The Amerisur QCA Corporate Governance Compliance Statement

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It has been my privilege to work with a Board that has seen the benefit in maintaining high standards of corporate governance and is committed to ensuring accountability and transparency as ways to protect the interests of all our shareholders.

The direction of travel for our governance improvements has been positive and overall compliance with governance best practice has improved during the last couple of years. This journey has seen us use the UK Corporate Governance Code as a benchmark of what best practice looks like.

As a further development of this progress we have decided to adopt the Quoted Companies Alliance (QCA) Code as the main benchmark that Amerisur will measure itself against. Amerisur has been voluntarily comparing itself with the provisions of the 2016 and 2014 versions of the UK Corporate Governance Code (the “Code”), and now it is felt that the QCA Principles can also add some value to how we engage upon, and report governance matters. We offer the following disclosure to help shareholders and other stakeholders understand how Amerisur has been effective in the application of the QCA Code to date.

Key changes in governance arrangements during the year

As Chairman of Amerisur I look forward to helping ensure the importance of corporate governance resonates throughout the Company and being responsible for keeping Board governance on our agenda. Our achievements over the last year or so include Board refreshment, investor roadshows and expanded reporting by the Remuneration Committee. In more detail it was reported in our 2017 Annual Report that we are proud we have achieved the following:

•  As part of our succession planning we have welcomed two new high calibre independent Directors to the Board. With this refreshment, we felt we had made progress towards where we wanted to be with regard to the correct mix of skills, experience and independence. The current Board review being undertaken in September 2018 will inform this process further and take us through the next step of development. Initial findings have informed the Board and Nominations Committee actions and they are in the process of: improving the Board gender balance; and have appointed external consultants to assist in the recruitment of a new Director who should have skills in: Corporate Social Responsibility (“CSR”) and developing world experience in the natural resources industry;

•  Our new Senior Independent Director, Alex Snow, is keen to build on the outstanding work done by our previous SID, Stephen Foss, who has done so much to engage with our shareholders to help discuss potential governance improvements, and to lead the work on the revamp of our remuneration practices.

•  Amerisur’s fully independent Audit and Remuneration Committees have continued to expand their reporting, and the Chairmen of these Committees make themselves available for engaging with shareholders.

•  As part of our commitment to shareholder engagement we have been seeking the views of shareholders through outreach campaigns and roadshows. To enfranchise investors, we have been voluntarily putting our Remuneration Report up for shareholder approval, and this is being proposed again for the third successive year.

•  One of the benefits of this process has been the Remuneration Committee completing a review of the remuneration policy and practices, with the support of a respected third-party remuneration consultancy. The changes have been numerous and are explored in the Remuneration Report. The Board’s commitment to ongoing interaction with shareholders will help maintain our progressive stance on governance matters, and investors’ feedback is most welcome in supporting this. We hope the following governance and Committee reports offer the level of detail on our journey that meets shareholders’ expectations.

Additional disclosure on the governance improvements we have made during 2017 can be found in the Statement of Corporate Governance in the Annual Report for 2017. This website compliance statement also serves as an interim update on our governance activities, and how we are applying the QCA Code to supports business success.

During 2018 the Board has continued to review the Group’s corporate governance framework and it was decided to measure our governance against the new QCA Code in August 2018 and that we will do so annually, as required by AIM Rule 26.

At present we feel that we are in full compliance with the QCA Code for the website disclosure element. In order to become fully compliant with the Annual Report QCA Code disclosure requirements we will add additional notes to the 2018 Annual Report, primarily relating to Principle 7 on: the Board evaluation process that is being undertaken at present; disclosure of the “criteria against which board, committee, and individual effectiveness is considered”; and additional disclosure of how the directors are keeping their skills and training updated. With these improvements we would like to think we meet all the requirements for disclosure on compliance with the 10 Principles of the QCA Code.

How Amerisur has met the Principles that relate to website disclosure are as follows:

Shareholder engagement and expectations (Principle 2)

We would specifically like to explain the ways in which the Amerisur has sought to engage with shareholders to meet Principle 2, and that this has been a team effort involving several members of the Board. Recent examples of our commitment to shareholder engagement are:

•  We have been seeking the views of shareholders through outreach campaigns and have undertaken several shareholder engagement and investor relations activities, including: investor roadshows; Board members participation at investor conferences; and attending other events where investors have the opportunity to meet and talk to the Executive Directors;
•  Over the last three years there have been extensive corporate governance roadshows to introduce the Chairman and the senior independent director to key shareholders governance teams. On occasion face to face meetings with shareholders has included meeting their requests to have a specialist present to answer specific questions. For 2017-2018 this has involved the Board member heading a third-party director search being asked questions and the Remuneration Committee Chairman meeting with shareholders;
•  It has been publicly stated in our Annual Report that the Chairmen of our fully independent Audit and Remuneration Committees have made themselves available for engaging with shareholders;
•  Investors are actively encouraged to attend our AGM and all members of our Board were present at the 2018 AGM which they see as an important event in the annual calendar to meet and talk to shareholders; and
•  To further enfranchise investors, we have voluntarily been putting our Remuneration Report up for shareholder approval, and this was proposed again for the third successive year at the 2018 AGM.

Our responsibilities to our stakeholders (Principle 3)

Our business model has identified the key resources and relationships on which our business relies, and we feel the key points are outlined in our ‘Statement of Corporate Governance’ on this webpage here and on page 44 of our 2017 Annual Report which highlights the key internal and external relations that are important to the Company. Our key policies on our relations with communities, governments and stakeholders are also on this webpage, and outlined on pages 44 and 45 of our Annual Report.

Some examples of how we encourage and act upon feedback from stakeholders are:

•  Amerisur has retained the services of a shareholder engagement and proxy solicitation company to help engage with much more of our shareholder base and help court their views on a range of issues. Where shareholders desire meetings and discussions with Company representatives these are then arranged with the appropriate Board members. The Board’s commitment to ongoing interaction with shareholders will help maintain our progressive stance on governance matters, and investors’ feedback is most welcome in supporting this;
•  For 2017 the Senior Independent Director and Chairman have made themselves available to attend meetings with major shareholders without the Executive Directors present. This has been to discuss a range of topics from governance matters, such as the progress reporting on activities to increase the independent representation on the Board, right through to the practical challenges of managing risks in Latin America; and
•  How the Company interacts with the local community is discussed on our Sustainability webpage here and on pages 32 to 35 of our Annual Report and how our workforce is represented is reviewed on page 34.

Evaluating Board performance (Principle 7)

A Board evaluation has been undertaken, and the following changes are related to this process:

•  The Board review conducted in 2017 has helped inform the Board refreshment that has been taking place with three directors retiring from the Board and as part of our succession planning we have welcomed two new high calibre independent Directors to the Board during 2017-2018. These appointments were made as the result of an extensive and independent search process against stringent criteria, which led to the addition of one independent Non-Executive Director with extensive City experience, and one with oil and gas sector experience;
•  There has been another internal Board review conducted during 2018 and the results will be known soon and made publicly available with and will assist our succession planning. There will be disclosure of the outcomes of these activities made in the 2018 Annual Report, and on this website, including the results of the evaluation process, and any actions planned as a result. The Board and Nominations Committee are in the process of acting upon initial findings by making moves on improving the Board gender balance and the recruitment of a Director who should have skills in: Corporate Social Responsibility (“CSR”) and developing world experience in the natural resources industry;
•  Succession planning has been a Board issue for discussion at several meetings during the year. The processes for succession planning have been well developed and helped with the board evaluation process which has led to extensive Board refreshment, including three new Non-Executive Directors over three years, and a new Senior Independent Director; and
•  Board training is conducted upon induction and resources are made available for ongoing professional development. Legal Counsel, the Company Secretary, our nominated financial advisers and our corporate governance advisers provide advice and support to the Board members as requested.

Developing the value/s of our corporate culture (Principle 8)

The Board seeks to ensure that the company has values and behaviours that are recognised and respected. Our approach to ensuring this is outlined in the ‘Our Approach to Sustainability’ webpage here and in the 2017 Annual Report where we highlight the four core segments of how we manage sustainability which are seen as: Community, Our People; the Environment; and Ethical Standards. Key elements of this approach are:

•  Our ethical code is stated as: “Amerisur aims to operate responsibly in its everyday business activities and expects its employees to adhere to high ethical standards. The Company puts importance on safety, integrity and transparency, and treats its employees with respect and fairness”;
•  Amerisur feels that the building and maintaining of good relationships with stakeholders where it operates is not only an important part of Amerisur’s strategy and its commitment to being an ethical business, but also ensures the Company is able to create value for all of its stakeholders. There are some examples of current activities on pages 32 to 35 of the 2017 Annual Report and on our Sustainability page here; and
•  We feel that it has been important to be able to demonstrate this to stakeholders and we are pleased to have been awarded a certification in the international standard for ethics which is ‘SGE 21:2008 Ethical and Socially Responsible Management System.’

Governance structures fit for the future (Principle 9)

As mentioned the Board sees the benefit in maintaining high standards of corporate governance and is committed to ensuring accountability and transparency as ways to protect the interests of all our shareholders. The approach of Amerisur to Corporate Governance has been outlined on our website here.

To help facilitate this:

•  Our Chairman ensures that all Directors are properly briefed and have access to independent professional advice and to the services of the Company Secretary, and receive the appropriate training, as necessary and as determined by an annual review;
•  Additionally, due to the CEO being based in South America there are additional roles the Chairman undertakes, including meetings when it is not feasible for the CEO to attend. These are primarily key stakeholder and governmental engagement meetings and the Chairman is an important element in having built the relationships which have allowed operations to proceed and prosper;
•  The Non-Executive Directors’ role is to constructively challenge, and they can suggest agenda items for Board meetings, and are encouraged to do so; and
•  The Senior Independent Director (SID) is available to shareholders if they have concerns which contact through the normal channels of Chairman, Chief Executive or other Executive Directors has failed to resolve or for which such contact is inappropriate.

Matters that are reserved for the Board to discuss are:

•  The “formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions, and reporting to the shareholders”, and an obligation “to be aware of the risks facing the Company, mitigate them where possible, insure against them where appropriate and manage the residual risk in accordance with the stated objectives of the Group.” (Source: pages 41 and 56 of the 2017 Annual Report)

To help structure the Board’s activities there are key committees for audit, remuneration and nomination, each of which have clearly set out any terms of reference and disclosed tasks they undertake.

There is a description of the Board Committees on the website here and within the 2017 Annual Report. The Audit Committee’s Terms of Reference is made publicly available on the website as well as here.

Current plans to help ensure the evolution of the governance framework continues. The Board is conducting a review of the most appropriate method for undertaking an annual evaluation of its own performance, and that of its key Board Committees and individual Directors.

Communicating the benefits of good governance with shareholders and key stakeholders (Principle 10)

For the benefit of shareholders to see our progress we provide historical annual reports and other governance-related material. This includes the Financial Statements for the last nine years available here.

As well as having voluntarily put our Directors Remuneration Report up for shareholder approval we announce the vote outcomes on the day of the Company's Annual General Meeting. At the 2018 Annual General Meeting all resolutions presented to shareholders were duly passed with more than 80% support and nearly all with more than 90% support.

Giles Clarke, Chairman

26th September 2018
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