Role of the Board
Board Oversight
The management of PotashCorp's global business, including its commitment to sustainability, is overseen by the Board of Directors (the board). It has the authority and obligation to protect and enhance company assets in the interest of shareholders.
As it pursues the company's best interests, the board considers employees, customers, investors, suppliers and the communities and environment where PotashCorp does business, recognizing that each is essential to success.
Comprehensive governance principles that address such issues as board independence and integrity, functions, selection and composition, and committees have been adopted. A charter sets out the board's responsibilities and the limits to management's responsibilities. The board is charged with:
- Ongoing oversight and approval of the company's business strategy
- Appointment of the Chief Executive Officer and monitoring of his or her performance
- Appointing corporate officers
- Establishing standards for management and monitoring performance
- Approving procedures for strategy implementation; overseeing the identification and management of risks; ensuring the integrity of internal control and management information systems; monitoring compliance with internal policies and procedures, external legal requirements and high ethical and moral standards
- Oversight of reporting business performance to current and prospective shareholders
The complete text of PotashCorp's governance principles, Board of Directors charter and other governance policies can be found on the company's website, www.potashcorp.com/governance/.
Board Responsibility for Sustainability
Board committees are responsible for sustainability issues in their areas of oversight, ensuring that all aspects of sustainability are addressed on an ongoing basis.
- The compensation committee annually reviews the Chief Executive Officer's performance against established goals and objectives, many of which relate to sustainability performance (including improvements in safety, fostering a culture of integrity and social responsibility, and providing leadership for the company with stakeholder groups).
- The audit committee helps the board ensure the integrity of PotashCorp's financial statements and compliance with legal and ethical requirements and oversees major policies on risk assessment and risk management.
- The audit committee also receives regular reports on the company's ethics and compliance activities and reviews quantitative and qualitative accounts of compliance matters.
- The safety, health and environment (SHE) committee's mandate is to review and, as appropriate, recommend changes to the company's SHE and security policies and monitor compliance with them, as well as applicable legislation and regulations, including potential regulations related to climate change.
- The corporate governance and nominating committee reviews the corporate sustainability program and certain of its elements, as part of both its oversight responsibility for sustainability and its other ongoing responsibilities.
- The corporate governance and nominating committee also reviews sustainability issues not addressed by other committees. These include social issues such as philanthropy, human rights issues and policies, and certain economic issues involving stakeholder relationships with customers and investors.
At every meeting, or a minimum of eight times per year, the board addresses aspects of sustainability. Some meetings include special sessions to deal with specific topics.
Sustainability Initiatives of the Board in 2007
The board specifically reviews the company's sustainability performance once each year.
In 2007, it placed special emphasis on the company's safety performance. The Chair of the SHE committee attended the BST Users Conference for the third year in a row and gave a presentation to the 140 PotashCorp employees in attendance on the board's expectation of what a safety leader should be.
The board codified a philanthropic strategy which makes donations to youth and education a priority and establishes a commitment to donate 1 percent of after-tax earnings on a five-year rolling basis.
In July, Aboriginal consultants made a presentation to the Board of Directors and senior executives in Saskatoon on the role of Aboriginal awareness in building a representative workforce.
Board Composition
PotashCorp's board has 12 members. They are residents of Canada, the United States and the Dominican Republic. In 2007, women comprised 25 percent of board members.
Diversity of PotashCorp's Board of Directors |
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| 2003 | 2004 | 2005 | 2006 | 2007 | |
| % board members who are female | 25 | 25 | 25 | 25 | 25 |
| % board members from minority groups | 8 | 8 | 8 | 8 | 17 |
| % board members age 30-50 | 8 | 8 | 8 | 8 | 17 |
| % board members over age 50 | 92 | 92 | 92 | 92 | 83 |
Board Independence
There are nine independent board members and three non-independent members. The three non-independent members are the CEO and two outside directors who have an arm's-length business relationship with PotashCorp. The board has adopted categorical independence standards modeled after New York Stock Exchange rules. An affirmative determination of the independence of each director or nominee is made in accordance with those standards. The annual proxy circular discloses the basis for such determination.
Processes for Evaluating the Board's Performance
The board has an annual evaluation process for determining the effectiveness of individual directors and committees. It includes:
- Board assessment by all directors
- Assessment of each committee by members of that committee
- Assessment of the board Chair by members of the board
- Assessment of each committee Chair by members of each committee
- Assessment of individual directors by the board Chair
Board Expertise
Directors may be elected to bring special expertise or a point of view to board deliberations, but they are not chosen to represent a particular constituency. The best interests of the company and its shareholders are always paramount.
Training is provided to help directors fulfill their obligations. The board's Director Orientation Policy is designed to provide each new director with a baseline of knowledge about PotashCorp that will assist informed decision-making. To facilitate ongoing director education, at least one in-house board training session is conducted annually. In addition, the company will fund each director's attendance at one seminar or conference of interest and relevance each year and each committee Chair at one additional seminar or conference.
Providing Input to the Board
Mechanisms to Provide Recommendations to the Board
The board has established procedures to enable shareholders or other interested parties to communicate with it in writing or by e-mail. Matters relating to accounting, internal accounting controls or auditing will be referred to the audit committee. Other matters will be referred to the Chair. The board also has established procedures for confidential, anonymous submission of concerns by employees and other stakeholders about business conduct, including questionable accounting or auditing matters. It has published a procedure for shareholders to suggest nominees for election to the board.
Sustainability Issues Raised by Shareholders and Employees
Issues raised with the board by shareholders in 2007 focused on executive compensation. One shareholder urged that the company adopt a "say on pay" policy and another proposed limits on the contributions to supplemental executive retirement plans. In both cases these shareholders have raised these issues with numerous companies, and no specific issues relating to PotashCorp's practices were identified. Both proposals were dropped or voted down by the shareholders.
Linkage Between Compensation and Performance
PotashCorp's board believes that the economic interests of directors should be aligned with those of shareholders. Therefore all directors, over a specified period of time, are expected to hold shares and/or deferred share units in the company equal to at least five times their annual retainer.
The CEO's annual compensation is determined primarily on the basis of his performance and the performance of the company. The board's compensation committee considers all factors it deems relevant, including PotashCorp's financial results, corporate governance, certain sustainability goals and the CEO's performance relative to written objectives established at the beginning of each year. The goals and related achievements are set out in the annual proxy circular.
The company believes that aligning compensation with performance is in the best interests of all stakeholders. It places significant emphasis on pay-for-performance, with "at risk" components of total compensation linked to the enhancement of cash flow return and total shareholder return. The company has two "at risk" components: an annual bonus program and a contribution to the retirement plan. In 2007, more than 70 percent of employees had an "at risk" component as part of their compensation and in 2008, this was raised to 100 percent. The more senior the management position, the greater the proportion of compensation that is "at risk." The "at risk" portion of the CEO's compensation is more than 85 percent of his total compensation, as shown in the 2008 proxy circular.
