The Importance of Governance to Sustainability
Good governance is built on integrity, accountability and transparency. It creates long-term value by helping us to respond to the needs of our stakeholders and by mitigating risks that could affect our reputation.
Our governance practices and management systems define the roles and responsibilities of our Board of Directors and management to all those who are affected by our operations. Combined with our efforts to engage stakeholders, these practices and systems are designed to embed sustainability at all levels of our organization.
Sustainability and Our Organizational Goals
Governance and Risk Management
Like most sustainability initiatives, good governance plays an important role in risk management. It enables PotashCorp to reduce risk by holding management accountable for performance against stated goals and by critically evaluating business decisions and strategies that determine the direction of the company, while protecting our reputation by ensuring ethical behavior and transparent disclosure.
Role of the Board
PotashCorp’s Board of Directors (board) oversees our global business, including our commitment to sustainability. The board has the authority and obligation to protect and enhance company assets in the interest of shareholders. When making decisions, the board considers employees, customers, investors, suppliers and the communities and environment where PotashCorp does business.
The board:
- Oversees and approves the company’s business strategy;
- Appoints the CEO and monitors his or her performance;
- Appoints corporate officers;
- Establishes standards for management behavior and performance;
- Approves procedures for implementing business strategies;
- Oversees the identification and management of risks;
- Ensures the integrity of internal control and management information systems;
- Monitors compliance with internal policies and procedures, external legal requirements and ethical standards;
- Oversees the reporting of business performance to current and prospective shareholders.
PotashCorp’s comprehensive governance principles, charters and other governance policies can be found here.
Board Responsibility for Sustainability
Board committees ensure that all aspects of sustainability are addressed.
Mechanisms for Providing Recommendations to the Board
People can communicate with the board by established procedures in writing or by e-mail. Matters relating to accounting, internal accounting controls or auditing are referred to the audit committee; others are referred to the Chair.
The board has also established procedures for confidential, anonymous submission of concerns by employees and other stakeholders about business conduct, including questionable accounting or auditing practices. Procedures also exist for shareholders to suggest nominees for election to the board.
Board Independence
The board has nine independent members and three non-independent members as defined by New York Stock Exchange (NYSE) rules. The non-independent members are the CEO and two outside directors whose relatives have arm’s-length business relationships with PotashCorp.
The board has adopted independence standards modeled after NYSE rules. A determination of each director’s or nominee’s independence is made in accordance with those standards.
Processes for Evaluating the Board’s Performance
The board annually evaluates directors and committees, with assessments of:
- The board, by all directors
- Each committee, by members of that committee
- The board Chair, by members of the board
- Each committee Chair, by members of each committee
- Individual directors, by the board Chair
- The board and committees, by senior management who interact with them
Board Expertise
Directors may be elected to bring expertise or a point of view to board deliberations, but they are not chosen to represent a particular constituency or interest. The best interests of the company and our shareholders are always paramount.
Training is provided to help directors fulfill their obligations. The board’s Director Orientation Policy provides each new director with baseline knowledge about PotashCorp to facilitate informed decision-making. At least one in-house board training session is conducted annually to ensure ongoing education of directors. In addition, the company covers the cost for directors to attend one seminar or conference of interest and relevance each year and one additional seminar or conference for each committee Chair.
Linkage Between Compensation and Performance
PotashCorp’s board believes that the financial interests of directors should be aligned with those of shareholders. Therefore all directors, over a specified period of time, must hold shares and/or deferred share units in the company equal to at least five times their annual retainer.
In light of the global financial crisis, the CEO and the corporate officers agreed to forego a merit increase to their salaries in 2009.
We align compensation with performance by placing an emphasis on “at-risk” components. In 2007, more than 70 percent of employees had an “at-risk” bonus as part of their compensation. 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 CEO’s annual compensation is determined primarily on the basis of personal performance and the performance of the company. When determining CEO remuneration, the board’s compensation committee considers all factors it deems relevant, including financial results and performance against sustainability targets and other goals reported in our annual Proxy Circular. In 2008, more than 85 percent of our CEO’s compensation was based on “at-risk” components.
