UK Corporate Governance Code
The company is incorporated in Jersey, where there is no formal code relating to corporate governance. As a result, in the year ended 31 December 2010 the company was required to apply the Combined Code on Corporate Governance ('Combined Code') which was issued in June 2008 in order to comply with the Listing Rules of the UK Financial Services Authority. The company had previously voluntarily applied the Combined Code. Following the issue of the UK Corporate Governance Code in June 2010 ('UK Corporate Governance Code'), which applies to reporting periods beginning on or after 29 June 2010, the company has also reviewed the additional and changed principles and provisions of that code, in order to adopt the provisions early, where possible.
The company has been in compliance with the Combined Code throughout the year, except as explained below, in relation to Mr Robert Israel's independence.
Details relating to the remuneration paid by the group are contained in the report of the remuneration committee which can be found on page 81 of this annual report. In addition, reference to the group's activities of the audit and governance and nomination committees can be found on pages 77 and 93 respectively.
The board has taken cognisance of the UK Corporate Governance Code in preparing this report, and that of the remuneration, governance and nomination and audit committees. In particular, the board acknowledges that to continue to be successful in the long term the company must be lead by an effective board, with appropriate skills, experience, independence and knowledge of the activities of the company. The board adopted a board charter in January 2010 which clearly defines its duties and this will be updated in accordance with the UK Corporate Governance Code. A copy of this charter is available on the company's website: www.randgoldresources.com.
The following sets out a statement of how the board has applied the main principles set out in the UK Corporate Governance Code and the steps that they will be taking going forward to address the new or revised requirements.
Every company should be headed by an effective board which is collectively responsible for the long term success of the company.
The board remains committed to guiding the strategic and entrepreneurial development of the group and supports the principle of collective responsibility for the success of the company. Details of what the board has reserved, for its sole discretion, can be found in its charter, referred to above.
The board has reserved for its sole discretion: the finalisation and adoption of the group's strategic plan; the approval of the annual operating budget, and monitoring performance against budget; the approval of interim and final financial statements; the dividend policy; the approval of any significant change in accounting policies and practices; fiscal policies including treasury and hedging policies; approval of all financial, legal and ethical controls of the company to ensure the appropriate compliance procedures are in place; significant mergers and acquisitions and other material transactions; approval of all mining developments; new issues of long-term debt; capital issues, any material changes to the company's capital structure; remuneration of executive directors; nominating candidates for election by the general meeting of shareholders to membership of the board; approval of all circulars, prospectuses and listing particulars; approval of the annual report and accounts, including the directors' report, remuneration committee report, audit committee report, corporate governance report and the governance & nomination committee report and the approval of the 20-F.
In order to facilitate its supervision of the company and group the board has established three board sub-committees, the audit committee, the remuneration committee and governance and nomination committee. Details of the charters of each committee are available on the company's website.
Day to day management of the company has been delegated to the CEO. An executive committee has been established by the CEO and membership is made up of the CEO as chairman, the financial director and senior executives of the company, which includes the operational general managers for East and Central Africa and West Africa as well as the general managers of each of the company's operations. In addition, the CEO chairs the company's environmental committee, details of which can be found in the social responsibility and sustainability report which can be found on pages 59 to 69 on this report.
Management provides the board, ahead of each quarterly board meeting, with a detailed quarterly pack which covers an executive overview of the company and group, and includes reports from each mine, major project and activity along with sections covering the financial, legal, technical, human resources, environmental and communications activities.
During the year the board met five times formally. Board meetings normally take place over a two day period with the first day allocated to committee meetings and the second for the formal board meeting. The intervening evening allows the board to engage in informal discussions concerning the activities of the group. In addition, the January board meeting is used to visit a number of the company's operations and allows the board members to interact with a substantial number of the company's senior management, mine and project personnel. As was the case in 2010, the January 2011 board visit took place over four days, enabling members to visit the Loulo gold mine as well as the Gounkoto project in Mali. Dr Kadri Dagdelen also paid a visit to the Massawa and Bambadji projects in Senegal and the chairman joined executive management visiting the new Tongon mine in Côte d'Ivoire. Attendance at the board meetings is tabled below.
At the January 2011 board meeting, the chairman presided over a session of the non-executive directors without the presence of the executive directors.
Appropriate directors' and officers' insurance cover has been obtained by the company in respect of legal action against the directors.
There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company's business. No one individual should have unfettered powers of decision.
In accordance with clearly defined parameters, the chairman, is responsible for the leadership of the board and for ensuring effective communication exists between the executive and non-executive directors.
The CEO has been delegated the authority to manage the day-to-day administration of the group. A formal job description is in existence and this is reviewed annually by the board and the CEO.
The board charter, which is available on the company's website, clearly sets out those powers which are reserved solely for the board's discretion and consideration, while listing separately those issues for which the CEO would be accountable and be monitored.
The chairman is responsible for the leadership of the board and ensuring its effectiveness on all aspects of its role.
The chairman, in conjunction with the CEO and the company secretary, sets the agenda of each meeting and has ensured throughout the year that time is provided for discussion regarding key strategic issues. The usual practice of formal meetings and committee meetings taking place over two days allows (on each occasion the board formally meets) for active debate among all members of the board. As required, at the time of his appointment as chairman, in November 2004, Mr Liétard still meets the requirement of independence currently.
As part of their role as members of a unitary board, non- executive directors should constructively challenge and help develop proposals on strategy.
An atmosphere of open debate exists at the company's board meetings allowing for any single director to engage executive management on key aspects of policy and performance.
The non-executive directors believe that the format of the board, in conjunction with the activities of the three board committees, is sufficient to allow them to effectively verify the performance of management in achieving set goals and objectives. The members of the audit committee believe that their discussions, under the direction of the audit charter, provide an assurance regarding the integrity of the financial information and that the financial controls and the systems of risk management are both robust and defensible. Likewise the remuneration committee has actively been involved in the determination of the levels of remuneration for the executive directors. The current remuneration committee report, which appears on page 81 of this report, details the revisions of such executive remuneration. The governance and nomination committee has continued its involvement with regards to succession planning and were it to be deemed necessary would be actively involved in the appointment and removal of any executive director.
Both in the audit committee and at the main board meetings issues relating to financial performance are addressed.
For several years the company has had the position of a senior independent director and Mr Norborne Cole Jr continues to serve in this role and is avaliable to shareholders should they wish to contact him.
The non-executive directors under the leadership of the chairman have continued to meet in session without the presence of the executive directors or secretary. The directors also meet without the presence of the chairman. In addition, the audit committee has likewise met with the company's external audit partner without the presence of the CFO, Mr Graham Shuttleworth, or the CEO.
The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.
Since July 2010, the board has comprised eight members, two executive and six non-executive directors. Following the resignation of Mr Walden the board again charged the governance and nomination committee with the duty of identifying the needs of the board regarding suitable candidates and for the members to assist the committee with a short list of candidates for consideration. The committee continues to consider the composition of the board while at the same time seeking to achieve an optimal balance of skills as well as an appropriate geographic and gender representation. In addition to possessing the expertise required for the strategic direction of a major international mining company, candidates are expected to combine a strongly independent perspective with the ability to share a cohesive vision of the company's future.
As reported in the 2009 annual report, at its January 2010 meeting the board appointed Dr Dagdelen as a board member and, in accordance with the company's articles of associaton, Dr Dagdelen stood and was re-elected to the board at the AGM on 4 May 2010. Details of Dr Dagdelen's qualifications can be found on page 7 of this annual report.
The board believes that mining is a long-gestation business and as such justifies a longer period of service for non- executive directors than many industries, and that reasonable periods of service are therefore needed for the stability of the board, but that new appointments are needed from time to time to add a fresh perspective.
Following his appointment to the board in January 2010, Dr Kadri Dagdelen was appointed to membership of the audit committee, whilst upon his resignation from the board on 1 July 2010 Mr John Walden ceased to be a member of the same committee.
The board monitored compliance with the independence criteria included in the Combined Code and now monitors compliance with the UK Corporate Governance Code. The majority of the board therefore continues to be independent non-executive directors. All of the directors and their biographies are set out on pages 6 to 7 of this report.
- Currently Mr Israel has served as a director for more than thirteen years. The board has considered his objectivity and contribution and continues to believe that these are still independent in character and judgement. However, the board agreed in 2009 that for the duration of his service Mr Israel should be considered for re-election annually; a provision that is now a requirement of the UK Corporate Governance Code in any event.
Disclosures in respect of all related party transactions are included in note 23 of the financial statements.
There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.
This is dealt with in the report of the governance and nomination committee.
All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.
The board believes that all its members have devoted sufficient time to the company. Details of any candidates' existing board commitments are disclosed at the time of consideration of their respective appointment. No current director, whether executive or non-executive, is the chairman of another FTSE 100 company, or has other significant commitments that have or would prevent them from allowing sufficient time to discharge their responsibilities effectively.
All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.
The board continues to operate in a field which is technically complex and directors are provided with information which enables them to fulfil their duties effectively. Upon joining, board members are provided with a memorandum outlining their fiduciary responsibilities. Visits to the mines and branch offices and technical presentations provided by management are used to further their knowledge in various areas of specialisation. To facilitate Dr Dagdelen's induction, in addition to visiting Tongon and Kibali, he also visited Morila and Loulo in January 2010 and spent time with the group exploration team understanding the geology in relation to the Massawa and Gounkoto discoveries during his January 2011 site visit. Dr Dagdelen and his team at the Colorado School of Mines have been working with management on improving mine optimisations at all operations and key members of staff have visited Denver for this purpose.
The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.
Under the guidance of the chairman, it is the duty of the company secretary to ensure an effective flow of information between the board, its committees and the management of the company. The process is completely computerised allowing the board to access all current and historical board and committee packs as well as key corporate documentation through a secure website. The company secretary ensures that the board is appraised on all governance matters.
The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.
This is dealt with in the report of the governance and nomination committee.
The board's evaluation procedure operates through a structured self assessment system allowing each director to rate the performance of the board and its committees and focuses on a number of key areas. The individual assessments are then scored and the results were tabled and initially discussed at the November 2010 board meeting. A separate session at the time of the January 2011 board meeting enabled the issues to be more fully discussed in detail. This session also allowed for the evaluation of the individual performance of each director and the contributions made to the board by that individual.
Although it was planned that the January 2011 board meeting would include time for the members to meet and undertake its board appraisal exercise under the guidance of a third party consultant, the political unrest in the Côte d'Ivoire resulted in the planned itinerary being changed at the end of 2010 and the proposed third party session could not be accommodated. However, the board under the leadership of the chairman conducted its usual assessment. At the conclusion of the session, the chairmanship was passed to Mr Cole, in his capacity as senior independent director, and the board then appraised the performance of the chairman and provided feedback to Mr Liétard.
The board continues to believe that the board's evaluation exercise is beneficial.
All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance.
At its meeting in November 2010, the board agreed as required by the UK Corporate Governance Code that with effect from the next AGM each director will stand for re- election annually. Any newly appointed director is subject to election by shareholders after his/her appointment. The articles of association specify neither an age limit for directors nor any restriction about the period of service.
At the last annual general meeting, Dr Dagdelen was appointed to the board in accordance with the provisions of Article 85.1 of the company's articles of association, and in accordance, with Article 90.1, Messrs Liétard, Cole Jr, Voltaire and Israel retired by rotation and were re-elected to the board. In compliance with Article 90.1, Dr Bristow and Mr Shuttleworth will retire by rotation and being eligible have offered themselves for re-election. Mr Israel, being deemed not independent for the purposes of the Combined Code, will stand for re-election and Messrs Liétard, Coleman, Cole Jr, Dr Voltaire and Dr Dagdelen will stand for re-election and as retiring directors are eligible and have offered themselves for re-election to the board. Biographies of the directors can be found on pages 6 and 7 of this annual report.
Copies of the letters of appointment of the non-executive directors are available for inspection at the company's registered office.
In terms of the service contracts concluded with each non- executive director, notice can be provided by the board of a director giving three months notice. At the time, each contract was concluded, the period was determined in accordance with our articles of association allowing for a three year term, except for Mr Isreal whose term was only one year.
Levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of executive directors' remuneration should be structured so as to link rewards to corporate and individual performance.
This is dealt with in the report of the remuneration committee.
There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.
This is dealt with in the report of the remuneration committee.
The board should present a balanced and understandable assessment of the company's position and prospects.
This is dealt with in the report of the audit committee.
The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems.
The directors have general responsibility for selecting suitable accounting policies and applying them consistently, and for taking such steps as are reasonably open to them to safeguard the assets of the group and prevent and detect fraud and other irregularities. As discussed above, the board has reserved for itself such business decisions so it can assess the significant risks to achieve the company's strategic objectives and, in this regard, refer to the audit committee report on pages 77 to 80.
The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the company's auditors.
This is dealt with in the risk management section of the report of the audit committee.
The company's audit committee has been set up to review the company's financial reports, internal control principles and risk management systems, significant financial reporting judgements and for dealing with the appointment of the auditors and monitoring their relationship with the company and its management. A copy of the company's audit charter, which is reviewed annually, is available on the company's website.
There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.
The board acknowledges responsibility for maintaining effective communication with all shareholders. The CEO, corporate communications manager and the company's investor relations consultants prepare a quarterly report for the board detailing the activities and presentations given to shareholders. In addition, since September 2004 the company has employed international market intelligence experts to provide a global shareholder identification service which has greatly enhanced the focus of the company's communication message.
Although corporate communication with shareholders is generally conducted by the CEO, the chairman, at least quarterly, participates in an open forum with shareholders and stakeholders. In addition, the chairman leads a group of senior executives and directors to the African Mining Indaba, one of the premier global mining conferences attended by a substantial number of global players in the mining and related industries.
Besides attendance at various industry conferences, a minimum of two road shows are undertaken during the year to enable company representatives to interact directly with shareholders and interested parties. Where possible, the CEO asks non-executive directors to join him at presentations made to shareholders and institutional investors. During their January 2011 visit to Loulo the board had the opportunity to interact with a group of investment analysts and fund managers who were then touring the operations. In addition, the chairman joined those shareholders, investors and analysts who attended the African Mining Indaba in Cape Town. Furthermore, the entire board joined management at the August 2010 quarterly results presentations and both events allowed for interaction with those present. The board continues to use the internet for publication of announcements and to file these on the company's website to assist with communication with shareholders. In addition, the board encourages shareholders to access the annual report from the website rather than having it sent by post in printed form. Our public relations department monitors and responds to all feedback received through our website. The structure and accessibility of our website is regularly monitored through a process of internal and external audits.
The board should use the AGM to communicate with investors and to encourage their participation.
The board believes that the annual general meeting continues to be an appropriate forum for contact with shareholders and encourages their attendance and participation. In order to reflect the sentiment of shareholders at the annual general meeting, it is an unwritten policy that all resolutions should be considered by way of a ballot poll and the number of proxies received disclosed to members in attendance. At each annual general meeting, all committee chairmen as well as other non-executive directors are present to address any queries raised by shareholders.
Institutional shareholders should enter into dialogue with companies based upon the mutual understanding of objectives. It has been the policy of the company that twice a year road shows are conducted by the CEO accompanied by various members of senior management where meetings are held with most of the company's major institutional shareholders to brief them on the activities of the company. Furthermore, after the publication of each set of quarterly results the chairman and CEO will typically make themselves available on a conference call with interested shareholders and investors, a briefing of UK and other international media outlets and in addition the chairman and the CEO will conduct meetings with certain of the company's institutional shareholders. The road shows are in addition to the company's attendance at several key international gold mining conferences around the world.
Institutional shareholders have a responsibility to make considered use of their votes. The company is pleased to see the increasing trend of institutional shareholders now exercising their rights to vote at general meetings. Over the past three years the percentage of shareholders present and voting at the company's AGM has increased dramatically.
Since the company's UK listing in 1997, all resolutions considered at its general meeting have been by way of a poll as the board believes that this more accurately reflects the views of its shareholders.