King Solomon Mines

Corporate Governance

CORPORATE GOVERNANCE STATEMENT

 

Corporate Governance

The Board of Directors of King Solomon Mines Limited (ASX:KSO) is responsible for corporate governance and strives for high standards in this regard.  The Board monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.  The Board draws on relevant best practice principles particularly those issued by the Australian Securities Exchange (ASX) Corporate Governance Council in August 2007 with 2010 amendments (including the June 2010 recommendations on diversity).  The Company notes that on 27 March 2014 the ASX Corporate Governance Council released its Third Edition of the Corporate Governance Principles and Recommendations and that, over the course of the upcoming financial year, the Board will consider the changes made in the new edition, apply them to its Corporate Governance procedures and report on them in its Statement in the 2015 Annual Report.  Therefore, in this year’s Annual Report, commensurate with the spirit of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 2nd Edition (Principles and Recommendations), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices.  At a number of its meetings the Board examined the Company’s corporate governance practices and the progress towards a review of its practice compared to the best practice principles proposed by the ASX Corporate Governance Council.  While the Company is attempting to adhere to the principles proposed by ASX, it is mindful that there may be some instances where compliance is not practicable for a company of KSO’s size.

 

The ASX Corporate Governance Council publication “Corporate Governance Principles and Recommendations” is for guidance purposes, however all listed companies are required to disclose the extent to which they have followed the recommendations; to identify any recommendations that have not been followed; and reasons for not doing so.  The Company reports, below, on how it has followed, or otherwise departed from, each of the Principles and Recommendations during the current financial year.    The Company’s Board of Directors has reviewed the recommendations.  In many cases the Company was already achieving the standard required.  In other cases the Company has considered new arrangements to enable compliance.  In a limited number of instances, the Company has determined not to meet the standard set out in the recommendations, largely due to the recommendation being considered by the Board to be unduly onerous for a company of its size.

 

The following paragraphs set out the Company’s position relative to each of the eight principles contained in the ASX Corporate Governance Council’s report.

 

Principle 1:  Lay solid foundations for management and oversight

The Company has a small Board of three Directors (one Non-Executive Director, Christopher Castle, plus the Managing Director, Stephen McPhail, and a second Executive Director Fu La) and a small team of two part-time employees, so roles and functions have to be flexible to meet specific requirements.  The Company has established and disclosed the respective roles and responsibilities of its Board and management, and how their performance is monitored and evaluated.

 

The Board’s role and responsibilities within the Company include:

 

  • Setting and reviewing the vision, goals and strategy of the Company;
  • Approving the annual strategic plan of the Company and major operating plans;
  • Approving the Company’s budgets;
  • Reviewing and providing feedback on the performance of the Managing  Director;
  • Reviewing the performance of the Board and individual Directors;
  • Reviewing the Company’s half-year and full year financial statements and reports, and quarterly cash-flow  statements;
  • Determining Company policies and ensuring adequate procedures are in place to manage the identified risks; and
  • Carrying out the functions sometimes delegated to a Nomination Committee (due to the small size of the Company).

 

The role and responsibilities of the Company’s Chairman includes:

 

  • Ensuring leadership in setting and reviewing the Company’s vision and strategies.
  • Setting the Board meeting agendas with the Managing Director, ensuring that Directors receive all relevant information for the Board meetings, chairing the Board meetings and dealing with any conflicts that may arise.
  • Chairing the Annual General Meetings (AGMs) and ensuring that shareholders as a whole have the opportunity to speak on relevant matters, and ensuring that the audit partner attends the AGM.
  • Being the spokesperson, along with the Managing Director, on external Company matters.
  • Being the primary point of contact between the Board and external parties.
  • Being kept fully informed on major matters by the Managing Director, chairing the performance appraisal of the Managing Director and providing mentoring.
  • Initiating Board and committee performance appraisals, ensuring that the agreed composition of the Board is maintained and that Director induction plans are in place.

 

The Managing Director’s responsibilities, role and duties include:

 

  • Formulating the Company’s vision and strategies with the Board, developing action plans to achieve the vision and reporting regularly to the Board on progress made.
  • Providing leadership to the management team and employees, appointing and negotiating terms of employment of senior staff members (with the Board’s approval where necessary), developing a succession plan, ensuring that procedures are in place for education and training to ensure compliance with laws and policies.  The process for evaluating the performance of executive and staff members has been developed by the Managing Director and the Board. 
  • The successful implementation of the Company’s exploration programme.
  • Bringing all matters requiring review/approval to the Board, advising the Board on any changes to the Company’s risk profile, providing certification regarding the Company’s financial statements for the quarter, half and full year, reporting to the Board on a monthly basis on the performance of the Company and ensuring that the education of Directors on relevant matters occurs.

 

The Board and management’s performance is monitored and evaluated by the Board, its Committees and individual Directors, and these matters are formally reviewed at least once per year at a Board meeting that considers remuneration for the coming year.

 

Principle 2:  Structure the Board to add value

The Company has a Board of an appropriate size and composition, with suitable skills and commitment to enable it to discharge its duties effectively, and complies with most of the recommendations within this area as the Chairman is independent; separate from the Managing Director.  The Company does not comply with the recommendation that a majority of Directors are independent, because two are Executive Directors.  The Company does not have a Board Nomination Committee because of the small size of the Board; this function is carried out by the full Board of Directors.

 

One of the Company’s three Directors is the Non-Executive Chairman of Directors and he has not undertaken “material” consultancy work for the Company within the past three years.  Each Director of the Company has the right to seek independent professional advice at the expense of the Company.  Prior approval from the Chairman is required, but this will not be unreasonably withheld.

 

A Director may be elected for a term of a maximum of three years.  To ensure a gradual and controlled movement of Directors, the longest serving one-third of all Directors (rounded down to the nearest whole number) is expected to retire at each AGM, but shall be eligible for re-election.

 

Principle 3:  Promote ethical and responsible decision-making

The Company strives to act ethically and responsibly at all times, and has adopted a formal Code of Conduct, reflecting the Company’s size and the close interaction of individuals throughout the organisation.  The Company’s Code of Conduct requires that Directors and management conduct themselves with the highest ethical standards.  All Directors and employees will be expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.  The Code of Conduct and 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, and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices, are set out on the Company’s website at www.kingsolomonmines.com

 

The Company has a Diversity Policy, which includes requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress towards achieving them.  Over the past financial year the Board assessed its progress towards achieving gender diversity and concluded that because of the current state of the mineral exploration industry and the difficulty of obtaining finance, its staff size and its ability to achieve gender diversity have been very limited.  The measurable objectives the Company has taken for achieving gender diversity set by the Board in accordance with its Diversity Policy and progress towards achieving them have been restricted because of the financial pressures mentioned above.  The Company currently has two part-time employees both of whom are women.  Due to the size of the Company there are no women in senior executive positions, no women on the Board and two female employees in the organisation of five.  The Company's Diversity Policy can be found under the Corporate section of the Company's website at www.kingsolomonmines.com

 

The Company has a policy concerning trading in its securities by Directors, management, staff and significant consultants as follows:

 

KSO complies with the Continuous Disclosure requirements of the ASX Listing Rules, and accordingly the market is kept fully and currently informed about all material matters that might affect trading in the Company’s securities.  Purchases or sales in the Company’s shares by Directors, employees and key consultants are to be carried out in the “window”, being the period commencing two days and ending 30 days following the date of announcement of the Company’s annual or half-yearly results, its quarterly reports or a major announcement leading, in the opinion of the Board, to an informed market.  Trading outside a trading window by Directors, employees and key consultants must only occur after consultation with the Chairman of the Board or the Managing Director.  Directors, employees and key consultants are prohibited from buying or selling Company shares at any time if they are aware of any price-sensitive information that has not been made public.

 

Principle 4:  Safeguard integrity in financial reporting

The Company has formal and rigorous processes that independently verify and safeguard the integrity of its corporate reporting.  The Company periodically reviews its procedures to ensure compliance with the recommendations set out under this principle.

 

Senior management confirms that the financial reports represent a true and fair view, and are in accordance with relevant accounting standards.  The Managing Director and the Chief Accountant state in writing to the Board that the Company’s financial reports are complete, and present a true and fair view, in all material respects, of the financial condition and operational results of the Company, in accordance with relevant accounting standards.

 

The Company has an Audit Committee with a formal charter approved by the Board.  The Audit Committee consists of Non-Executive Director Mr Castle (Audit Committee Chairman) and Managing Director Mr McPhail.  These Directors have the applicable expertise and skills for the Audit Committee.  This structure does not meet the ASX’s guidance regarding independence, in that the majority are not independent Directors, the Committee does not have at least three members, the Committee Chairman is the Chairman of the Board and all members of the Committee are not Non-Executive.  This is a result of the Company having a small Board with two Executive members and one Non-Executive member.  In order to have two members on this Committee, it was necessary to include an Executive Director, in this case Mr McPhail, who is the Managing Director and who is involved in the financial management of the Company.  As the Board adds additional Non-Executive Directors, it is planned that Mr McPhail will be replaced with a Non-Executive Director.  The Audit Committee reports to the Board after each Committee meeting.  In conjunction with the full Board, the Committee reviews the performance of the external auditor (including the scope and quality of the audit).

 

Principle 5:  Make timely and balanced disclosure

The Company makes timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a material effect on the price or value of its securities.  The Company, its Directors and staff are very aware of the ASX’s continuous disclosure requirements, and operates in an environment where strong emphasis is placed on full and appropriate disclosure to the market.  The Company has a formal written policy regarding disclosure designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance, and discloses those policies or a summary of those policies.

 

Principle 6:  Respect the rights of shareholders

The Company respects the rights of its security holders by providing them with appropriate information and facilities to allow them to exercise those rights effectively.  All significant information that is disclosed to the ASX is then posted on the Company’s website at www.kingsolomonmines.com.  When analysts are briefed on aspects of the Company’s operations, the material used in the presentation is released to the ASX and posted on the Company’s website at www.kingsolomonmines.com.  Procedures have also been established for reviewing whether any price-sensitive information has been inadvertently disclosed, and if so, this information is also immediately released to the market.

 

Whilst the Company does not have a communications policy to promote effective communication with shareholders, as it believes this is excessive for small companies, the Company does communicate regularly with shareholders and encourages their participation at general meetings.  The Company requests the external auditor to attend general meetings and this has been supported by the Company’s audit partner at PricewaterhouseCoopers.

 

Principle 7:  Recognise and manage risk

The Company has established a sound risk management framework and periodically reviews the effectiveness of that framework.  The Company is a small exploration company, and does not believe that at this stage there is significant need for formal policies on risk oversight and management of material business risks.  Risk management arrangements are the responsibility of the Board of Directors and senior management collectively, and Risk Factors are a standing agenda item at Board meetings.  The Company receives assurance from the Managing Director and the Financial Controller that the system of risk management and internal control is sound, and that the system is operating effectively in all material respects in relation to financial reporting risks.

 

Principle 8:  Remunerate fairly and responsibly

The Company pays Director remuneration that is sufficient to attract and retain high quality Directors and has designed its executive remuneration to attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders.  The Directors believe that the size of the Company makes individual salary and contractor negotiation more appropriate than formal remuneration policies.  The Company has a Remuneration Committee of one Non-Executive Director, Mr Castle (Committee Chairman), and the Managing Director, Mr McPhail, which meets as and when required, to review performance matters and remuneration.  There has been no formal performance evaluation of the Board during the past financial year, although its composition is reviewed at a Board meeting at least annually.  The Directors work closely with management, and have full access to all the Company’s files and records.  The Remuneration Committee seeks independent external advice and market comparisons as necessary.  The structure of the Remuneration Committee does not comply with the ASX’s recommendation in that it does not consist of a majority of independent Directors but it is chaired by an independent Chair and it does not comply in that it does not have at least three members.  In accordance with reporting requirements, the Company discloses the fees and other remuneration paid to all its Directors and senior management, and it clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives.

 

Voting Rights

There are no restrictions on voting rights.  On a show of hands every member present or by proxy shall have one vote and, upon a poll, each share shall have one vote.  Option holders have no voting rights until the options are exercised.

 

Australian Corporations Act and acquisition of shares

The Company is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act dealing with the acquisition of shares (including substantial holdings and takeovers).