The board of directors and management of the Corporation believe that appropriate corporate governance practices are important for the effective management of the Corporation and value creation for its shareholders. A description of Radius Financial’s corporate governance practices follows and a comparison is made to the guidelines on corporate governance of the Securities and Exchange Commission and the Canadian Securities Administrators (the “Guidelines”).
Mandate of the Board of Directors
The board of directors has adopted a written mandate setting out its responsibilities for the stewardship of the Corporation. The mandate of the board, which is consistent with the Guidelines, is to oversee the management of the business of the Corporation by the executive officers and managers of the Corporation and includes the following duties and responsibilities:
- Approving the long-term strategy for the Corporation and monitoring the Corporation’s overall performance against that strategy;
- Reviewing annually the strategic plan including opportunities and risks and approving significant investments, divestitures and alliances;
- Identifying matters that require prior approval of the board
- Identifying and assessing the principal risks inherent in the business activity of the Corporation as a whole or in its investment in any major operating company and systems to manage and monitor those risks;
- Reviewing succession planning and the appointment of senior executives of the Corporation, reviewing their performance against the objective of maximizing shareholder value, measuring their contribution to that objective, and overseeing the compensation policies for investment participation of those executives;
- Reviewing annually the Corporation’s communication policies and, prior to issuance, major shareholder communications
- Establishing and monitoring the environmental policy for the Corporation;
- Approving the Corporation’s written Code of Business Conduct and Ethics and monitoring compliance with that Code;
- Satisfying itself as to the integrity of the Chief Executive Officer and other senior officers and that they foster a culture of integrity within the Corporation;
- Reviewing financial performance and reporting and assessing the integrity of the Corporation’s internal control and management information systems; and
- Reviewing and monitoring the Corporation’s adherence to high standards of corporate governance principles as well as measures for receiving shareholder feedback;
Composition of the Board
The board of directors proposed for election is composed of six members, three of whom are independent in that they have no direct or indirect business or other relationships that could reasonably be expected to interfere with the exercise of independent judgment.
The non-independent directors are:
The independent directors are:
The independent directors have diverse business backgrounds, a wide range of public company experience and meaningful investments in the Corporation and its subsidiary businesses. As a result, they well represent the interests of shareholders, including minority shareholders, of the Corporation. The board has adopted a policy requiring that each director own shares of the Corporation and the minimum number of shares to be held is currently set at 250,000 shares. The minimum number of shares to be held is determined at December 31 each year and directors have up to 12 months to acquire additional shares to achieve ownership requirements, except that new directors may have up to four years to achieve the appropriate share ownership level.
Independence and Functioning of the Board
Each director works with his or her fellow directors to perform the responsibilities of the board and its committees as set out in their respective written charters. Each director acts to serve the long-term interests of the Corporation and its shareholders and in so doing conducts himself or herself in an independent manner and in accordance with the highest ethical standards. Directors continually seek to improve their knowledge about the Corporation and the opportunities and risks facing its business. In so doing, directors prepare for, attend where possible and participate in all meetings of the board and, where they are members, of its committees. To achieve this result, each director commits to devote sufficient time to effectively carry out his or her responsibilities. Directors are expected to be able to provide informed judgment on a wide variety of matters, particularly those relevant to the business of the Corporation. Given the nature of Radius’s business and the matters reviewed by the board, each director is also expected to possess a significant degree of financial literacy. It is anticipated that an individual who accepts the position as a director of the Corporation will commit to be a board member for an extended period of time.
The current practice of the board of directors permits an individual director or committee of the board to engage an outside advisor at the expense of the Corporation, and with notice to the lead director, in appropriate circumstances. In addition, each director who has or may reasonably be perceived to have a material interest in any transaction or agreement being considered by the board is required to make full disclosure of his or her interest and if an actual conflict exists, is expected to abstain from voting on such matter.
Key Position Descriptions
The Guidelines suggest that position descriptions for the board, chairs of the board committees and the Chief Executive Officer should be developed. The broad mandate of the board, and its duties and responsibilities as described above, serve to define the relationship between the board and management. They work together in a collegial manner without a significantly structured or hierarchical format. This is consistent with the highly entrepreneurial nature of the Corporation. There are written mandates for the committees of the board.
The following are position descriptions for the Chairman:
The Chairman is to manage the affairs of the board, ensuring that the board meets its obligations and responsibilities and functions effectively, and to see that the interests of the shareholders are achieved. In that capacity he ensures that the board has adequate resources and the full, timely and relevant information required to enable responsible decision-making. The Chairman chairs all meetings of shareholders and is available for questions from shareholders. The Chairman provides the principal point of contact between management and the board and facilitates effective interaction between board members and management.
Committees of the Board
The board has established three standing committees of directors, the responsibilities of each of which are summarized below and are set forth in a written charter approved by the board. Other committees are appointed from time to time when required. The proceedings of committees are reviewed by, and their recommendations are brought for consideration to, the full board.
The Audit Committee is composed of three directors, all of whom are independent directors as recommended by the Guidelines. These directors also meet the higher independence standard for audit committee members recommended by the Guidelines. The Committee reviews the financial qualifications of its members. All of the members of the Audit Committee are financially literate and at least one has the experience level of a financial expert, all as contemplated by the Guidelines. The Committee is scheduled to meet four times during 2009. Its responsibilities include the review and assessment of the Corporation’s external audit plan, the audit approach on subsidiary companies, accounting policies, internal controls, access granted to the Corporation’s records and co-operation by management in the audit process, accounting systems, financial risk management, adequacy of insurance coverage, compliance by subsidiary companies with environmental policies, and quarterly and annual financial reporting. The Audit Committee reviews the annual and quarterly consolidated financial statements, 10-K and 10-Q’s, Management’s Discussion and Analysis of the financial results, the external auditor’s report and press releases on earnings and reports its findings to the board of directors for consideration when approving the annual and quarterly financial statements for issuance to the shareholders. The Audit Committee meets without the presence of management, except at the Committee’s invitation, and has direct access to representatives of the auditors. The Committee is responsible for assessing the independence of the auditors and sets the criteria for non-audit services the external auditor is prohibited from providing.
The Compensation Committee is and will be composed of three members, all of whom are independent and unrelated directors, which is consistent with the Guidelines. This Committee establishes and administers the compensation policies and remuneration levels for the executive officers and managers of the Corporation and reviews such levels for certain senior executive officers of the Corporation’s subsidiaries. This function includes reviewing and recommending to the board incentive-compensation plans and equity-based plans for the Corporation, including the stock option plan and the Management Investment Plan. In formulating its recommendations on executive compensation in general and Chief Executive Officer compensation in particular, the Committee considers corporate goals and objectives relevant to the matter and evaluates the executive’s performance relative to those goals and objectives, among other things. The Committee’s recommendations for such remuneration levels, including that for the Chief Executive Officer, are reviewed by the board of directors. The Committee also reviews and approves the Corporation’s disclosure with respect to executive compensation. The Committee is scheduled to meet three times in 2009.
The Audit Committee is composed of three directors, all of whom are independent directors as recommended by the Guidelines. The Committee has a broad responsibility for reviewing and monitoring the Corporation’s corporate governance policies and related disclosures. The Committee also annually reviews the adequacy and forms of compensation for directors. This review is completed with reference periodically to outside surveys of directors’ compensation for corporations of similar size and complexity. The Committee monitors compliance with the Corporation’s Code of Business Conduct and Ethics and would consider and determine any proposed waiver for the benefit of the Corporation’s directors or senior officers.
Director Recruitment and Performance Review
The board of directors consists of six members, which is considered by the board to be an appropriate size to facilitate effective decision-making. The entire board, three out of six of the members of which are independent, acts as a nominating committee in identifying and recruiting new members to the board. The board considers the competencies and skills that the board, as a whole, should possess, evaluates the competencies and skills of each current board member and then determines the competencies, skills and other qualities for new directors and assesses prospective new directors against that framework.
Annually, the board reviews the slate of directors proposed to be elected by the Subordinate Voting Shareholders at the annual meeting. The board also reviews each year the reappointment of any non-executive director who will have reached the age of 72 or greater at the time of the annual meeting. Participation of directors is expected, and generally there is full attendance, at all board and committee meetings. Directors are asked to notify the Corporation if they are unable to attend and attendance at meetings is duly recorded.
New directors of the Corporation have generally been executives with extensive business experience and directorship responsibilities on the boards of other public and private institutions. It is the responsibility of the Governance Committee to oversee the orientation program for new directors. The formal orientation program is tailored to the particular background of the new director and would include such items as a review of the board’s mandate, the mandates of committees, the Corporation’s Code of Business Conduct and Ethics, past board of directors’ materials and other private and public documents concerning the Corporation, exposure to the officers of the Corporation and visits to certain of the Corporation’s operating companies. The expectation as to time commitment and participation by directors would also be reviewed. This program is consistent with the Guidelines.