 |
 |
 |
 |
 |
|
 |
|
 |
|
 |
|
 |
The Board and its committees Board composition and independence The Board currently comprises the Chairman, Chief Executive, Finance Director and three Non-Executive Directors, all of whom are considered by the Board to be independent. Their biographies on the Company website demonstrate a range of experience and sufficient calibre to bring independent judgement on issues of strategy, performance, resources and standards of conduct, which is vital to the success of the Group. Keith Henry is the Senior Independent Director. The Senior Independent Director is available to Shareholders if they have concerns which, through the normal channels of contact with the Chairman, Chief Executive or Finance Director, have not been resolved or for which such contact is inappropriate. A Continuing Relationship Agreement dated 18 July 2003 between Emerald, Waterford Finance and Investment Limited, Alastair Beardsall, Edward Grace, Fred Ponsonby and Merfyn Roberts stipulates that Emerald carries on business independently of Waterford and that all transactions and relationships between Emerald and Waterford are at arm’s length on a normal commercial basis. Operation of the Board The Board is responsible to Shareholders for the proper management of the Group. A statement of the Directors’ responsibilities in respect of the financial statements is set out on page 31 and a statement on going concern is given on page 17 of the 2006 Annual Report and Accounts. The Board has a formal schedule of matters specifically reserved to it for decision. These include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business, approval of budgets and financial statements and entering into debt in the normal course of business. A report on Health, Safety and Environment is presented at each Board meeting, and biannually the Colombian Country Manager presents an update to the board. Other matters are delegated to management, supported by policies for reporting to the Board. The Company Secretary, Helen Manning, is responsible to the Board for ensuring that Board procedures are followed, that applicable rules and regulations are complied with and for advising the Board, through the Chairman, on governance matters. The appointment and removal of the Company Secretary is a matter for the Board as a whole. With effect from 1 January 2006 the Company maintains appropriate insurance cover in respect of legal action against the Company’s Directors, but no cover exists in the event that the Director is found to have acted fraudulently or dishonestly. The Board met seven times during the year, including two strategy and business planning meetings attended by senior managers from Colombia. The agenda for each meeting allows an opportunity for the Chairman and Non-Executives Directors to meet without Executives present. The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, in advance of each Board meeting. The following Board committees deal with specific aspects of the Group’s affairs. Terms of reference of each committee have been approved by the Board explaining its role and the authority delegated to it by the Board. The committee chairmen report regularly to the whole Board and are required to confirm that the committees have sufficient resources to undertake their duties. Nomination Committee The Nomination Committee met twice during the year and its membership comprises of Non-Executive Directors; Fred Ponsonby (Chairman), Keith Henry and Merfyn Roberts. The Committee is responsible for ensuring that the Board comprises an appropriate balance of skills, knowledge and experience and as part of this role leads the process of recommending candidates for appointment to the Board. In appropriate cases, recruitment consultants are used to assist the process. A recruitment consultant was appointed to assist in the search for a Chief Executive; their role included initial interviews and professional advice throughout the process. The Nominations Committee also coordinates the performance evaluation of Directors and senior management and considers those candidates presenting themselves for election at the AGM. Audit Committee The Audit Committee met four times during the year and its members are the Non-Executive Directors; Merfyn Roberts (Chairman), Keith Henry and Fred Ponsonby. The Board is satisfied that at least one member of the Audit Committee, Merfyn Roberts, has recent and relevant financial experience. Meetings are also attended by the external auditor where appropriate and, by invitation, the Chairman, Chief Executive, and the Finance Director. The role and responsibilities of the Audit Committee are set out in the Terms of Reference available on the Company’s website and are described in more detail in the Report of the Audit Committee on page 21 of the 2006 Annual Report and Accounts. Remuneration Committee The Remuneration Committee met twice in 2006 and comprises of Non-Executive Directors; Keith Henry (Chairman), Merfyn Roberts and Fred Ponsonby. During the year Keith Henry became Chairman of the Remuneration Committee. The Committee is not currently independently advised by remuneration consultants but consults with the Chairman of the Board. The Committee is responsible for setting the remuneration for all Executive Directors and the Chairman, including pension rights and provision for compensation payments. The Committee also monitors the level and structure of remuneration for senior management. The remuneration of Non-Executive Directors is a matter for the Executive Directors, within limits set in the Articles of Association. The Remuneration Committee consults with the Chairman concerning the remuneration of Executive Directors. Further details of the role and responsibilities of the Remuneration Committee and its activities during the year are given in the Report on Directors’ Remuneration on pages 24 to 27 of the 2006 Annual Report and Accounts. Meetings and attendance The following table summarises the number of board and committee meetings held during the year and the attendance record of individual directors.
Induction, training and performance evaluation Induction and training New Directors receive induction on their appointment to the Board covering the activities of the Group and its key business and financial risks, the Terms of Reference of the Board and its Committees and the latest financial information about the Group. The Chairman provides an invitation to major Shareholders to meet a new Non-Executive Director. The Chairman ensures that Directors update their skills, knowledge and familiarity with the Company required to fulfil their roles on the Board and on Board Committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes to the Listing Rules, requirements under the Companies Act and other regulatory matters. Directors may consult with the Company Secretary at any time on matters related to their role on the Board. All Directors have access to independent professional advice at the Company’s expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chairman or the Company Secretary. Evaluation of the Board’s performance Performance evaluation takes place at a number of levels; for individual Directors, Board Committees and in assessing the effectiveness of the Board as a whole. The evaluation of performance is carried out using peer appraisal questionnaires which combines business and personal performance with financial and non-financial measures of achievement against certain objectives and includes interviews with the Senior Independent Director and the Senior Independent Director with the Chairman. Aspects of performance also include attendance and participation at Board meetings, quality of involvement in committees, commitment and effectiveness of their contribution to Board activities (including the AGM and Shareholder communications), the adequacy of training and Non-executive Directors’ independence. The process is conducted at the end of the year and reviewed by the Senior Independent Director, on behalf of the Nomination Committee; the Company Secretary is advised of its completion. The performance of the Chairman is reviewed annually in a meeting of the Non-Executive Directors, led by the Senior Independent Director. This review takes into account the views of Executive Directors who were interviewed by the Senior Independent Director. Retirement and re-election All Directors are subject to election by Shareholders after their appointment and to re-election thereafter at intervals of no more than three years. Non-Executive Directors are appointed for specified terms, initially three years with the opportunity for renewal by the Company thereafter. Any recommendation to reappoint a Non-Executive Director for a third term will be preceded by a rigorous review by the Nominations Committee and will take into account the need for progressive refreshing of the Board. Non-Executive Directors who serve more than nine years will be subject to annual re-election. If a Non-Executive Director resigns, a written statement is provided to the Chairman indicating whether he has any unresolved concerns about the running of the Company. Report of the Nominations Committee Due to the growth of the business and the acquisition of a material interest in Syria, a new Chief Executive was appointed on 1 December 2006. Keith Henry is submitting himself for re-election this year. Angus MacAskill will be seeking appointment as a Director of the Company. Their biographical details can be found on the Company’s website at www.emeraldenergy.com and demonstrate the range of skills and experience which each brings to the benefit of the Company and following formal evaluation, the Chairman has confirmed that their performance continues to be effective and that each Director continues to demonstrate commitment to the role. Report of the Audit Committee The Audit Committee is responsible for reviewing the Group’s internal control and risk management systems, and reviewing and monitoring their effectiveness. Its role includes monitoring the integrity of the Company’s financial statements and other formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgements contained in them. The Audit Committee advises the Board on the appointment, reappointment and removal of external auditors and approves their remuneration and terms of engagement, including developing and implementing a policy on the provision of non-audit services by the external audit firm. It also reviews and monitors the independence and objectivity of the external auditor. The Audit Committee met four times during the year. In the course of these meetings, the Committee considered the following matters: Internal controls: The Company has an ongoing process for reviewing the effectiveness of the system of internal controls. The objective to strengthen the finance team in Colombia has been completed. The Company has completed a process to select a new financial reporting system to be used throughout the Company, which will strengthen internal control through system and process controls. Internal audit: The Committee evaluated the requirement for an internal audit function and is satisfied that the Group does not currently justify a separate function but keeps the situation under review. Whistle blowing: The Committee reviewed the Group’s procedures for staff to raise concerns in confidence about possible financial reporting or other misconduct. The Committee considered the concerns raised, how these were investigated and follow-up action taken. Financial reporting: The Committee reviewed draft annual and interim reports before recommending their publication to the Board. The Committee discussed with the Chief Executive, Finance Director and external auditors the significant accounting policies, estimates and judgements applied in preparing these reports. Reappointment of the external auditors: During the year the Audit Committee initiated a review of auditors with a view to the appointment of a non top five firm. BDO Stoy Hayward LLP had previously been evaluated as a suitable alternative. The Finance Director and Chairman of the Audit Committee met with the BDO Stoy Hayward LLP partner and were satisfied BDO Stoy Hayward LLP could provide a competitive service both in Colombia and London and had experience of similar companies operating in Colombia. BDO Stoy Hayward LLP was appointed the Company’s auditors on 27 October 2006. The Committee recommended that the Board present a resolution to Shareholders at the 2006 AGM for the appointment of BDO Soy Hayward LLP as the external auditors. Auditor independence: The Committee satisfied itself as to the independence of the external auditor. In doing so it considered the following factors:
The Board reviews the non-audit services that the external auditors can provide and requires pre-approval of any such engagement. The auditors to be engaged ensure any non-audit services are not prohibited by professional or other regulatory requirements. This essentially limits work to tax services and assurance services that are generally of an audit nature. Even where the policy allows for the external auditor to be engaged to provide non-audit services, prior approval is required for all assignments. These approvals operate in addition to the Group’s general procurement policies, which require contracts over a certain level to be subject to a tender process. During the year BDO Stoy Hayward LLP provided consultancy services through their corporate finance function to assist with the production of the prospectus that was published on 20 October 2006, this work was completed prior to their appointment as Auditors. Communications with shareholders The Board is accountable to the Company’s shareholders and as such it is important for the Board to appreciate the requirements of the shareholders and equally that the shareholders understand how the actions of the Board and short-term financial performance relate to the achievement of the Company’s longer term goals. The reporting calendar is dominated by the publication of interim and final results each year, in which the Board reports to the shareholders on its stewardship of the Company. The operating and financial reviews on pages 5 to 17 comment on the Group’s financial performance in the context of the business risks, objectives and plans for the future. At other times during the year, presentations to analysts and updates to the stock exchange are made available to all shareholders via the Company’s website. In addition the Chairman, Chief Executive and Finance Director meet with major shareholders to discuss governance and group strategy. The Chairman provides periodic feedback to the Board following presentations to investors and meetings with the shareholders; the Company’s brokers are invited to attend Board meetings when investor relations are on the agenda. The Chairman may be accompanied by the Chief Executive and Finance Director during presentation of interim and final results. The Senior Independent Director may attend these presentations and inform the Board of views expressed by the shareholders. The Annual General Meeting provides an opportunity for communication with private and institutional investors and the Board encourages the shareholders to attend and welcomes their participation. All Directors attend the Annual General Meeting and the Chairman, Chief Executive; Finance Director and the chairmen of all the Board Committees are available to answer questions. Notice of the Annual General Meeting and related papers are sent to the shareholders at least 21 working days before the meeting. All proxy votes are counted and the numbers for and against each resolution are announced. All resolutions proposed at the Annual General Meeting on 18 May 2007 were passed unanimously. Internal control The Directors acknowledge that they are responsible for the Group’s system of internal control and for reviewing its effectiveness. The system is designed to manage, rather than eliminate, the risk of failure to achieve the Group’s strategic objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. The Group’s risk management processes and system of internal control procedures include the following: Management structure: Authority to operate the various business units is delegated to local management within limits set by the Board. The appointment of executives to the most senior positions within the Group requires the approval of the Board. Functional, operating and financial reporting standards are established by senior executive management for application across the whole Group. The Company procedures manual sets out the general ethos of the Group, delegation of authority and authorisation levels, segregation of duties and other control procedures together with group accounting policies. These procedures are supplemented by operating standards set by the local management, as required for the type of business and the geographical location of each subsidiary. Identification and evaluation of business risks: Following the guidance of the Turnbull Committee, a process has been established for identifying, evaluating and managing the significant risks faced by the Group. The major financial, commercial, legal, regulatory and operating risks within the Group are identified through a periodic review process. The Company regularly reviews these risks to ensure they are being effectively managed and appropriately insured, and prepares a risk assessment report that is passed to the Audit Committee. This process has been in place throughout the year under review and up to the date of approval of the annual report and financial statements. The Board reviews the process on at least an annual basis. Information and financial reporting systems: The Group’s planning and financial reporting procedures include detailed operational budgets for the year ahead and an eighteen-month rolling plan. The Board reviews and approves them. Performance against the approved budget is monitored through the monthly reporting of key performance indicators, updated forecasts for the year together with information on the key risk areas. Timely monitoring and feedback permits corrective action to be taken where necessary. Investment appraisal: A budgetary process and authorisation levels regulate commitment for expenditure. For expenditure beyond specified levels, detailed written proposals have to be submitted to the Board or the executive management. Reviews are carried out after the expenditure is made, and for some projects, during the expenditure period, to monitor actual versus budget; major overruns are investigated. The Audit Committee has reviewed the effectiveness of the system of internal control and has reported its findings to the Board.
|
|
|
