Corporate Governance
Greenearth Energy Ltd. corporate governance principles and policies are structured with reference to the Corporate Governance Council's best practice recommendations as outlined in the revised ASX Corporate Governance Principles and Recommendation issued in August 2007.
Principle 1 – Lay Solid Foundations for Management and Oversight.
Recommendation 1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions
The Greenearth Energy Ltd. board retains responsibility for the following items:
- Setting and monitoring objectives, goals and strategic direction for management with a view to maximising shareholder wealth
- Approving an annual budget and the monitoring of financial performance
- Ensuring adequate internal controls exist and are appropriately monitored for compliance
- Ensuring significant business risks are identified and appropriately managed
- Approving acquisitions
- Ensuring compliance with statutory requirements
- Selecting and appointing new Directors
- Maintaining the highest business standards and ethical behaviour
The board has delegated authority within the following areas to the Executive team:
- Monitoring performance of the business
- Ensuring that the business processes in relation to risk management and assurance are met
- Approving capital expenditure (except acquisitions) within delegated authority levels.
Recommendation 1.2 Companies should disclose the process for evaluating the performance of senior executives
Executives, who have distinct responsibilities have within their employment contract, provision for the establishment of Key Performer Indicators (KPIs). Evaluation will occur against these KPIs and is performed annually.
Principle 2 – Structure of the Board to add Value
Recommendation 2.1 The majority of the board should be independent directors
The Board of Greenearth Energy Ltd. comprises of four non-executive directors and one executive director. The non-executive directors are considered independent by the Board under the definitions provided in the Council's recommendations, thus satisfying this recommendation.
Recommendation 2.2 The chair should be an independent director
The chairman of the Board of Directors is Mr Simon R Molesworth. He is considered to be an independent under the Council's definition.
Recommendation 2.3 The roles of the chairperson and chief executive officer should not be exercised by the same individual
Mr Simon R Molesworth performs the role of chairperson, while Mr Robert L King carried out the role of Chief Executive Officer (CEO) during the financial year. This recommendation is satisfied.
Recommendation 2.4 The board should establish a nomination committee
Due to the limited size of the board, Greenearth Energy has not complied with this recommendation. This role is retained by the full board.
Principle 3 – Promote Ethical and Responsible Decision Making
Recommendation 3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:
- The practices necessary to maintain confidence in the company's integrity
- The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
- The responsibility and accountability of individuals for reporting and investigating reports of unethical practice
Directors, management and staff are expected to act ethically and responsibly and in accordance with the company's Code of Conduct. All Board members are qualified professionals within their respective industries and accordingly conduct themselves in a professional and ethical manner in both their normal commercial activities and the discharge of their responsibilities as directors. Whenever necessary, individual members of the Board may seek independent professional advice at the expense of the Company in relation to fulfilling their duties as directors. Additionally, terms and conditions of employment provide detailed instructions as to the acceptable standards of behaviour. A copy of the code of conduct policy can be viewed at the companies' website.
Recommendation 3.2 Companies should establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary of that policy
The Company has a policy concerning trading in the Company's securities by Directors, management and staff. Trading in the Company's shares by Directors, Executives and Staff of the Company should only occur in circumstances where the market is considered to be fully informed of the Company's activities. This policy requires that Directors, Executives and Staff discuss their intention to trade in the Company's shares with the Executive Chairman of the Company prior to trading. The Board recognises that it is the individual responsibility of each Director and employee to carry this policy through. Pursuant to the ASX Listing Rule 3.19B agreements that the company has in place with each director, if there is a change in the direct or indirect share holding of a director, they are required to notify the Company Secretary so that the appropriate disclosures can be made to the ASX. A copy of the securities trading policy can be viewed at the companies' website. Principle 4 – Safeguard Integrity of Financial Reporting
Recommendation 4.1 The board should establish an audit committee
The Audit Committee was established in September 2007. The company listed in February 2008. The primary objective of the Audit Committee is to assist the Board in fulfilling the Board's responsibilities relating to accounting and reporting practices of the Company and its controlled entities. The main functions of the Audit Committee are:
- To act as a committee of the Board of Directors in discharging the Board's responsibilities as they relate to financial reporting policies and practices, accounting policies and management and internal controls
- To provide through meetings a forum for communication between the Board, senior financial management and external auditors
The responsibilities of the Audit Committee include monitoring compliance with requirements of the Corporations Act 2001, Stock Exchange Listing Rules, Australian Securities Commission, taxation legislation and other laws as they apply to the subject matter of the Audit Committee's functions
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 Audit Committee comprises of Mr Robert J Annells (Chairman), Mr Simon R Molesworth and Mr John Kopcheff. All three directors are considered to be independent. The Company secretary acts as the Committee secretary assisting members. The Company's external auditors are invited to attend the Committee's meetings. In addition, the Committee is able to seek and obtain input from external consultants as required.
Recommendation 4.3 The audit Committee should have a formal operating charter
The Audit Committee Charter was adopted in September 2007. A copy of the Charter is publicly available on request.
Principle 5 – Make Timely and Balanced Disclosure
Recommendation 5.1 Companies should establish written policies and procedures designed to ensure compliance with ASX listing rule disclosure requirements and to ensure accountability at senior management level for that compliance and disclose those policies or a summary of those policies.
The Board adopted a Disclosure policy in September 2007. Greenearth Energy Ltd recognises that it has a legal and moral obligation to immediately disclose to the market any information that a reasonable person would expect to have a material effect on the price or value of the Company's securities. The directors and senior management personnel of Greenearth Energy acknowledge that they each have an obligation to identify and immediately disclose information that may be regarded as material to the price or value of the Company's securities. The Chairman and Chief Executive Officer is authorised to make statements and representations on Greenearth Energy Ltd's behalf. The Company Secretary is responsible for overseeing and coordinating the disclosure of information to the ASX, analysts, stockbrokers, shareholders, the media and the public. The Directors and senior management personnel must ensure that the Company Secretary is aware of all information to be presented at briefings with analysts, stockbrokers, the media and the public. Prior to being presented, information that has not already been the subject of disclosure to the market and is not generally available to the market must be the subject of disclosure to the ASX. Only when confirmation of receipt of the disclosure and release to the market by the ASX is received may the information be presented. Such subject material will also be placed on the company's website. If information that would otherwise be disclosed comprises matters of supposition or is insufficiently definite to warrant disclosure, or if the effect of a disclosure on the value or price of the Company's securities is unknown, Greenearth Energy Ltd may request that the ASX grant a trading halt or suspend its securities from quotation. Management of Greenearth Energy Ltd. may consult the Company's external professional advisers and the ASX in relation to whether a trading halt or suspension is required.
Principle 6 – Respect the Rights of Shareholders
Recommendation 6.1 Companies should design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings and disclose their policy or a summary of that policy.
Planned communications to shareholders are:
- The annual report is printed and distributed to shareholders free of charge to all shareholders. An electronic company is also placed on the company's website. The board ensures that the annual report includes relevant information about the operation of the company during the year, changes in the state of affairs of the Company and details of future development, in addition to the other disclosures required by the Corporations Act
- The half-year report contains summarised financial information and a review of operations of the Company during the period. The half-year financial report is prepared in accordance with the requirements of Accounting standards and the Corporations Act and is lodged with the ASX
- The Company's internet website (www.greenearthenergy.com.au) is regularly updated and provides details of all announcements by the Company to the ASX, annual reports and general information on the company and its business
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company's strategy and goals. The company invites its external auditors to attend the meeting for the purpose of answering shareholders questions.
Principle 7 – Recognise and Manage Risk
Recommendation 7.1 Companies should establish policies for the oversight and management of material business risk and disclose a summary of those policies
The Board has responsibility for managing risk and internal control and acknowledges that risk management is a core principle of sound Corporate Governance. The financial viability, reputation and future of the company are materially dependent on the manner in which risk is managed. The Board's strategy covers the areas of Financial Risk, Operational Risk, Insurance and Internal Control. The company has not appointed a Risk Management Committee due to the importance the Board places on risk mitigation. In addition, the small size of the Board makes it appropriate for the full board to manage this area.
Financial Risk The Board receives regular financial reports which measure performance and trends against budget. The reports are discussed at Board Meetings and the Chief Financial Officer answers questions posed by the Directors. Any variations from budget are highlighted, explained and evaluated. This scrutiny is appropriate to a company of the size of Greenearth Energy Ltd. In addition to monthly financial reporting, the company has in place policies to manage credit, foreign exchange and other business risks. Non-executive Directors meets at appropriate times with the external auditor in order to fulfil its Charter.
Operational Reporting Projects are approved only after extensive review by a highly qualified technical staff, and consultants and by submissions to the Board through the Chief Executive Officer. The operations of the company consist of a search for geothermal resources and projects are only considered after a review and evaluation of all technical data on record. Outside consultants are engaged as required to enhance the chances of success. Environmental considerations are factors in the consideration of every new project and are fully evaluated and reported before approval by the Board.
Insurance The Board recognises the value of insurance as a risk mitigation strategy and works with a leading insurance broker to ensure that appropriate insurance cover is in place at all times. Contacts with contractors are drawn up or reviewed by solicitors prior to the company entering into any commitment.
Internal Control In a small company, an extensive internal control system is not possible; however there is a natural control as a consequence of being small. The Board works very closely with the staff and, because the transactional volume is small, the Directors have a detailed knowledge of the working of the company. The Directors believe the system of internal control is appropriate to the size of the company and to its level of potential risk.
Recommendation 7.2 The board should require management to design and implement the risk management and internal control system to manage the company's management and internal control system to manage the company's material business risks 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 it material business risks.
The Board works very closely with the staff and, because the company and its transactional volume is small, the Directors have a detailed knowledge of the workings of the company. It is through the informal and formal (via scheduled board meetings) communications of all areas of the business, that the board is reported to the risks of the business and how effectively they are being managed.
Recommendation 7.3 The board should disclose whether it has received assurance from the Chief Executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to financial reporting risks.
This recommendation was compiled with for this financial year.
Principle 8 – Remunerate Fairly and Responsibly
Recommendation 8.1 The board should establish a remuneration committee
Due to the limited size of the board, Greenearth Energy Ltd. has not complied with this recommendation. This role is conducted by the full board.
Recommendation 8.2 Companies should clearly distinguish the structure of non-executive directors' remuneration from that of executive directors and senior executives.
Non-executive directors are remunerated for their services from the maximum aggregated amount approved by shareholders for that purpose. Their compensation is reviewed by the Board. There are no termination benefits for non-executive directors appointed since listing.
The executive director and senior executives are employed under a contract detailing their remuneration, service period and non-competition clauses. They may be entitled to termination benefits as stipulated in their employment contracts and in accordance with relevant state laws governing long service leave and superannuation. Generally, executives have an element of their remuneration at risk. The key performance Indicators (KPIs) which will entitle them to access the at risk portion of their remuneration are set at commencement of employment and will be reviewed through the annual business planning and review process.