Corporate Governance Practices
The following disclosure on the Corporation’s corporate governance practices follows the disclosure requirements found in National Instrument 58-101 Disclosure of Corporate Governance Practices.
1. Board of Directors
(a) Disclose the identity of directors who are independent.
Multilateral Instrument 52-110 – Audit Committees ("MI 52-110") sets out the standard for director independence. Under MI 52-110, a director is independent if he or she has no direct or indirect material relationship with the Corporation. A material relationship is a relationship which could, in the view of the board of directors, be reasonably expected to interfere with the exercise of a director’s independent judgment. MI 52-110 also sets out certain situations where a director will automatically be considered to have a material relationship with the Corporation. Applying the definition set out in MI 52-110, eight of the nine members of the Board are independent. The members who are independent are:
- Art Aylesworth
- David Green
- Divesh Sisodraker
- Julian Elliot
- Kelly Edmison
- Praveen Varshney
- Rob Logan
(b) Disclose the identity of directors who are not independent, and describe the basis for that determination.
The following directors are not independent by virtue of the fact that they are executive officers of the Corporation:
(c) Disclose whether or not a majority of directors are independent. If a majority of directors are not independent, describe what the board of directors (the board) does to facilitate its exercise of independent judgment in carrying out its responsibilities.
A majority of the directors are independent (5 out of 8).
(d) If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.
In addition to their positions on the Board, the following directors also serve as directors of the following reporting issuers:
Praveen Varshney: Afrasia Mineral Fields Inc., Garnet Point Resources Corp., JER Envirotech International Corp., Northern Canadian Uranium Inc.
Kelly Edmison: IP Applications Corporation, Radiant Communications Corp., Icron Technologies Corporation, Pender Financial Group Corporation, Pender Growth Fund (VCC) Ltd.
(e) Disclose whether or not the independent directors hold regularly scheduled meetings at which members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held during the preceding 12 months. If the independent directors do not hold such meetings, describe what the Board does to facilitate open and candid discussion among its independent directors.
Each board meeting has, as a matter of course, a non-management discussion. There were five such meetings in the preceding 12 months.
(f) Disclose whether or not the chair of the Board is an independent director. If the Board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the Board has neither a chair that is independent nor a lead director that is independent, describe what the Board does to provide leadership for its independent direct.
The Chairman is an independent director.
(g) Disclose the attendance record of each director for all Board meetings held since the beginning of the issuer's most recently completed financial year.
All directors were present for all meetings although some participated by teleconference from time to time.
2. Board Mandate
Disclose the text of the Board's written mandate. If the Board does not have a written mandate, describe how the Board delineates its role and responsibilities.
The mandate of the Board is to supervise the management of the Corporation and to act in the best interests of the Corporation. The Board approves all significant decisions that affect the Corporation and its subsidiaries before they are implemented. The Board meets on a quarterly basis and special meetings are held at the call of the Chairman or upon the request of two members of the Board. The Board’s written mandate is disclosed on the website of the Corporation at www.carmanah.com.
3. Position Descriptions
(a) Disclose whether or not the Board has developed written position descriptions for the chair and the chair of each Board committee. If the Board has not developed written position descriptions for the chair and/or the chair of each Board committee, briefly describe how the Board delineates the role and responsibilities of each such position.
The Board has in place written position descriptions for the chair of each committee and for the Board chair.
(b) Disclose whether or not the Board and CEO have developed a written position description for the CEO. If the Board and CEO have not developed such a position description. Briefly describe how the Board delineates the role and responsibilities of the CEO.
The Board has a written position description for the CEO.
4. Orientation and Continuing Education
(a) Briefly describe what measures the Board takes to orient new directors regarding:
(i) the role of the Board, its committees and its directors; and
When possible, new nominees for the Board are invited to attend and observe meetings of the Board prior to appointment as directors. They also observe the workings of the three committees. Each new Board member is given a binder containing the Board mandate and its policies and procedures.
(ii) the nature and operation of the issuer's business.
New Board members are given a comprehensive tour of the Corporation’s facilities and the opportunity to interview the Corporation’s senior management. Additional tours and management meetings are conducted at each Board meeting to ensure directors are kept abreast of changes at the Corporation.
(b) Briefly describe what measures, if any, the Board takes to provide continuing education for its directors. If the Board does not provide continuing education, describe how the Board ensures that its directors maintain the skill and knowledge necessary for them to meet their obligations as directors.
Board members who do not have prior public company experience are expected to take the Directors Education Program offered by the Institute of Corporate Directors (www.icd.ca), if they have not already done so. Currently, three directors have taken the course and a fourth is scheduled to take the next available course.
5. Ethical Business Conduct
(a) Disclose whether or not the Board has adopted a written code for its directors, officers and employees.
The Board has adopted a written Code of Conduct for the Corporation. New employees, officers and directors are required to confirm in writing that they have read and understood the Code.
The Board has adopted a Whistle Blower Policy which provides employees with the ability to report, on a confidential and anonymous basis, any violations within our organization including (but not limited to), falsification of financial records, unethical conduct, harassment or theft. The Board believes that providing a forum for employees, officers and directors to raise concerns about ethical conduct and treating all complaints with the appropriate level of seriousness fosters a culture of ethical conduct.
The Board also has adopted a Share Trading Policy to govern the trading of shares by directors, officers and staff of the Corporation and a Stock Option Granting Policy to govern the granting of options.
(i) disclose how an interested party may obtain a copy of the written code;
The Code of Conduct, the Whistle Blower Policy, the Share Trading Policy, and the Stock Option Granting Policy are available on the Corporation’s website.
(ii) describe how the Board monitors compliance with its code, or if the Board does not monitor compliance, explain whether and how the Board ensures compliance with its code; and
The Board, through the Governance Committee, monitors compliance with the Code, and is responsible for granting compliance waivers to directors and officers.
(iii) provide a cross-reference to any material change report(s) filed within the preceding 12 months that pertains to any conduct of a director or executive officer that constitutes a departure from the code.
None.
(b) Describe any steps the Board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.
Directors with an interest in a material transaction under discussion by the board are required to declare their interest and abstain from voting on the transaction.
(c) Describe any other steps the Board takes to encourage and promote a culture of ethical business conduct.
The Board endeavours to ensure that the ethics of the Corporation take precedence over any other consideration in the Corporation’s decision-making process.
(i) disclose how an interested party may obtain a copy of the written code;
6. Nomination of Directors
(a) Describe the process by which the Board identifies new candidates for Board nomination.
The Governance and Nominating Committee identifies gaps in the Board’s areas of competence and seeks to identify new candidates for Board nomination to address those deficiencies.
(b) Disclose whether or not the Board has a nominating committee composed entirely of independent directors. If the Board does not have a nominating committee composed entirely of independent directors, describe what steps the Board takes to encourage an objective nomination process.
The Governance and Nominating Committee is composed entirely of independent directors.
(c) If the Board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee.
As note above, the Board does not have a separate nominating committee.
7. Compensation
(a) Describe the process by which the Board determines the compensation for your company's directors and officers.
Salary and option packages for executive positions are based upon the degree of responsibility and accountability borne by the role as well as the overall experience of each incumbent relative to the marketplace for comparable talent. The compensation committee reviews and approves compensation packages which exceed $100,000 per year in base compensation.
(b) Disclose whether or not the Board has a compensation committee composed entirely of independent directors. If the Board does not have a compensation committee composed entirely of independent directors, describe what steps the Board takes to ensure an objective process for determining such compensation.
The compensation committee is composed of three independent directors: Kelly Edmison (Chair), Art Aylesworth and Rob Logan.
(c) If the Board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee.
The compensation committee is responsible for recommending to the Board human resources and compensation policies and guidelines for application to the Corporation, and for implementing and overseeing human resources and compensation policies approved by the Board. In particular, the Committee’s compensation duties are:
- To recommend compensation policies and guidelines to the Board
- To ensure that the Corporation has in place programs to attract and develop management of the highest calibre
- To develop policies for the orderly succession of management
- To develop and maintain a position description for the CEO and to assess the performance of the CEO against corporate goals and objectives
- To set the CEO's annual salary, bonus and other benefits, direct and indirect, including targets tied to corporate goals and objectives
- To approve compensation, incentive plans and equity-based plans for all other designated officers of the Corporation
- To oversee the implementation and administration of compensation policies approved by the Board
- To receive recommendations from the CEO concerning annual compensation policies and budgets for all employees
- To periodically review the adequacy and form of the compensation of directors
- To review the report on Executive Compensation contained in the Management Information Circular
(d) If a compensation consultant or advisor has, at any time since the beginning of the issuer's most recently completed financial year, been retained to assist in determining compensation for any of the issuer's directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained. If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work.
Korn/Ferry was engaged to conduct a search for a Chief Operating Officer, Chief Financial Officer, and a Chief Executive Officer for the Corporation.
8. Other Board Committees
If the Board has standing committees other than the audit, compensation and nominating committees, identify the committees and describe their function.
The company has no other committees. The Strategy Committee was disbanded by Board Resolution on November 9, 2007. It had been formed earlier in the year to focus on the further development and execution of the Corporation's Five Year Plan. With the recent additions of a new CEO, CFO and COO the Board resolved that this Committee was no longer required.
9. Assessments
Disclose whether or not the Board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the Board satisfies itself that it, its committees, and individual directors are performing effectively.
To date the Board has not undertaken a formal process to review its performance, the performance of its committees and the performance of its individual directors. An independent review of the Board’s effectiveness will be conducted in the coming year.
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