Appendix A – Disclosure of Corporate Governance Practices
100% Compliance
The Corporation's governance practices fully comply with the governance rules of the Canadian Securities Administrators. The following table sets out the Corporation's compliance with National Instrument 58-101 — Disclosure of Corporate Governance Practices.
FORM 58-101F1 — CORPORATE GOVERNANCE DISCLOSURE
Board of Directors
Independent Directors
The Board has determined that all of the directors of the Corporation with the exception of Mr. Doyle, Ms. Paliza and Mr. Stromberg are independent. See disclosure under the "Director Independence and Other Relationships" section of this Management Proxy Circular.
Directors who are not independent
See disclosure under the "Director Independence and Other Relationships" section of this Management Proxy Circular.
Majority of independent directors
Nine of twelve, or 75%, of the Corporation's current directors are independent.
Other directorships
Such other directorships have been disclosed in the "Nominees for Election to the Board of Directors" section of this Management Proxy Circular.
Meeting without management or non-independent directors
The Board has adopted a policy for the independent members of the Board to meet without management present at each regularly scheduled meeting of the Board. These sessions are of no fixed duration and participating directors are encouraged to raise and discuss any issues of concern. This policy was complied with for all meetings of the Board in 2008.
Board chair independence
Dallas J. Howe serves as the Board Chair, and is an independent director. He has served as Board Chair since 2003. A position description for the Board Chair has been developed and approved by the Board. Amongst other things the Board Chair is expected to:
| (a) | provide leadership to ensure effective functioning of the Board; |
| (b) | lead in the assessment of Board performance; |
| (c) | assist the Compensation Committee in monitoring and evaluating the performance of the Chief Executive Officer and senior officers of the Corporation; |
| (d) | lead the Board in ensuring succession plans are in place at the senior management level; and |
| (e) | act as an effective liaison among the Board and management. |
Director Attendance
Attendance records are fully disclosed in the "Attendance of Directors" section of this Management Proxy Circular. Pursuant to the "PotashCorp Governance Principles", directors are expected to attend all meetings of the Board and Board committees upon which they serve, to come to such meetings fully prepared, and to remain in attendance for the duration of the meetings. Where a director's absence from a meeting is unavoidable, the director should, as soon as practicable after the meeting, contact the Board Chair, the Chief Executive Officer or the Corporate Secretary for a briefing on the substantive elements of the meeting.
Board Mandate
The Board of Directors Charter is in this Management Proxy Circular as Appendix E.
Position Descriptions
Board and committee chair position descriptions
A position description for the Board Chair and each Board Committee Chair (which are attached to the relevant Board Committee Charters) has been developed and approved by the Board and can be found on the Corporation's website at www.potashcorp.com.
CEO position description
A written position description for the Chief Executive Officer has been developed and approved by the Board.
The Chief Executive Officer reports to the Board and has general supervision and control over the business and affairs of the Corporation. Amongst other things, the Chief Executive Officer is expected to:
| (a) | foster a corporate culture that promotes ethical practices, encourages individual integrity and fulfils social responsibility; |
| (b) | develop and recommend to the Board a long-term strategy and vision for the Corporation that leads to creation of shareholder value; |
| (c) | develop and recommend to the Board annual business plans and budgets that support the Corporation's long-term strategy; and |
| (d) | consistently strive to achieve the Corporation's financial and operating goals and objectives. |
Orientation and Continuing Education
Orientation
The Board has adopted a written New Director Orientation Policy designed to:
| (a) | provide each new director with a baseline of knowledge about the Corporation that will serve as a basis for informed decision-making; |
| (b) | tailor the program for each new director, taking into account his or her unique mix of skills, experience, education, knowledge and needs; and |
| (c) | deliver information over a period of time to minimize the likelihood of overload and maximize the lasting educational impact. |
The orientation program is tailored to the needs of each new director, and consists of a combination of written materials, one-on-one meetings with senior management, site visits and other briefings and training as appropriate.
Continuing Education
The Board recognizes the importance of ongoing director education and the need for each director to take personal responsibility for this process. To facilitate ongoing education, the Corporation:
| (a) | maintains a director's intranet site to facilitate the exchange of views and published information; |
| (b) | maintains a membership for each director in an organization dedicated to corporate governance and ongoing director education; |
| (c) | each year encourages and funds the attendance of each director at one seminar or conference of interest and relevance and funds the attendance of each Committee Chair at one additional seminar or conference. In all cases, approval for attendance is obtained, in advance, from the Board Chair; |
| (d) | encourages presentations by outside experts to the Board or Committees on matters of particular importance or emerging significance; and |
| (e) | at least annually, schedules a site visit in conjunction with a Board meeting. |
Ethical Business Conduct
Code of Conduct
The Board has adopted the "PotashCorp Core Values and Code of Conduct". The complete text of the "PotashCorp Core Values and Code of Conduct", as well as other governance related documents, can be found at www.potashcorp.com and are available in print to any shareholder who requests them.
The Audit Committee reviews the process for communicating the "PotashCorp Core Values and Code of Conduct" to the Corporation's personnel, and for monitoring compliance therewith. The Board, through the Audit Committee, receives regular reports from management directly responsible for compliance-related matters (the General Counsel, Vice President Internal Audit and Senior Vice President Administration). In addition, annual compliance sign offs are sought from each employee.
The Board, through the Audit Committee Chair, also receives reports of all financial or accounting issues raised through the Corporation's anonymous toll-free hotline.
The Corporation has not filed any material change reports since the beginning of the 2008 financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the "PotashCorp Core Values and Code of Conduct". Pursuant to the "PotashCorp Governance Principles", no waiver of the application of the "PotashCorp Core Values and Code of Conduct" to directors or executive officers is permitted.
Material Interests
Pursuant to the "PotashCorp Governance Principles", each director of the Corporation must possess and exhibit the highest degree of integrity, professionalism and values, and must never be in a conflict of interest with the Corporation. A director who has a conflict of interest regarding any particular matter under consideration should advise the Board, refrain from debate on the matter and abstain from any vote regarding it. The Board has also developed categorical independence standards to assist it in determining when individual directors are free from conflicts of interests and are exercising independent judgment in discharging their responsibilities. All directors and senior officers are bound by the "PotashCorp Core Values and Code of Conduct" and no waiver of the application of that Code to directors or senior officers is permitted.
Culture of ethical business conduct
The "PotashCorp Core Values and Code of Conduct" was redistributed to all employees in November 2007 and is continually reinforced with on-line training programs. During 2008 and the beginning of 2009, all directors and employees were asked to sign a written confirmation of their compliance with the "PotashCorp Core Values and Code of Conduct". The Board, through the Audit Committee, requires the management Compliance Committee to annually report on the status of the Corporation's ethics and compliance programs, including receipt of the Compliance Risk Assessment, Summary of Ethics and Compliance Training during the current year and plans for ethics and compliance training in the coming year.
Nomination of Directors
Identification of new candidates for board nomination
The Corporate Governance and Nominating Committee (the "CG&N Committee") is responsible for recruiting and proposing to the full Board new nominees for directors. The CG&N Committee, in the discharge of its duties:
| (a) | in consultation with the Board and Chief Executive Officer and, on an ongoing basis, identifies the mix of expertise and qualities required for the Board; |
| (b) | assesses the attributes new directors should have for the appropriate mix to be maintained; |
| (c) | in consultation with the Board and Chief Executive Officer and, on an ongoing basis, maintains a database of potential candidates; |
| (d) | has implemented a procedure to identify, with as much advance notice as practicable, impending Board vacancies, so as to allow sufficient time for recruitment and for introduction of proposed nominees to the existing Board; |
| (e) | develops a "short-list" of candidates and arranges for each candidate to meet with the CG&N Committee, the Board Chair and the Chief Executive Officer; |
| (f) | recommends to the Board, as a whole, proposed nominee(s) and arranges for their introduction to as many Board members as practicable; |
| (g) | ensures that prospective candidates are informed of the degree of energy and commitment the Corporation expects of its directors; and |
| (h) | encourages diversity in the composition of the Board. |
Independent Corporate Governance and Nominating Committee
The Corporation has a standing CG&N Committee.
Each of the directors who comprise the CG&N Committee is independent. Please refer to "Director Independence and Other Relationships" and the "Corporate Governance and Nominating Committee Report" sections of this Management Proxy Circular for additional information.
Corporate Governance and Nominating Committee Charter
The responsibilities, powers and operation of the CG&N Committee are set out in its charter, which is available on the Corporation's website at www.potashcorp.com. Pursuant to the CG&N Committee Charter, the purpose of the CG&N Committee is to identify the individuals qualified to become members of the Board, to recommend to the Board nominees for election to the Board at each annual meeting of shareholders or to fill vacancies on the Board and to address related matters. Please refer to the "Corporate Governance and Nominating Committee Report" section of this Management Proxy Circular for additional information.
Compensation Committee
Director and Officer Compensation
Director and officer compensation is established on the advice of independent consultants, with a view to establishing target compensation at the median of the applicable comparator group. Please refer to the "Compensation Discussion and Analysis" and the "Director Compensation" sections of this Management Proxy Circular, as well as the section "Outside Compensation Consultants" in this table.
Independence
The Corporation has a standing Compensation Committee. Each of the five directors who comprise the Compensation Committee is independent. Please refer to the "Director Independence and Other Relationships" and "Compensation Discussion and Analysis" sections of this Management Proxy Circular for additional information.
Compensation Committee Charter
The responsibilities, powers and operation of the Compensation Committee are set out in its charter, which is available on the Corporation's website at www.potashcorp.com. Pursuant to the Compensation Committee Charter, the purpose of the Compensation Committee is to carry out the Board's responsibility for: (i) executive compensation (including philosophy and programs); (ii) management development and succession; (iii) Board compensation; and (iv) broadly applicable compensation and benefit programs. Please refer to the "Compensation Discussion and Analysis" section of this Management Proxy Circular for additional information.
Outside Compensation Consultants
In 2005, the Compensation Committee of the Board of Directors engaged Watson Wyatt as executive compensation consultants. Watson Wyatt provides input to the Committee on the philosophy and competitiveness of the design and award values for certain executive and director compensation programs. In addition, Watson Wyatt assists in the evaluation of compensation arrangements associated with certain strategic opportunities. In accordance with the Committee's adherence to the best practice of retaining independent executive compensation consulting, Watson Wyatt does not perform any other consulting services for the Corporation. Any work other than executive compensation consulting services performed for the Corporation by Watson Wyatt must be approved in advance by the Chair of the Compensation Committee.
Other Board Committees
In addition to the Audit Committee, Compensation Committee and CG&N Committee, the Board also has a Safety, Health and Environment Committee. The Safety, Health and Environment Committee assists the Board review and recommend for approval policies, management systems and performance with respect to safety, health and environment matters affecting the Corporation.
Board Assessments
Pursuant to the "PotashCorp Governance Principles", which is available on the Corporation's website at www.potashcorp.com, the Board has adopted the following five-part effectiveness evaluation program:
1. Annual Board Assessment by All Members of the Board
Each year Board members complete a detailed questionnaire which (a) provides for quantitative ratings in key areas and (b) seeks subjective comment in each of those areas. The questionnaire is administered by the Corporate Secretary. Responses are reviewed by the Corporate Secretary and the Chair of the CG&N Committee. A summary report is then prepared and provided to the Board Chair, the CG&N Committee and the CEO, and then reported to the full Board by the CG&N Committee Chair. Attribution of comments to individual Directors in the summary report is made only if authorized by that Director. In assessing the responses to the questionnaire, the focus is on continuous improvement. Matters requiring follow-up are identified, action plans are developed and there is ongoing monitoring by the CG&N Committee to ensure satisfactory results. As part of the annual Board assessment, the Board reviews and considers any proposed changes to the Board Charter.
2. Annual Assessment of Each Committee by Members of That Committee
Each year members of each Committee complete a detailed questionnaire designed to allow Committee members to evaluate how well each Committee is operating and to make suggestions for improvement. The questionnaire is administered by the Corporate Secretary who receives responses and reviews them with the appropriate Committee Chair. A summary report is then prepared and provided to the Board Chair, the Chair of the CG&N Committee, the appropriate Committee and the CEO and then reported to the full Board by the appropriate Committee Chair. As part of the annual Committee assessment, the Board reviews and considers any proposed changes to the Committee Charters.
As with the Board assessment, the focus is on continuous improvement. Chairs of each Committee are expected to follow up on matters raised in the Committee assessments and take action as appropriate.
Each of the Audit, Compensation, CG&N, and Safety, Health and Environment Committees participate in this process.
3. Annual Assessment of the Board Chair by Members of the Board
Each year members of the Board are asked to assess and comment on the discharge, by the Board Chair, of his duties. Individual responses are received by the Chair of the CG&N Committee. The Chair of the C&GN Committee solicits specific input from the CEO from his perspective as CEO regarding the effectiveness of the Chair. A summary report is then provided to the Board Chair and the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Board Chair assessment, the Board reviews and considers any proposed changes to the Board Chair position description.
4. Annual Assessment of Each Committee Chair by Members of Each Committee
Each year, members of each Committee are asked to assess and comment on the discharge, by each Committee Chair, of his or her duties. Responses are received by the Corporate Secretary and the Committee Chair under review. A summary report is then provided to the appropriate Committee and to the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Committee Chair assessment, the Board reviews and considers any proposed changes to the Committee Chair position descriptions.
5. Annual Assessment of Individual Directors
Each year during the period from May to September, the Board Chair (and, if in the opinion of the Board Chair it is desirable, the Chair of the CG&N Committee) formally meets with each Director individually to engage in full and frank discussion of any and all issues that either wish to raise, with a focus on maximizing the contribution of each Director to the Board and Committees. In completing the review, the Board Chair employs a checklist, discusses both short-term and long-term goals, and establishes action items to allow each individual Director to enhance both his or her personal contributions and overall Board effectiveness. The Board Chair will share peer feedback with each Director as appropriate and reviews progress and action taken. Each Director, during such formal review, should be prepared to discuss with the Board Chair how the Directors, both individually and collectively, can operate more effectively. The Board Chair discusses the results of the individual evaluations with the Chair of the CG&N Committee and report summary findings to both that Committee and to the full Board at the November meeting.
6. Management Board Survey
As part of the Board's continuing efforts to improve its performance, the Board surveys those members of senior management who regularly interact with the Board and/or its Committees to solicit their input and perspective on the operation of the Board and how the Board might improve its effectiveness. The survey includes subjective management responses to questions and one on one interviews between management respondents and the Chair of the CG&N Committee. The results of the management surveys and the one on one interviews are reported by the Chair of the Corporate Governance and Nominating Committee to the full Board and the Corporate Secretary.