> Governance

Governance practices and ethical conduct are fundamental to how Erdene operates its business and are embedded in the culture and operations of the company

Erdene is committed to promoting ethical conduct in the operation of its business. The company understands that to be truly effective, its governance practices and ethical conduct must be embedded in the culture and operations of the company. This philosophy is captured in written policies and procedures, which play an integral role in assuring Erdene maintains its standards. These policies and procedures have been adopted by the Board of Directors, and are intended to ensure the integrity of company performance. Erdene’s officers and employees are required to perform each of their duties with integrity, and in compliance with the rules which govern the company’s business.

The following describes the company's system of corporate governance.

 

Mandate of Board Committees

The Board of Directors is responsible for the stewardship of Erdene through the appropriate supervision of the business and management of the company. This mandate is accomplished directly and through five committees, the Audit Committee, the Compensation Committee, the Corporate Governance and Disclosure Policy Committee, the Pre-Clearance Committee and the Technical Committee.

The strategic planning and business objectives developed by Erdene’s management are submitted to and reviewed by the full Board of Directors, both on a formal annual basis and on an ongoing basis through regular interim reports from management. The full Board also reviews and approves the annual financial statements, annual report, annual budget, management proxy information circulars, material press releases, decisions as to material acquisitions not within the budget, and the grant of stock options.

Given the size and relative stability of the company’s Board of Directors, there is no formal program for the orientation and education of new recruits to the Board. Erdene does, however, ensure that all new directors receive a complete package outlining the securities law obligations and restrictions on Board members and the company, as well as a copy of all of its policies.

The Board meets a minimum of four times a year and more frequently if required.

Independence from Management

Three of the Board's five directors are "independent" within the meaning of applicable securities legislation. An independent director is defined to be a director who has no direct or indirect relationship with the Corporation which could, in the view of the Board, be reasonably expected to interfere with the exercise of a member's independent judgment.

The Board is satisfied that it maintains adequate and appropriate independence from management. All directors, each of whom has considerable business experience, are expected and encouraged to exercise their independent judgment. To facilitate this, all of the members of the Compensation Committee, the Audit Committee and the Corporate Governance and Disclosure Policy Committee are unrelated directors.

Establishment of Board Committees

There are five standing Committees of the Board; the Audit Committee, the Compensation Committee, the Corporate Governance and Disclosure Policy Committee, the Pre-Clearance Committee and the Technical Committee. The Board may, from time to time, establish ad hoc committees to address special business issues.

The Audit Committee presently consists of three directors, John Byrne, William B. Burton and Phillip Webster, all of whom are independent of management. The Audit Committee is responsible to monitor the company's accounting and financial reporting processes and the systems in place to manage the principal operational risks faced by Erdene, including internal control and management information systems. This committee is responsible for reviewing and approving the interim consolidated financial statements and for reviewing and recommending the annual consolidated financial statements to the Board of Directors for approval. The Audit Committee is also responsible to renew and appraise the audit efforts of the Corporation's external auditor. All of the members of the Audit Committee are expected to have the ability to read and understand a balance sheet, an income statement and a cash flow statement. At least one member is required to have the ability to analyze and interpret a full set of financial statements including the notes attached thereto in accordance with Canadian generally accepted accounting principles. The Audit Committee meets a minimum of four times a year.

The Compensation Committee presently consists of three directors, Phillip Webster, William B. Burton and John P. Byrne. The mandate of this committee is to review the performance, compensation and succession planning of the executive officers of Erdene and to ensure the proper administration of the company's Incentive Stock Option Plan. This committee is also responsible for reviewing and recommending all executive benefits plans and executive prerequisites for approval by the Board of Directors. The Compensation Committee meets twice a year.

The Corporate Governance and Disclosure Policy Committee presently consists of three directors, John Byrne, William B. Burton and Philip Webster. This committee oversees all regulatory disclosure requirements and the company's disclosure practices, including its Insider Trading Policy. This committee is responsible to ensure that appropriate systems, processes and controls for disclosure are in place and to review all news releases and core disclosure documents before their release or filing.

The responsibility for proposing new nominees to the Board and for assessing directors on an ongoing basis is assumed by the full Board of Directors and every director is entitled to bring the matter to the Board. While it is open to any one director to propose new nominees to the Board for consideration by the Board as a whole, the Corporate Governance and Disclosure Policy Committee reviews the qualifications of candidates for Board membership and the slate of candidates for directors to be nominated for election by Shareholders at annual general meetings of Shareholders. The Corporate Governance and Disclosure Policy Committee meets a minimum of four times a year.

The Pre-Clearance Committee presently consists of two directors, Peter Akerley and J. C. (Chris) Cowan. This committee is responsible for pre-clearing trades in the company’s securities by the officers and directors of Erdene, and members of their families who reside with them, in accordance with the company's Pre-Clearance Policy.

The Technical Committee presently consists of two directors, Peter Akerley and J. C. (Chris) Cowan who individually have extensive experience in mining and minerals exploration. This committee will assist management in identifying and reviewing any acquisitions, joint ventures or similar opportunities prior to review by the full board. This committee will meet as opportunities present themselves.

Disclosure Policy

The Board and Management of Erdene are committed to open, full and fair communications with investors, which is reflected in its formal, written Disclosure Policy. The objective of the Disclosure Policy is to ensure that communications to the investing public about the company are:

  • Timely, factual and accurate; and
  • Broadly disseminated in accordance with all legal and regulatory requirements

The Disclosure Policy extends to all directors, officers and employees of the company, all those authorized to speak on behalf of Erdene and all other insiders.

Communication Policy

Receiving shareholder feedback and dealing with shareholder concerns is a priority for Erdene. In order to ensure adequate communication between the company and its shareholders, Erdene:

  • Regularly issues news releases on corporate activities;
  • Maintains a comprehensive website which is updated regularly, and
  • Has an employee who is responsible for receiving shareholder calls and ensuring that any shareholder concerns are placed before Management for its consideration.
Performance of the Board of Directors

Without convening a special meeting for this purpose, the Board shall periodically perform an assessment exercise addressing its effectiveness, with input from Management. Board remuneration is to be divulged in all Proxy Solicitation Circulars to be sent to Shareholders prior to meetings.

General Principles

The Board shall remain committed to ensuring the long-term viability and profitability of the company, as well as the well-being of its employees and of the communities in which it operates.

Evolution of Practices

The corporate governance practices described above are subject to changes as Erdene evolves. The Board shall remain sensitive to corporate governance issues and shall continuously seek to set up the necessary measures, control mechanisms and structures to ensure an effective discharge of its responsibilities without creating additional overhead costs and reducing the return on Shareholders' equity. The Board of Directors recognizes that the company’s existing corporate governance practices do not fully comply with all of the TSX Guidelines. The Board of Directors is committed to complying in all respects with the TSX Guidelines as the company grows in size and when the TSX Guidelines become appropriate for Erdene to adopt entirely.

 

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