Overview

The Importance of Governance to Sustainability

Good governance is built on integrity, accountability and transparency. It creates long-term value by helping us 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 whom our operations affect. 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 Goals and Targets

Governance and Risk Management

Good governance enables PotashCorp to reduce risk by holding management accountable for performance against stated goals, by evaluating the company’s business decisions and strategies and by protecting corporate reputation by working to ensure ethical behavior and transparent disclosure.

Role of the Board

PotashCorp’s Board of Directors (the board) oversees our global business, including our commitment to sustainability. The board has the authority and obligation to act in the best long-term interests of the company.

When making decisions, the board considers shareholders, employees, customers, 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 controls 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

Board committees ensure that all aspects of sustainability are addressed.

The compensation committee annually reviews the Chief Executive Officer’s performance against established goals and objectives, which relate to sustainability performance (including improvements in safety, environmental stewardship, employee development, product quality, customer service, investor relations and improving the socio-economic well-being of the communities where we operate).

The audit committee helps ensure the integrity of PotashCorp’s financial statements and compliance with legal and ethical requirements, oversees major policies on risk assessment and risk management, 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 oversees the company’s safety, health, environmental and security performance against comprehensive SHE management policies and procedures intended to ensure compliance with both the law and our own more stringent internal standards. The committee also monitors progress against our safety and environmental goals and targets, working closely with management to ensure that appropriate strategies and processes are in place to promote a culture that prioritizes safety and environmental responsibility.

The corporate governance and nominating committee reviews the corporate sustainability program and certain of its elements as part of its oversight responsibilities. It also reviews sustainability issues not addressed by other committees, including social issues such as philanthropy, human rights issues and policies and economic issues that involve stakeholder relationships with customers and investors.

Mechanisms for Providing Recommendations to the Board

People can communicate with the board by established procedures in writing or email. Matters relating to accounting, internal accounting controls or auditing are referred to the audit committee; others are referred to the Chair of the board.

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. Further details can be found in our annual Proxy Circular.

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 is also assessed periodically by senior management.

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 New 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 and one site visit are 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, within five years of commencement of board service, must hold shares and/or deferred share units in the company equal to at least five times their annual retainer.

We align compensation with performance by placing an emphasis on “at risk” components. All PotashCorp employees have an “at risk” bonus as part of their compensation. 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 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 the CEO objectives set by the board and linked to sustainability goals as reported in our annual  Proxy Circular.

In 2009, 86 percent of our CEO’s compensation was based on “at risk” components.

PotashCorp’s CEO and corporate officers recommended, and the board agreed, that they forgo a merit increase to their salaries in 2009 in light of the global economic crisis.