CORPORATE GOVERNANCE STATEMENT
Recent external events have changed the way in which corporate governance responsibilities are viewed and in March 2003 the ASX Corporate Governance Council released its ‘Principles of Good Corporate Governance and Best Practice Recommendations’. The principles of corporate governance have been developed, supported by best practice and implementation recommendations. The Council has recognised that these principals and recommendations do not contain a “one size fits all” solution and that it will be necessary for companies to adopt a “fit for purpose” solution in the adoption of these practices.
The ASX Listing Rules require listed entities to disclose the extent to which they have followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period. This corporate governance statement summarises the corporate governance practices that have been formally reviewed and adopted by the Board with a view to ensuring continued investor confidence in the operations of the Company and is endorsing the corporate governance principles relevant to a Company of Jupiter’s nature and size. A table has been included at the end of this statement detailing the Company’s compliance with the best practice recommendations.
BOARD OF DIRECTORS
Role of the Board (1.1)
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.
Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following:
• To set the strategic direction for the Company and monitor progress of those strategies;
• Establish policies appropriate for the Company;
• Monitor the performance of the Company, the Board and management;
• Approve the business plan and work programmes and budgets;
• Authorise and monitor investment and strategic commitments;
• Review and ratify systems for health, safety and environmental management; risk and internal control; codes of conduct and regulatory compliance;
• Report to shareholders, including but not limited to, the Financial Statements of the Company; and
• Take responsibility for corporate governance.
Composition of the Board
To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations.
The names of Directors of the Company in office at the date of this statement are set out in the Directors’ Report. Information regarding Directors’ experience and responsibilities will be included in the Directors’ Report section of the Annual Report (2.5).
The number of Directors is specified in the Constitution of the Company as a minimum of three up to a maximum of ten.
The preferred skills and experiences for a Director of the Company include:
• Exploration and Development;
• Production operations;
• Business Development; and
• Public Company administration.
Chairman of the Board
The Chairman of the Board should be a Non-Executive Director and the Chairman will be elected by the Directors. The Board considers that the Chairman, Mr Geoff Gander is not independent (2.2/2.3).
Independent Directors (2.1)
The Board considers that a Director is independent if that Director complies with the following criteria:
• Apart from Director’s fees and shareholding, independent Directors should not have any business dealings which could materially affect their independent judgment;
• Must not have been in an Executive capacity in the Company in the last 3 years;
• Must not have been in an advisory capacity to the Company in the last 3 years;
• Must not be a significant customer or supplier for the Company;
• Must not be appointed through a special relationship with a board member;
• Must not owe allegiance to a particular group of shareholders which gives rise to a potential conflict of interest;
• Must not hold conflicting cross Directorships; and
• Must not be a substantial shareholder or a nominee of a substantial shareholder (as defined under section 9 of the Corporations Act).
Using the ASX Best Practice Recommendations on the assessment of the independence of Directors. The Board considers that of a total of three Directors there are two Directors, Mr Geoff Gander and Mr David Quinlivan are considered to be independent.
Mr Eddie Smith is a Non-Executive Chairman of the Company and is not considered to be independent. However, his experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board.
Retirement and Rotation of Directors
Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the Company. Each year one third Directors must retire and offer themselves for re-election. Any casual vacancy filled will be subject to shareholder vote at the next Annual General Meeting of the Company.
Independent Professional Advice (2.5)
Each Director has the right to seek independent professional advice at the Company’s expense after consultation with the Chairman. Once received the advice is to be made immediately available to all board members.
Access to Employees
Directors have the right of access to any employee. Any employee shall report any breach of corporate governance principles or Company policies to the Executive Director and/or Company Secretary/Financial Controller who shall remedy the breach. If the breach is not rectified to the satisfaction of the employee, they shall have the right to report any breach to an independent Director without further reference to senior managers of the Company.
Directors and Officers Liability Insurance
Directors and officers insurance for Directors will be arranged by the Company at Company expense with a 1% contribution from each Director.
Share Ownership
Directors are encouraged to own Company shares.
Board Meetings
The following points identify the frequency of Board Meetings and the extent of reporting from management at the meetings:
• A minimum of four meetings are to be held per year;
• Other meetings will be held as required, meetings can be held by telephone link; and
• Information provided to the Board includes all material information on: operations, budgets, cash flows, funding requirements, shareholder movements, broker activity in the Company’s securities, assets and liabilities, disposals, financial accounts, external audits, internal controls, risk assessment, new venture proposals, and health, safety and environmental reports.
The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company during the financial year are set out in the Directors’ Report.
Board Performance Review (8.1)
It is the policy of the Board to conduct an evaluation of its performance. The evaluation process was introduced via the Board Charter and will be implemented for the year ended 30 June 2008. The objective of this evaluation will be to provide best practice governance of the Company.
Other Areas for Board Review
• Reporting to shareholders and the market to ensure trade in the Company’s securities takes place in an efficient, competitive and informed market; and
• Insurance, both corporate and joint venture related insurances.
Board Committees
Audit Committee (4.2)
The Company does not have an audit committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an audit committee can be adequately handled by the full Board.
The Executive Chairman and the Company Secretary/Financial Controller declare in writing to the Board that the Company’s financial statements for the year ended 30 June 2005 present a true and fair view, in all material aspects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. This representation is made by the Executive Chairman and the Company Secretary/Financial Controller prior to the Director’s approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management (4.1).
Nomination Committee (2.4)
The Board of Directors of the Company does not have a nomination committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a nomination committee can be adequately handled by the full Board.
Remuneration Committee (8.1) (9.2) (9.5)
The Company does not have a remuneration committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a remuneration committee can be adequately handled by the full Board.
Remuneration levels for Directors, Secretaries, Senior Executives of the Company, and relevant group Executives of the consolidated entity (“the Directors and Senior Executives”) are competitively set to attract and retain appropriately qualified and experienced Directors and Senior Executives.
The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The remuneration structures take into account:
• the capability and experience of the directors and senior executives
• the Directors and Senior Executives ability to control the relevant segment/s’ performance
• the consolidated entity’s performance including:
o the consolidated entity’s earnings
o the growth in share price and returns on shareholder wealth
• the amount of incentives within each Directors and Senior Executives remuneration
For details of remuneration paid to Directors and officers for the financial year please refer to the Directors’ Report and Note 19 to the Financial Statements.
Risk Management (7.1)
The risks involved in an oil and gas exploration Company and the specific uncertainties for the Company continue to be regularly monitored and the full Board of the Company meets on an annual basis to formally review such risks. All proposals reviewed by the Board include a consideration of the issues and risks of the proposal.
The potential exposures with running the Company have been managed by the Board and Company Secretary/Financial Controller who have significant broad-ranging industry experience, work together as a team and regularly share information on current activities.
Additionally, it is the responsibility of the Board to assess the adequacy of the Company’s internal control systems and that its financial affairs comply with applicable laws and regulations and professional practices. The Non-Executive Chairman and the Company Secretary/Financial Controller declare in writing to the Board that the financial reporting risk management and associated compliance controls have been assessed and found to be operating efficiently and effectively. This representation is made by the Executive Chairman and Company Secretary/Financial Controller prior to the Director’s approval of the release of the annual and six monthly accounts. This representation is made after enquiry of, and representation by, appropriate levels of management (4.1) (7.2).
PROMOTION OF ETHICAL AND RESPONSIBLE DECISION-MAKING
Code of Conduct (10.1)
The goal of establishing the Company as a significant Australian-based petroleum exploration and production Company is underpinned by its core values of honesty, integrity, common sense and respect for people. The Company desires to remain a good corporate citizen and appropriately balance, protect and preserve all stakeholders’ interests.
The Board has adopted a Code of Conduct for Directors and employees of the Company. The Company’s goal of achieving above average wealth creation for our shareholders should be enhanced by complying with this code of conduct which provides principles to which Directors and employees should be familiar and to which they are expected to adhere and advocate (3.1).
It is the responsibility of the Board to ensure the Company’s performance under this Code and for its regular review.
Trading in Company Securities by Directors, officers and employees
Trading of shares is covered by, amongst other things, the Corporations Act and the ASX Listing Rules. The Board has established a Securities Trading Policy that establishes strict guidelines as to when a Director, officer or an employee can deal in Company shares. The policy prohibits trading in the Company’s securities whilst the Directors, officer or employee is in the possession of price sensitive information.
For details of shares held by Directors and officers please refer to the Directors’ Report and Note 19 to the Financial Statements (3.2).
SHAREHOLDER COMMUNICATION
The Board aims to ensure that shareholders and investors have equal access to the Company’s information.
The Company has policies and procedures that are designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. This disclosure policy includes processes for the identification of matters that may have material effect on the price of the Company’s securities, notifying them to the ASX and posting them on the Company’s website (5.1).
The Company also has a strategy to promote effective communication with shareholders (6.1) and encourage effective participation at general meetings through a policy of open disclosure to shareholders, regulatory authorities and the broader community of all material information with respect to the Company’s affairs including, but not limited to:
• Conflicts of interest and related party transactions;
• Executive remuneration;
• The grant of options and details of Share Option Plans;
• The process for performance evaluation of the Board, its committees, individual Directors and key managers;
• The link between remuneration paid to Directors and Executives and corporate performance; and
• Shorter, more comprehensible notices of meetings.
The following information is communicated to shareholders:
• The Annual Report and notices of meetings of shareholders;
• Quarterly reports reviewing the operations, activities and financial position of the Company;
• All documents that are released to the ASX are made available on the Company’s website; and
• All other information on the Company’s website is updated on an ongoing basis.
ASX BEST PRACTICE RECOMMENDATIONS
The table below identifies the ASX Best Practice Recommendations and whether or not the Company has complied with the recommendations during the reporting period:
Complied Note
1.1 Formalise and disclose the functions reserved to the Board and those delegated to management.
X
2.1 A majority of the Board should be independent Directors.
X
2.2 The Chairperson should be an independent Director.
1
2.3 The roles of Chairperson and Chief Executive Officer should not be exercised by the same individual.
1
2.4 The Board should establish a Nomination Committee.
2
2.5 Provide the information indicated in Guide to Reporting on Principle 2.
X
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.
3.2.1 the responsibility of and accountability of individuals for
reporting and investigating of unethical practices.
X
3.2 Disclose the policy concerning trading in Company securities by Directors, officers and employees.
X
3.3 Provide information indicated in Guide to reporting on Principle 3.
X
4.1 Require the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) to state in writing to the board that Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.
X
4.2 The Board should establish an Audit Committee.
3
4.3 Structure the Audit Committee so that it consists of:
- Only Non-Executive Directors;
- A majority of independent Directors;
- An independent Chairperson, who is not Chairperson of the Board; and
- At least three members. 3
4.4 The Audit Committee should have a formal charter.
3
4.5 Provide the information indicated in Guide to reporting on Principle 4.
X
5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for the compliance.
X
5.2 Provide the information indicated in Guide to reporting on Principle 5.
X
6.1 Design and disclose a communication strategy to promote effective communication with shareholders and encourage effective participation at general meetings.
X
6.2 Request the external auditor to attend the Annual General Meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditors’ Report.
X
7.1 The Board or appropriate Board Committee should establish policies on risk oversight and management.
X
7.2 The Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) should state to the Board in writing that:
7.2.1 the statement given in accordance with the best practice recommendation 4.1 (the integrity of financial statements) is founded on a system of risk management and internal compliance and control which implements the policies adopted by the board.
7.2.2 the Company’s risk management and internal compliance and control system is operating efficiently in all material respects.
X
7.3 Provide the information indicated in Guide to reporting on Principle 7.
X
8.1 Disclose the process for performance evaluation of the board, its committees and individual Directors, and key Executives and corporate performance.
4
9.1 Provide disclosure in relation to the Company’s remuneration policies to enable investors to understand
(i) The costs and benefits of these policies; and
(ii) The link between remuneration paid to Directors and key
Executives and corporate performance.
X
9.2 The Board should establish a Remuneration Committee.
5
9.3 Clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executives.
X
9.4 Ensure that payment of equity-based Executive remuneration is made in accordance with thresholds set in plans approved by shareholders.
6
9.5 Provide the information indicated in Guide to reporting on Principle 9.
X
10.1 Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders.
X
Note 1: The Company does not have a Chief Executive Officer. Whilst not independent, Mr Eddie Smith is the Non-Executive Chairman of the Board. Given his skills, experience and knowledge of the Company, the Board considers that it is appropriate for him to be Chairman.
Note 2: The Board of Directors of the Company does not have a Nomination Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a Nomination Committee can be adequately handled by the full Board.
Note 3: The Company does not have an Audit Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by an Audit Committee can be adequately handled by the full Board.
Note 4: It is the policy of the Board to evaluate its performance. The evaluation process was introduced via the Board Charter and will be implemented for the year ended 30 June 2006. The objective of this evaluation will be to provide best practice governance to the Company.
Note 5: The Company does not have a Remuneration Committee. The Board is of the opinion that due to the nature and size of the Company, the functions performed by a Remuneration Committee can be adequately handled by the full Board.
Note 6: The Company does not have any equity-based payments to Executives.