Commentary - Santos

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Corporate Governance (continued) The Board is responsible for: • overseeing the Company’s strategic direction and management of the Company; • approving the annual capital and operating budget; • approving delegations of authority to Management; • approving significant acquisitions and disposals of assets; • approving significant expenditure decisions outside of the Board-approved corporate budget; • approving and monitoring financial performance against strategic plans and corporate budgets; • approving ethical standards and codes of conduct; • selection, evaluating and succession planning for Directors, the CEO and Company Secretary and generally endorsing the same for the CEO’s direct reports; • setting the remuneration of Directors and the CEO and generally endorsing of the same for the CEO’s direct reports; and • overseeing the integrity of risk management processes and systems. Delegation of Authority The Board delegates management of the Company’s resources to the Company’s executive management team under the leadership of the CEO, to deliver the strategic direction and goals approved by the Board. This is formally documented in the Company’s Delegation of Authority. Responsibilities delegated by the Board to Management: • the conduct and operation of the Company’s business in the ordinary course; • implementing corporate strategies; and • operating under approved budgets and written delegations of authority. The Company’s Delegation of Authority was the subject of an extensive review in the first half of 2012, with a view to simplification and incorporation of increased accountability by personnel exercising their delegated authority, whilst reducing unnecessary ‘red tape’. A substantially restructured, simplified and updated version was adopted in June 2012. The new Delegation of Authority incorporates increased accountability for personnel exercising delegated authority. Regular Senior Executive performance evaluations are undertaken. An important aspect of the Board’s responsibilities is the evaluation of the Company’s executives. Performance evaluation of Senior Executives is undertaken twice a year by the CEO. The Chairman undertakes the CEO’s annual review and reports the outcome to the People and Remuneration Committee. The results of these reviews are used in determining future remuneration in consultation with the People and Remuneration Committee, and generally for review by the Board in relation to Management succession planning. Performance reviews were conducted in accordance with this process for each of the Senior Executives, including the CEO, during the year. These reviews impacted on the short term incentives for the Senior Executives and included the following criteria: • analysing performance against agreed measures; • examining the effectiveness and quality of the individual in their given role; • assessing key contributions; • identifying areas of potential improvement; and • assessing whether expectations of shareholders and other stakeholders have been met. Details of the remuneration received by the CEO and Senior Executives, including short- and long-term incentives relating to Company and individual performance targets, are set out in the Remuneration Report commencing on page 58 of the Annual Report. Details of non-executive Director remuneration are also set out in the Remuneration Report. 34
2.2 Indemnity, access to information and independent professional advice The Board Charter sets out the circumstances and procedures pursuant to which a Director may seek independent professional advice at the Company’s expense. Those procedures require prior consultation with, and approval by, the Chairman and assurances as to the qualifications and reasonableness of the fees of the relevant adviser. A copy of the advice and letter of instruction is usually required to be provided to the Board. Pursuant to a deed executed by the Company and each Director, a Director also has the right to access all documents which have been presented to meetings of the Board or to any Committee of the Board or otherwise made available to the Director whilst in office. This right continues for a term of seven years after ceasing to be a Director, or such longer period as is necessary to determine any relevant legal proceedings that commenced during that term. Information in respect of indemnity and insurance arrangements for Directors and certain Senior Executives appears in the Directors’ Report on page 76 of this Annual Report. Board Committee Membership Part 3: Board Committees Relevant policies and charters See www.santos.com • Audit Committee Charter • Environment, Health, Safety and Sustainability Committee Charter • Finance Committee Charter • Nomination Committee Charter • People and Remuneration Committee Charter 3.1 Role and membership The Board has established a number of Committees to assist with the effective discharge of its duties. The membership and role of each Committee is set out below and in Section 3.3. All Committees are chaired by and comprise only non-executive, independent Directors, except the Environment, Health, Safety and Sustainability Committee, which includes the CEO as a member in accordance with the Charter of that Committee. Other composition requirements specific to each Committee are set out on the following page and in Section 3.3. Non-Committee members may attend Committee meetings by invitation. Audit Committee Environment, Health, Safety and Sustainability Committee Finance Committee Each Committee operates under a specific charter approved by the Board. Board Committees conduct their own internal review of their performance, structure, objectives and purpose from time to time. A revised Charter for the Environment, Health, Safety and Sustainability Committee was adopted in February 2012, following a review by that Committee. This updated the Charter in line with changes brought about by the new Work Health Safety Act 2011 (Cth). An indicative annual schedule of matters for consideration by the Committee was also added, as part of consolidation of safety due diligence principles endorsed by the Board. Board Committees have access to internal and external resources, including access to advice from independent external consultants or specialists. The Chairman of each Committee provides an oral, and, where appropriate and practicable, a written report together with the minutes and recommendations of the Committee at the next Board meeting. Following is a summary of the membership of the Board Committees. Nomination Committee People and Remuneration Committee KC Borda Non-executive Director Chairman Member PR Coates Non-executive Director Member Chairman Member (Chairman) KA Dean Non-executive Director Chairman Member RA Franklin 1 Non-executive Director Member Member RM Harding 1 Non-executive Director Member Chairman Member DJW Knox Executive Director Member (Managing Director/CEO) GJW Martin Non-executive Director Member Chairman JS Hemstrich Non-executive Director Member Member 1. Mr RM Harding ceased to be a member of the People and Remuneration Committee, and Mr RA Franklin was appointed as a member of the People and Remuneration Committee, on 17 February 2012. <strong>Santos</strong> Annual Report 2012 35
Page 1 and 2: Annual Report 2012 The energy to de
Page 3 and 4: World of Santos Ref Location Site/A
Page 5 and 6: Contents Overview 2 Operating and f
Page 7 and 8: Operating cash flow $1,658 million
Page 9 and 10: Review by Peter Coates and David Kn
Page 11 and 12: Our vision and strategy Our vision
Page 13 and 14: Production and sales Santos continu
Page 15 and 16: RESERVES (SANTOS SHARE) mmboe Year-
Page 17 and 18: NET PROFIT AFTER TAX $million AVAIL
Page 19 and 20: 2012 key statistics GREENHOUSE GAS
Page 21 and 22: Eastern Australia Positioned for gr
Page 23 and 24: On board the Mutineer-Exeter FPSO,
Page 25 and 26: GLNG Construction well underway on
Page 27 and 28: Pipelay underway at the Dua oil pro
Page 29 and 30: Jane Sharman Hemstritch BSc (Hons),
Page 31 and 32: DAVID KNOX Chief Executive Officer
Page 33 and 34: Principle 4 - Safeguard integrity i
Page 35 and 36: DEFINING REQUIRED SKILLS AND EXPERI
Page 37: Internal Board Review process Imple
Page 41 and 42: Regular meetings held with auditors
Page 43 and 44: 4.3 Examples of business risks Exam
Page 45 and 46: 4.4 Independence of auditors and no
Page 47 and 48: The Company remains committed to at
Page 49 and 50: Organisation chart BOARD COMMITTEES
Page 51 and 52: As at 31 December 2003 2004 2005 20
Page 53 and 54: Directors’ Report The Directors p
Page 55 and 56: Principal Activities The principal
Page 57 and 58: Asia Pacific Asia Pacific Business
Page 59 and 60: Dividends On 22 February 2013, the
Page 61 and 62: Shares Issued on the Exercise of Op
Page 63 and 64: The Company believes that the addit
Page 65 and 66: Remuneration Governance People and
Page 67 and 68: Long-term Incentives (“LTI”) Th
Page 69 and 70: Long-term Incentives How much annua
Page 71 and 72: Senior Executive Remuneration Overv
Page 73 and 74: Table 7: Non-executive Directors’
Page 75 and 76: Table 9 contains details of the num
Page 77 and 78: Details of the fees and other benef
Page 79 and 80: Long-term incentives How are long-t
Page 81 and 82: Index A Announcements 173 Annual G
Page 83 and 84: Major announcements made in 2012 13

Commentary - Santos

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