Report of the Corporate Governance Committee
The Corporate Governance and Nominating Committee considers and recommends corporate governance programs to the Board, proposes nominees for Board and committee appointment and assists with Board, committee and director evaluations to ensure that our governance practices are rigorous, relevant and appropriate to Teck. The Committee continually reviews and considers current developments in governance practices, policies, and standards; continually monitors the ethics, conflict of interest and conduct standards of the Corporation; and makes recommendations on governance to the Board. The Committee’s primary focus is on effective oversight of and independence from Management and to ensure that the interests of all shareholders are considered and protected in our governance process.
The Board appoints a Chairman of the Committee who, in consultation with the Committee members, determines the schedule and frequency of Committee meetings, provided that the Committee meets at least four times per year.
All of the members of the Committee are independent(1) and knowledgeable about corporate governance principles and have been appointed to the Committee because of their substantial and diversified board experience. Their biographies are set out on pages 8 to 13. The Committee is chaired by the Deputy Chairman and Lead Director of Teck, Warren Seyffert, who has an extensive background in corporate law and governance matters. Mr. Seyffert is either a member of, or an ad hoc member of, each of the committees of the Board.
See directors' biographies on pages 8 to 13 for detailed information.
1) Director who is: (a) not a member of Management and is free of any interest and any business, family or other relationship which could reasonably be perceived to interfere with the director’s ability to act with a view to the best interests of the Corporation other than interests and relationships arising solely from holdings in the Corporation, and (b) is not considered to have a direct or indirect material relationship with the Corporation under subsection 1.4 of National Instrument 52-110.
Each year, prior to the annual shareholders meeting, a detailed questionnaire is circulated to all directors to elicit the basic information required to assess the independence of each director. The Committee assists the Board in its consideration of each director’s independence both for general Board purposes and for service on the Audit Committee. In making its determination, the Board considers both the requirements of National Instrument 52-110 and the rules of the NYSE applicable to Teck.
A majority of the Board is independent. The Audit, Corporate Governance and Nominating and Compensation Committees are comprised entirely of independent directors.
The following directors and nominees are independent: M. M. Ashar, J. H. Bennett, H. J. Bolton, F. P. Chee, J. L. Cockwell, E. C. Dowling, T. Kubota, T. Kuriyama, J. G. Rennie, W. S. R. Seyffert and C. M. T. Thompson.
The Canadian Securities Administrators’ corporate governance guidance suggests that independent directors hold regularly scheduled meetings at which non-independent directors and members of Management are not in attendance. The Board has adopted a policy of scheduling an in-camera session without Management present for a portion of every meeting. We believe, however, that the experienced counsel of all Board members is valuable on many occasions, and open and candid discussion amongst the independent directors is not inhibited by the presence of the non-independent directors. Accordingly, their exclusion from a portion of each Board meeting is not always warranted.
In addition to its regular duties, since the last annual meeting of shareholders, the Committee:
- reviewed the composition of all the Board committees and made recommendations to the Board for the appointments that were made after the Annual General Meeting in 2012;
- reviewed the results of the Committee’s self-assessment process;
- reviewed the results of the Board’s annual self-assessment process;
- reviewed and considered various emerging governance issues ;reviewed and discussed engagement with various stakeholders in connection with governance matters, as well as correspondence with those shareholders;
- reviewed the independence of and recommended the nomination for election at the Meeting of 14directors to the Board;
- reviewed comments received from shareholders and responses thereto;
- reviewed and discussed various emerging governance issues;
- reviewed the Board’s mandatory retirement policy and decided not to make any changes at this time;
- reviewed and approved amendments to position descriptions for individual directors, the Lead Director and Chairman of the Board; and
- completed its annual charter review and amended the charter accordingly.
The Board has the responsibility to take reasonable steps to ensure that Management identifies, understands, and evaluates the principal risks of and to the Corporation’s business; implements appropriate systems to manage these risks; and achieves a proper balance between risk and reward. As a policy, the Board receives regular quarterly reports from Management on global and site specific risk management, ethical conduct, environmental management and employee health and safety, in addition to detailed reports on particular risk issues. The Board, as a matter of routine at each meeting, discusses risks associated with the Corporation’s business and reviews the Corporation’s risk tolerance for existing operations as well as for new projects and developments.
The Board considers that the most significant risks facing the Corporation vary from time to time depending on the prevailing economic climate and the specific nature of the Corporation’s activities at the relevant time. At each meeting of the Board, the Board reviews and considers general as well as particular risks faced by the Corporation. The Board closely monitors the potential vulnerability of the Corporation’s operations and financial condition in light of risks that are beyond the control of management, including:
- risks relating to commodity prices, exchange rates and general economic conditions;
- risks related to project development, including the risk of capital cost overruns, delays in receipt of permits or governmental approvals;
- risks related to existing operations, such as those associated with natural catastrophes and potential social issues; and
- longer term risks such as political risk generally, and risks relating to adverse developments in environmental regulation.
As noted above, the relative significance of these risks shifts over time and the Board’s assessment of the relative significance of these risks will depend in part on the issues before the Board at the time. The Board regularly reviews management’s processes in place for identification, monitoring, transfer and mitigation of all of these risks. The Audit Committee has separate processes in place to monitor risks related to financial reporting and financial matters, and Management’s processes to deal with those risks.
Canadian Securities Administrators Governance Guidelines and Disclosure Requirements
Our governance practices are consistent with the governance guidelines set out in National Policy 58-201, as adopted by the Canadian Securities Administrators. Our disclosure is responsive to and complies in full with the requirements of National Instrument 58-101 and Form 58-101F1. The table in Schedule B sets out, in summary form, our compliance with these disclosure requirements.
Comparison with NYSE Corporate Governance Rules
The Board and Management are committed to leadership in corporate governance. As a Canadian reporting issuer with securities listed on the TSX, we have in place a system of corporate governance practices that meets or exceeds all applicable Canadian requirements.
Notwithstanding that Teck is a “foreign private issuer” for purposes of its NYSE listing, and as such, not all of the NYSE director independence requirements that are applicable to U.S. domestic issuers apply to Teck, the Board has established a policy that at least a majority of its directors must satisfy the director independence requirements under Section 303A.02 of the NYSE corporate governance standards. As noted above, the Board annually reviews and makes such determination as to the independence of each director for both Canadian and NYSE purposes.
The NYSE requires that, as a foreign private issuer that is not required to comply with all of the NYSE’s corporate governance standards applicable to U.S. domestic issuers, Teck disclose any significant ways in which its corporate governance practices differ from those followed by NYSE listed U.S. domestic issuers. The differences between our practices and the NYSE rules applicable to U.S. domestic issuers are not material and are more a matter of form than substance. The one exception is that Hugh J. Bolton, the Chair of the Corporation’s Audit Committee has a son who until May 31, 2012 was a partner of Teck’s external Auditors, PricewaterhouseCoopers LLP. While the Board has determined that Mr. Bolton is “independent” under the NYSE listing standards applicable to foreign private issuers, because of his son’s status, Mr. Bolton would not be considered “independent” under the NYSE listing standards if Teck were a U.S. domestic issuer.
Succession and Nomination of New Directors
The Committee’s responsibilities with respect to the nomination of directors include: the identification of the appropriate competencies and skills considered to be necessary for the Board as a whole; assessing and determining the skills of each director; developing and annually updating a long-term plan for the Board’s composition that takes into consideration the independence, age, skills and experience required for the effective conduct of the Corporation’s business; identifying nominees for election or re-election to the Board or to fill any vacancy that is anticipated; identifying and recommending to the Board individual directors to serve as members or chairs of committees of the Board and reviewing and making recommendations regarding programs for the orientation and education of new Board members and their ongoing education. The Committee maintains a standing list of potential candidates as directors in anticipation of the need to replace existing directors, which takes into account the relevant skills and experience expected to be required by the Board.
The Board believes that a broad range of competencies and skills is necessary for the Board to discharge its responsibilities. Specific skills and competencies must be considered in the context of integrity and good judgment, together with the ability to devote sufficient time to Board affairs. The following skills matrix sets out the areas of expertise that the Board considers important in the context of our business, and identifies the number of directors with relevant skills and experience in each area. This matrix will be used to assess the needs of the Board in the context of succession planning.
The Board has a policy requiring directors to stand down from the Board at the annual meeting of the Corporation if they have reached age 75 by that date. To date, three directors have been affected by this policy, of whom two stood down in accordance with the policy and the third was asked to stay on for an additional year, notwithstanding his age, because the Board determined that the Corporation would benefit from his continued services.
Dr. Norman B. Keevil reached age 75 this year, raising the question of whether the policy should be applied in this instance. The matter was discussed during in camera meetings of the Committee and the Committee took the view that the loss of Dr. Keevil’s counsel and advice would significantly disadvantage the Corporation. The Committee unanimously concluded that Dr. Keevil should be asked to stand for re-election to the Board for at least each of the next three ensuing years, and if elected, to accept appointment as Chair of the Corporation for those years.
The Lead Director reviewed the Committee’s proposal with each director, all of whom supported the proposal in light of Dr. Keevil’s in-depth experience in the mining industry, his knowledge and successful involvement with the exploration, development and operation of projects and mines throughout the world and the numerous recognitions and awards that he has garnered during his career while helping to build the Corporation into Canada’s largest diversified mining company with global operations. Upon Dr. Keevil assenting to the Committee’s request, the proposal was formally recommended to the Board and unanimously approved.
The Corporate Governance and Nominating Committee does not believe that it is necessary to set a formal limit on the number of its directors who serve on the same board of another company in order to ensure the independence of directors and their ability to act in the best interest of the Corporation. The Corporate Governance and Nominating Committee does consider board interlocks in the course of assessing each director’s ability to serve as a director of the Corporation, and supports the disclosure of interlocks.
Other Succession Planning
In accordance with its mandate, the Board as a whole has oversight of succession planning for senior Management. Succession plans for all senior positions are developed and maintained by the Vice President, Human Resources in consultation with other senior executives. The Board annually reviews potential succession candidates by position, as well as Management’s action plans for positions where no succession candidate has been identified. The Board separately considers succession as it relates to the Chief Executive Officer and reviews potential successors for that position.
Orientation and Continuing Education of Directors
As part of the Corporation’s orientation program, new directors are given copies of all policies, codes and mandates. They are also provided with guidance concerning trading in the Corporation’s securities, blackout periods, and the Corporation’s disclosure practices. Senior officers from each business division are made available to meet with new members to familiarize them with the Corporation’s operations, programs and projects. Presentations made at these meetings, together with site visits, are intended to provide insight into the Corporation’s business and familiarize new directors with the policies and programs they require to effectively perform their duties.
The Corporation’s ongoing director education programs entail, as a matter of routine each year, site visits, presentations from outside experts and consultants, briefings from staff and Management, and reports on issues relating to the Corporation’s operations, the economy, accounting and financial disclosure issues, mineral and hydrocarbon education and other initiatives intended to keep the Board abreast of new developments and challenges that the Corporation may face. In 2012, some of the key matters covered by the director education program included:
- site visits to two of our operating coal mines in the Elk Valley;
- participation by individual directors as panelists and moderators at the Corporation’s annual strategic retreat, on specific topics;
- presentation by outside speakers on risks and trends in environmental regulations; and
- presentation by Management on resource estimation methods.
The directors are encouraged to attend, at the Corporation’s expense, industry conferences and director education seminars and courses.
Evaluation of Directors
Each year, the Committee considers the competencies and skills necessary for the Board as a whole to have, together with the competencies and skills that the existing directors possess, with a view to assisting the Board in assessing the participation, contribution and effectiveness of individual members of the Board. As part of this process, Board members complete a detailed questionnaire, which provides for quantitative and qualitative ratings of their and the Board’s performance in key areas and seeks subjective comment in each of those areas. The Deputy Chairman and Lead Director reviews individual responses and a summary report consolidating those responses. The Committee also reviews the results of the self-assessment process, identifies areas requiring follow-up, and reports to the full Board on the results of the assessment process. Action plans to follow-up on specific issues are monitored by the Committee.
Ethical Business Conduct
The Board has adopted a written Code of Ethics for the directors, officers and staff employees (the “Code”) that requires that the highest ethical standards of behavior be followed while conducting the Corporation’s business. The Code is filed on SEDAR and posted on the Corporation’s website. A copy of the Code can also be obtained from the Corporate Secretary of the Corporation at Suite 3300 – 550 Burrard Street, Vancouver, British Columbia, V6C 0B3.
We maintain an anonymous Whistleblower Hotline under the “Doing What’s Right Program” to encourage employees to report unethical conduct. All staff employees are required to undergo a web-based ethics training program. Compliance with the Code is monitored by an annual survey of directors and staff employees. Directors and employees are required to certify that they have complied with the Code, and are either not aware of any non-compliance or that they have reported instances of apparent Code infractions to Management, the Chair of the Audit Committee, or otherwise as prescribed in our “Doing What’s Right Program”.
Directors and executive officers are required to disclose a material interest in any transaction or agreement that the Board is considering. To ensure the exercise of independent judgment, directors or executive officers who have disclosed such an interest are prohibited from participating in the Board discussion or in voting on the transaction.
Furthermore, to ensure that the Committee has access to outside assistance should it require it, the Committee is authorized at any time to engage outside advisors or legal counsel at the expense of the Corporation to assist the Committee in the performance of its duties.
Presented by the Corporate Governance and Nominating Committee:
W.S.R. Seyffert (Chairman)
J. H. Bennett
H. J. Bolton
J. G. Rennie
C. M. T. Thompson
Source: 2013 Management Proxy Circular (772KB PDF)
Date: March 1, 2013