Commentary - Santos

Corporate Governance
(continued)
The Board Charter also includes the following
principles:
• nomination for re-election is subject to
review by the Nomination Committee and
endorsement by the Board;
• there should be appropriate circumstances
justifying nomination for re-election
after a Director has served for 12 years
(e.g. Chairmanship or special skills); and
• the contribution of the Board, Board
Committees, and of individual Directors
is the subject of formal review and
discussion in accordance with the
process set out below.
In making recommendations relating to
Board composition, the Nomination
Committee takes into account both the
current and future needs of the Company.
The Nomination Committee specifically
considers each of the Directors coming up for
re-election and makes an assessment as to
whether to recommend their re-appointment
to shareholders. This assessment considers
matters including their contribution to the
Board, the results of Board and Committee
reviews, and the ongoing needs of the
Company. The Committee also takes into
account the succession plans of the Directors
more broadly.
Where a potential ‘gap’ is identified in the
backgrounds, experiences or skill sets that
are considered desirable or necessary for the
Board’s continued effectiveness, this
information is used to inform the selection
of new Director candidates.
The Nomination Committee is responsible
for defining the desired attributes and skill
sets for a new Director and the services of
an independent consultant are then used to
assist in the identification and assessment
of a range of potential candidates based on
a brief from the Nomination Committee. The
Nomination Committee reviews prospective
candidates, then makes recommendations to
the Board regarding possible appointments
of Directors, including recommendations for
appointments to Committees.
1.4 Director induction
and continuing education
Prior to appointment, each Director is
provided with a letter of appointment
which includes copies of the Company’s
Constitution, Board Charter, Committee
Charters, relevant policies and functional
overviews of the Company’s strategic
objectives and operations. The expectations
of the Board in respect to a proposed
appointee to the Board and the workings
of the Board and its Committees are also
conveyed in interviews with the Chairman.
Induction procedures include site visits and
access to appropriate executives in relation
to details of the business of the Company.
The existing practices of providing new
directors with a formal letter of appointment
setting out their rights, duties and
responsibilities and ensuring that they
receive a comprehensive induction program,
including business briefings by Management
and site visits, has now been explicitly
recognised in the revised Board Charter.
The letter of appointment was reviewed
and updated in October 2012, as were the
Company’s induction procedures.
Directors are encouraged by the Board to
continue their education by attending both
internal and external training and education
relevant to their role.
Board site visits in 2012 to GLNG,
Gunnedah and Narrabri.
During 2012, the Directors participated in
briefing sessions on a broad range of issues,
including global oil and gas industry trends,
crude oil pricing, global LNG supply and
demand, global exploration outcomes and
trends, and the national Work Health Safety Act
2011 (Cth). Directors also attended site visits
to GLNG and to Gunnedah and Narrabri,
including engagement with local community
business and government leaders. In addition,
Board meetings have been held at various
Santos offices including in Adelaide, Sydney,
Brisbane and Singapore, giving the opportunity
for familiarisation with each location’s
operations and personnel, and presentations
from the local management team.
1.5 Review of board
and director performance
As specified in the Board Charter, reviews
of Board, Committee and individual Director
performance are conducted annually. At least
once every three years, the annual review of
the Board and individual Directors is carried
out by an independent consultant. The scope
of the external review is agreed in advance
with the Board. Internal reviews are
facilitated by the Chairman, in consultation
with the Nomination Committee, and involve
questionnaires and formal interviews with
each Director culminating in a written report
prepared by the Chairman.
The last external review of the Board as
a whole concluded in 2011 and a number
of initiatives were introduced as a result,
including the initiation of a strategic five
year review, broadening the remit of the
People and Remuneration Committee and
increasing the Board’s engagement with
upcoming talent within the Company
as well as the key stakeholders in the
Company’s business.
An internal review of the Board, each
Committee and individual Directors was
carried out in early 2012. This review
included feedback from all Directors on the
workings of the Board as a whole, as well as
from senior executives. It included a review
of the performance, structure, objectives and
purpose of the Board Committees. The review
addressed:
• the Board’s contribution to strategy and
policy;
• interaction between the Board and
Management;
• the Board’s processes to monitor business
performance and compliance;
• risk management;
• Board composition and structure; and
• the operation and conduct of the Board.
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