Corporate Governance
Extract from 2006 Annual Report and Financial Statements
Chris Moar, Company Secretary
Ramco, as an AIM listed Company, is not required to comply with the July 2003 Combined Code on Corporate
Governance. However, the Board recognises the importance of sound corporate governance and has ensured that the Company has adopted policies and procedures which reflect such of the Principles of Good Governance and the Code of Best Practice as published by the Committee on Corporate Governance (commonly known as the “Combined Code”), as are appropriate to the Company’s size.
Directors
The Board currently comprises three Executive Directors and one Non-Executive Director. Up until his resignation on 14 March 2007, Malcolm Hay was the senior Non-Executive Director. Prior to this date there were two Non-Executive Directors and prior to the resignation of D Paterson on 9 June 2006 there were three Non-Executive Directors. Given his long history as an employee and previous role as an Executive Director of the Company, N S Cumming is not considered to be an independent Non-Executive Director. The Board is responsible for setting overall Group strategy, policy, monitoring Group performance and authorising significant transactions.
The Board meets not less than four times a year and has adopted a schedule of matters reserved for its decision. All Directors have full and timely access to information and may take independent professional advice at the Group’s expense.
The Board has three standing committees with terms of reference as follows:
Audit and Remuneration Committees
These committees are comprised solely of Non-Executive Directors who take no part in the discussion of their own remuneration. Both were chaired by M Hay until he resigned on 14 March 2007 and the other member is N S Cumming. Between March and June 2007 the activities of these committees were temporarily suspended. However, it is planned that two new Non-Executive Directors will be appointed to the Group’s Board soon after the date of this report. These appointments will mean that 50% of the Board is made up of Non-Executive Directors and will allow the Audit and Remuneration Committees to resume their activities.
Audit Committee
The Audit Committee determines the terms of engagement of the Company’s auditors and determines, in consultation with the auditors, the scope of the audit. The Audit Committee receives and reviews reports from management and the Company’s auditors relating to the interim and annual accounts and the accounting and internal control systems in the Company. The Audit Committee has unrestricted access to, and oversees, the relationship with the Company’s auditors. The Audit Committee meets at least twice a year and meets with the Company’s auditors at least once a year. Executive Directors may attend by invitation.
The External Auditors are engaged to express an opinion on the financial statements. They review and test the systems of internal financial control and data contained in the financial statements to the extent necessary to express their audit opinion. They discuss with management the reporting of operational results and the financial position of the Group and present their findings to the Audit Committee.
The Audit Committee reviews the independence and objectivity of the External Auditors. The Committee reviews the nature and amount of non-audit work undertaken by PricewaterhouseCoopers LLP each year to satisfy itself that there is no effect on their independence. Details of this year’s fees are given in note 3 on page 31. The Committee is satisfied that PricewaterhouseCoopers LLP are independent.
The Audit Committee monitors the performance of the External Auditors on an ongoing basis, with input from the Finance Director and other key members of the finance team. Following such an assessment, the Committee meets to discuss what actions, if any, require to be taken. The Committee also makes a recommendation to the Board on the appointment or re-appointment of the External Auditors.
The Group does not have an internal audit function but the need for such a function is reviewed periodically. It is the current view of the Board that an internal audit function is not considered appropriate given the size and nature of the operations and the Group.
Remuneration Committee
The Remuneration Committee reviews the scale and structure of the Executive Directors’ remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the Non-Executive Directors are set by the entire Board. No Director or manager of the Company may participate in any meeting at which discussion or any decision regarding his own remuneration takes place. The Remuneration Committee also administers any share option schemes or other employee incentive schemes adopted by the Company from time to time.
The Remuneration Report is presented on pages 16 to 19 and contains a statement of remuneration policy and details of the remuneration of each Director.
Nominations Committee
The Nominations Committee is currently chaired by N S Cumming and meets as required. The other member is Steve Remp. One of the new Non-Executive Directors will be appointed to the vacant position on this committee soon after the date of this report.
The Committee proposes to the Board suitable candidates for appointment as Directors of the Company, and considers Board succession plans. Directors appointed by the Board in the course of the year must retire and offer themselves for reappointment at the next AGM.
Risk Management and Internal Control
The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. Management identify risks, the likelihood of those risks occurring, the impact if they do occur and the actions being taken to manage and mitigate those risks to an acceptable level.
The Board of Directors has overall responsibility for maintaining a sound system of internal financial control to safeguard shareholders’ investment and the Group’s assets. Such a system can provide reasonable but not absolute assurance that assets are safeguarded, transactions are authorised and correctly recorded, and that material errors and irregularities are either prevented or would be detected within a timely period. The system, which has been in place throughout the year and up to the date of this report, comprises the following main elements, all of which are reviewed by the Board:
- An organisation structure with clearly defined lines of responsibility and delegation of authority.
- Appointment of employees of the necessary calibre to fulfil their allotted responsibilities.
- Established procedures for budgeting and capital expenditure.
- Monthly reporting of actual performance compared to budget, reviewed by the Board quarterly.
- Rolling monthly forecasts for the financial year.
- The Group reports to shareholders on a half yearly basis to ensure timely reporting of financial results.
Investor Relations
Communications with investors are given high priority. The Company keeps its institutional shareholders up to date with its business and objectives, and obtains their views on the Company, by means of periodic presentations. Additionally the Company is ready to respond appropriately to particular issues or questions that may be raised by investors. All shareholders are sent the Annual Report and financial statements, the Interim Report and can also elect to receive all press releases, many choosing to receive this information by e-mail.
The Company has a web site, www.ramco-plc.com, which is regularly updated and contains a wide range of information about the Company including share price information, Annual Report and financial statements, and press releases. Similar information about Lansdowne can be found at www.lansdowneoilandgas.com
The Board views the AGM as an opportunity to communicate with private investors and encourages them to attend. The Board aims to ensure that the Chairman of the Audit and Remuneration Committees is available to answer questions. The Executive Chairman gives a short presentation on the business and its trading position. Shareholders are invited to ask questions and are given the opportunity to meet the Directors informally following the meeting. Whenever possible, the Company complies with best practice in ensuring that the Notice of the AGM is dispatched to shareholders at least 20 working days ahead of the meeting.
Directors’ Responsibilities
Company law requires the Directors to prepare the financial statements for each financial year that give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year, and of the profit or loss of the Group for that period.
The Directors confirm that suitable accounting policies have been used and applied consistently. The Directors also confirm that reasonable and prudent judgements and estimates have been made in preparing the financial statements for the year ended 31 December 2006 and that applicable accounting standards have been followed.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The maintenance and integrity of the Ramco Energy plc website is the responsibility of the Directors. The work carried out by the Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.