 of the Corporate Governance Statement.

Council Recommendation 5.2

Companies should provide the information indicated in the Guide to reporting on Principle 5

 

The Company complies with this recommendation. Refer Section 4.1 of the Corporate Governance Statement.

Respect the Rights of Shareholders

Council Principle 6: Respect the rights of shareholders and facilitate the effective exercise of those rights

Companies should respect the rights of shareholders and facilitate the effective exercise of those rights

Council Recommendation 6.1

Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

 

The Company complies with this recommendation. Refer Section 4.2 of the Corporate Governance Statement.

Council Recommendation 6.2

Companies should provide the information indicated in the Guide to reporting on Principle 6

 

The Company complies with this recommendation. Refer Section 4.2 of the Corporate Governance Statement.

Recognise and Manage Risk

Council Principle 7: Companies should establish a sound system of risk oversight and internal control

Council Recommendation 7.1

The Company should establish policies for the oversight and management of material business risks and disclose a summary of those policies

 

The Company complies with this recommendation. Refer Section 5.1 of Corporate Governance Statement.

Council Recommendation 7.2

The Board should require management to design and implement the risk management and internal control systems to manage the Company’s material business risk and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material risks.

 

The Company complies with this recommendation. Refer Section 5.2 of Corporate Governance Statement.

Council Recommendation 7.3

The Board should disclose whether it has received assurance from the Chief Executive Officer and the Chief Financial Officer that the:

7.3.1  best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound

          system of risk management and internal compliance and control which implements the policies

          adopted by the Board;

7.3.2  the Company’s risk management and internal compliance and control system is operating

          efficiently and effectively in all material respects

 

The Company complies with this recommendation. Refer Section 5.3 of the Corporate Governance Statement.

Council Recommendation 7.4

Companies should provide the information indicated in the Guide to reporting on Principle 7

 

The Company complies with this recommendation. Refer Sections 5.1, 5.2 and 5.3 of the Corporate Governance Statement.

Remunerate Fairly and Responsibly

Council Principle 8: Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear

Council Recommendation 8.1

The Board should establish a remuneration committee

 

The Company complies with this recommendation. Refer Section 2.2 of the Corporate Governance Statement.

Council Recommendation 8.2

Clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives

 

The Company complies with this recommendation. Refer Section 2.2 of the Corporate Governance Statement.

Council Recommendation 8.3

Companies should provide the information indicated in the Guide to reporting on Principle 8

 

The Company complies with this recommendation. Refer Sections 1.4.7 and 2.2 of the Corporate Governance Statement.

Summary Statement

 
ASX P & R
If not, why not2
  
ASX P & R
If not, why not2
Recommendation 1.1
  Recommendation 4.3
 
Recommendation 1.2
  Recommendation 4.4
 
Recommendation 1.3
  Recommendation 5.1
 
Recommendation 2.1  
Recommendation 5.2
 
Recommendation 2.2  
Recommendation 6.1
 
Recommendation 2.3
  Recommendation 6.2
 
Recommendation 2.4  
Recommendation 7.1
 
Recommendation 2.5
  Recommendation 7.2
 
Recommendation 2.6
  Recommendation 7.3
 
Recommendation 3.1
  Recommendation 7.4
 
Recommendation 3.2
  Recommendation 8.1
 
Recommendation 3.3
  Recommendation 8.2
 
Recommendation 4.1
  Recommendation 8.3
 
Recommendation 4.2
       

1 Indicates where the Company has followed the Principles (“P”) & Recommendations (“R”)

2 Indicates where the Company has provided "if not, why not" disclosure and reasons have been outlined in the relevant preceding section.