Exhibit 99.1
DOMINION DIAMOND CORPORATION
MANAGEMENT PROXY CIRCULAR
For the
Annual Meeting of Shareholders
July 15, 2015
__________________________________________
June 2, 2015
TABLE OF CONTENTS
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DOMINION DIAMOND CORPORATION
INVITATION TO SHAREHOLDERS
Dear Shareholder:
On behalf of the Board of Directors, management and employees, we invite you to attend Dominion Diamond Corporation's Annual Meeting of Shareholders on Wednesday, July 15, 2015.
The items of business to be considered at this Meeting are described in the Notice of Annual Meeting and Management Proxy Circular. No matter how many shares you hold, your participation at shareholders' meetings is very important. If you are unable to attend the Meeting in person, we encourage you to vote by following the voting instructions included on the proxy form.
There will be an opportunity to ask questions and meet with management, the Board of Directors and your fellow shareholders.
We look forward to seeing you at the Meeting.
Sincerely,
Robert A. Gannicott
Chairman & Chief Executive Officer
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DOMINION DIAMOND CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVENthat an Annual Meeting of Shareholders (the “Meeting”) ofDOMINION DIAMOND CORPORATION(the “Corporation”) will be held at The Explorer Hotel, 4825 49thAvenue, Yellowknife, Northwest Territories at 8:00 a.m. Mountain time (10:00 a.m. Toronto time)on Wednesday, July 15, 2015, for the following purposes:
1. | to receive the audited consolidated financial statements of the Corporation for the fiscal year ended January 31, 2015, together with the report of the auditors thereon; |
2. | to elect directors; |
3. | to appoint auditors and authorize the directors to fix their remuneration; |
4. | to consider and, if thought fit, to approve an advisory resolution on the Corporation’s approach to executive compensation, as disclosed in the Management Proxy Circular of the Corporation; and |
5. | to transact such other business as may properly be brought before the Meeting or any adjournment thereof. |
The accompanyingManagement Proxy Circular of the Corporation provides additional information relating to the matters to be dealt with at the Meeting and forms part of this notice.
Whether or not you expect to attend the Meeting, please exercise your right to vote. Shareholders who have voted may still attend the Meeting. Instructions on how to complete and return the proxy are provided with the proxy form and are described in the Management Proxy Circular. To be valid, proxies must be received by the Proxy Department of CST Trust Company by mail at P.O. Box 721, Agincourt, Ontario, Canada, M1S 0A1, or by email toproxy@canstockta.com, or by fax to 1-866-781-3111 or outside Canada and U.S. to 416-368-2502, or in person at 320 Bay Street, Basement Level (B1), Toronto, Ontario, Canada, M5H 4A6, no later than 5:00 p.m. (Toronto time) on July 13, 2015, or if the Meeting is adjourned, no later than 10:00 a.m. (Toronto time) on the last business day preceding the day to which the Meeting is adjourned.
BY ORDER OF THE BOARD
Lyle R. Hepburn
Corporate Secretary
June 2, 2015
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DOMINON DIAMOND CORPORATION
MANAGEMENT PROXY CIRCULAR
All information is as of June 2, 2015 and all dollar figures are in United States dollars, unless otherwise indicated.
Q&A ON PROXY VOTING
Q: | What am I voting on? |
A: | At the Annual Meeting of Shareholders (the “Meeting”), shareholders are voting on the election of directors to the board of directors (the “Board”) of Dominion Diamond Corporation (the “Corporation”), the appointment of auditors for the Corporation and authorizing the directors to fix the remuneration of the auditors and the advisory resolution to accept the Corporation’s approach to executive compensation, as disclosed in this Management Proxy Circular. |
Q: | Who is entitled to vote? |
A: | If you owned your Common Shares as at the close of business on June 2, 2015, you are entitled to vote. Each Common Share is entitled to one vote on those items of business identified in the Notice of Annual Meeting of Shareholders. |
Q: | How do I vote? |
A: | There are two ways you can vote. You may vote in person at the Meeting, in which case please read the instructions set out after the following question. If you do not plan to attend the Meeting and you are a registered shareholder you may sign the enclosed form of proxy appointing the named persons or some other person you choose, who need not be a shareholder, to represent you as proxyholder and vote your Common Shares at the Meeting. If your Common Shares are held in the name of a nominee (a bank, trust company, securities broker, trustee or other), you will have received from your nominee either a request for voting instructions or a form of proxy for the number of Common Shares you hold. For your Common Shares to be voted, please follow the voting instructions provided by your nominee. |
Q: | What if I plan to attend the Meeting and vote in person? |
A: | If you are a registered shareholder and plan to attend the Meeting and wish to vote your Common Shares in person at the Meeting, do not complete or return the form of proxy. Your vote will be taken and counted at the Meeting. Please register with the transfer agent, CST Trust Company, upon arrival at the Meeting. |
If your Common Shares are held in the name of a nominee, the Corporation may have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder. Therefore, if you wish to vote in person at the Meeting, insert your own name in the space provided on the request for voting instructions or form of proxy and return it by following the instructions provided to you by your nominee. Do not complete the voting instructions on the form, as you will be voting at the Meeting. Please register with the transfer agent, CST Trust Company, upon arrival at the Meeting. |
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Q: | Who is soliciting my proxy? |
A: | The enclosed form of proxy is being solicited by the management of the Corporationand the associated costs will be borne by the Corporation. The solicitation will be made primarily by mail but may also be solicited personally, by telephone, e-mail, internet, facsimile, or other means of communication by employees of the Corporation. |
Q: | What if I sign the form of proxy enclosed with this Management Proxy Circular? |
A: | Signing the enclosed form of proxy gives authority to Robert A. Gannicott or Daniel Jarvis, each of whom is a director of the Corporation, or to another person you have appointed, to vote your Common Shares at the Meeting. |
Q: | Can I appoint someone other than these directors to vote my Common Shares? |
A: | Yes. Write the name of this person, who need not be a shareholder, in the blank space provided in the accompanying form of proxy. |
It is important to ensure that any other person you appoint is attending the Meeting and is aware that he or she has been appointed to vote your Common Shares. Proxyholders should, upon arrival at the Meeting, present themselves to a representative of CST Trust Company. | |
Q: | What do I do with my completed proxy? |
A: | If you are a registered shareholder, return the proxy to the Corporation’s transfer agent, CST Trust Company, in the envelope provided, or by email toproxy@canstockta.com, or by fax to 1-866-781- 3111 or outside Canada and U.S. to 416-368-2502, so that it arrives no later than 5:00 p.m. (Eastern Standard Time) on Monday, July 13, 2015 to record your vote. If your Common Shares are held in the name of a nominee, please follow the voting instructions provided by your nominee. |
Q: | If I change my mind, can I take back my proxy once I have given it? |
A: | Yes. If you change your mind and wish to revoke your proxy, prepare a written statement to this effect. The statement must be signed by you or your attorney as authorized in writing or, if the shareholder is a corporation, under its corporate seal or by an officer or attorney of the corporation duly authorized. This statement must be delivered to the Corporate Secretary of the Corporation at the following address no later than 5:00 p.m. (Eastern Standard Time) on Monday, July 13, 2015 or to the Chairman on the day of the Meeting, July 15, 2015, or any adjournment of the Meeting. |
Dominion Diamond Corporation
c/o 1090 Don Mills Road, Suite 506, Toronto, Ontario, M3C 3R6
Attention: Lyle R. Hepburn Fax No.: 416-350-3510
Q: | How will my Common Shares be voted if I give my proxy? |
A: | The persons named on the form of proxy must vote for or against or withhold from voting your Common Shares in accordance with your directions, or you can let your proxyholder decide for you. In the absence of such directions, proxies received by management will be voted in favour of the election of directors to the Board as described herein, the appointment of auditors, and the advisory resolution to accept the Corporation’s approach to executive compensation, all as disclosed in this Management Proxy Circular. |
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Q: | What if amendments are made to these matters or if other matters are brought before the Meeting? |
A: | The persons named in the form of proxy will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual Meeting of Shareholders and with respect to other matters which may properly come before the Meeting. As of the time of printing of this Management Proxy Circular, management of the Corporation knows of no such amendment, variation or other matter expected to come before the Meeting. If any other matters properly come before the Meeting, the persons named in the form of proxy will vote on them in accordance with their best judgment. |
Q: | How many Common Shares are entitled to vote? |
A: | As of June 2, 2015 (the “Record Date”), there were 85,245,730 Common Shares issued and outstanding. Each registered shareholder has one vote for each Common Share held at the close of business on the Record Date. To the knowledge of the directors and senior officers of the Corporation, as of date hereof, the following table sets forth the parties who beneficially own, directly or indirectly, or exercise control or direction over voting securities of the Corporation carrying 10% or more of the voting rights attached to any class of voting securities of the Corporation: |
Name of Shareholder and Municipality of Residence | Number of Common Shares owned, Controlled or Directed | % of Outstanding Common Shares |
Vanguard Precious Metals and Mining Fund Malvern, PA, USA | 9,839,407 | 11.5% |
M&G Investment Management Limited United Kingdom, England | 13,535,507(1) | 15.9% |
BlackRock, Inc. New York, NY, USA | 9,908,122 | 11.6% |
(1) M&G Investment Management Limited’s Schedule 13G filed with the Securities and Exchange Commission states that all of these Common Shares are legally owned by its advisory clients and none are owned directly by it. It further discloses that it has shared power to vote 3.4 million Common Shares and shares the power to dispose or to direct the disposition of 13.5 million Common Shares. Some of these Common Shares are owned legally by Vanguard Inc. their investment advisory client. M&G states in its filing that it has the sole investment power and no voting power in these securities. | |
Q: | How will the votes be counted? |
A: | Each question brought before the Meeting is determined by a majority of votes cast on the question. In the case of equal votes, the Chairman of the Meeting is entitled to a second or casting vote. |
Q: | Who counts the votes? |
A: | The Corporation’s transfer agent, CST Trust Company, counts and tabulates the proxies. This is done independently of the Corporation to preserve the confidentiality of individual shareholder votes. Proxies are referred to the Corporation only in cases where a shareholder clearly intends to communicate with management or when it is necessary to do so to meet the requirements of applicable law. Confidentiality may also be lost if the Board decides that disclosure is in the interest of the Corporation or its shareholders. |
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Q: | If I need to contact the transfer agent, how do I reach them? |
A: | You can contact the transfer agent and registrar by mail at: |
CST Trust Company
P.O. Box 700, Station B, Montreal, Quebec, H3B 3K3
Telephone: 1-800-387-0825 or outside Canada and U.S. 416-682-3860
Fax: 1-888-249-6189 or outside Canada and U.S. 514-985-8843
E-mail: inquiries@canstockta.com Website: www.canstockta.com
REPORTING CURRENCY
The reporting currency of the Corporation is the United States dollar. Certain dollar amounts reported in the various tables in this Management Proxy Circular that were originally incurred in Canadian dollars have been converted, as applicable, into United States dollars as follows:
1. | The Canadian currency exchange rate, being the rate for exchanging a Canadian dollar into a United States dollar, (the “Exchange Rate”) was obtained from the Bank of Canada closing rates for the applicable dates listed below, which rates were as follows: | |
(a) | the Exchange Rate for February 1, 2014 (the “Year-Beginning Exchange Rate”) was 0.8978; | |
(b) | the Exchange Rate for January 31 , 2015 (the “Year-End Exchange Rate”) was 0.7867; | |
(c) | the average Exchange Rate for the fiscal period February 1, 2014 to January 31, 2015 (the “Average Exchange Rate”) was 0.8968; | |
(d) | the Exchange Rate for April 30, July 31, October 31, 2014 and January 31, 2015 (the “Quarterly Exchange Rate”) was 0.9124, 0.9171, 0.8872 and 0.7867, respectively; and | |
(e) | the Exchange Rate for May 15, 2015 (the “May Exchange Rate”) was 0.8318. | |
2. | The dollar amounts shown for deferred share units (“DSUs”) granted to directors represent the Canadian dollar amount credited to their respective accounts on a quarterly basis, converted into United States dollars using the corresponding Quarterly Exchange Rate. | |
3. | The cash retainers paid to directors represent the Canadian dollar amount paid to them on a quarterly basis, converted into United States dollars using the corresponding Quarterly Exchange Rate. | |
4. | The value of restricted share units (“RSUs”) granted to Named Executive Officers was converted into United States dollars using the Exchange Rate at the date of the grant. | |
5. | The value of outstanding RSUs of Named Executive Officers was converted into United States dollars using the Year-End Exchange Rate. | |
6. | Cash compensation paid to Named Executive Officers, and in respect of consulting services referred to herein, was converted into United States dollars using the Average Exchange Rate. |
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BUSINESS OF THE MEETING
Financial Statements
The Consolidated Financial Statements for the year ended January 31, 2015 are included in the 2015 Annual Report.
Election of Directors
The Articles of the Corporation provide that the minimum number of directors shall be three and the maximum number shall be 12. There are currently seven directors. The directors of the Corporation are elected annually and hold office until the next annual meeting of shareholders or until their successors in office are duly elected or appointed, unless a director’s office is earlier vacated in accordance with the by-laws of the Corporation or theCanada Business Corporations Act(“CBCA”), or he or she becomes disqualified to act as a director. The Board has fixed the number of directors to be elected at the Meeting at seven.
Management does not contemplate that any of the persons proposed to be nominated will be unable to serve as a director. If prior to the Meeting any of such nominees is unable or unwilling to serve, the persons named in the accompanying form of proxy will vote for another nominee or nominees in their discretion if additional nominations are made at the Meeting.
Unless a proxy specifies that the Common Shares it represents should be withheld from voting in respect of the election of directors or voted in accordance with the specification in the proxy, the persons named in the enclosed form of proxy intend to vote FOR the election of the nominees whose names are set out in this Management Proxy Circular.
The list of directors and their biographies can be found on pages 11 to 14 of this Management Proxy Circular (see “Nominees for Election to Board of Directors”). Information regarding Director Compensation can be found on pages 14 to 19 of this Management Proxy Circular (See “Compensation of Directors”, “Director Summary Compensation Table” and“Incentive Plan Awards). Attendance at Board and Committee meetings by directors holding office during the fiscal period ended January 31, 2015 (“Fiscal 2015”), can be found on page 19 of this Management Proxy Circular (see “Meetings Held and Attendance of Directors”).
To the knowledge of the Corporation, except as set out below, no person nominated for election as a director of the Corporation is, or has been in the last 10 years, (a) a director, chief executive officer or chief financial officer of a company that (i) while that person was acting in that capacity, was the subject of a cease trade order or similar order (including a management cease trade order) or an order that denied the issuer access to any exemptions under securities legislation, for a period of more than 30 consecutive days, or (ii) after that person ceased to act in that capacity, was subject of a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation, for a period of more than 30 consecutive days which resulted from an event that occurred while that person acted in such capacity, or (b) a director or executive officer of a company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets.
On June 30, 2005, the Superior Court of Quebec (Commercial Division) granted an initial order to Campbell Resources Inc. under theCompanies Creditors Arrangement Act. At the time of this order, Graham G. Clow was serving as a director of Campbell Resources Inc. On February 23, 2007, the Monitor presented a Certificate of Execution with respect to the Plan of Arrangement confirming that Campbell Resources Inc. had executed all of its obligations pursuant to the Plan of Arrangement with its creditors.
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Majority Voting Policy
On January 14, 2009, the Board adopted a majority voting policy, which was amended on January 14, 2015. Board policy requires that in an uncontested election, any nominee who receives a greater number of votes ‘‘withheld’’ than “for” shall submit his or her resignation to the Nominating & Corporate Governance Committee promptly following the Meeting. The Nominating & Corporate Governance Committee shall consider the resignation and shall recommend to the Board whether or not to accept it. The Board shall determine whether or not to accept the recommendation and announce in a press release the Board’s determination (and the reasons for rejecting the resignation, if applicable) within 90 days following the date of the Meeting. A full description of the majority voting policy is included in Schedule 1 of this Management Proxy Circular.
Board of Directors Diversity Policy
On January 14, 2015 the Board adopted a Board of Directors Diversity Policy. The Board is committed to continued growth and development with respect to diversity among its board members and senior management.In addition, the Board is committed to ensuring that its members are reflective of diverse professional experience, skills, knowledge and other attributes that are essential to its successful operation and the achievement of the Corporation’s current and future plans and objectives.
When identifying candidates to nominate for election to the Board or recommend for appointment as senior management, the primary objectives of the Board and the Nominating & Corporate Governance Committee are to ensure consideration of individuals who are highly qualified, based on their talents, experience, functional expertise and personal skills, character and qualities, having regard to the Corporation’s current and future plans and objectives, as well as anticipated regulatory and market developments.
In furtherance of the Corporation’s commitment to diversity, the Board and the Nominating & Corporate Governance Committee will have due regard for the need to identify and promote individuals who are reflective of diversity for nomination for election to the Board and appointment as senior management.
The Board believes that its members have the expertise, skills, geographic representation, diversity, and size to make effective decisions. A full description of the Board of Directors Diversity Policy is included in Schedule 1 of this Management Proxy Circular.
Appointment of Auditors
Shareholders will be asked to vote for the reappointment of KPMG LLP, as auditors of the Corporation for the ensuing year, and to authorize the directors of the Corporation to fix their remuneration. A simple majority of the votes cast at the Meeting must be voted in favour thereof. Fees paid to KPMG LLP during the years ended January 31, 2015 and 2014 were as follows:
Fiscal 2015 (US$) | Fiscal 2014 (US$) | |
Audit Fees(1) | 1,151,600 | 1,373,078 |
Audit Related Fees(2) | 31,400 | 41,871 |
Tax Fees(3) | 112,400 | 30,927 |
All other Fees | - | - |
Total | 1,295,400 | 1,445,876 |
(1) | Includes audit and review services. |
(2) | Includes IFRS consultation and various audit services required as per legal obligations. |
(3) | Primarily tax advisory services. |
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The Audit Committee negotiates with the auditors of the Corporation on an arm’s length basis to determine the fees to be paid to the auditors. Such fees have been based on the nature and complexity of the matters in question, and the time incurred by the auditors.
The Audit Committee has adopted a policy that requires pre-approval by the Audit Committee of audit services and other services within permissible categories of non-audit services greater than Cdn$100,000.
The Audit Committee has considered whether the magnitude and nature of these services is compatible with maintaining the independence of the external auditors, and has determined that the independence of the external auditors is maintained.
Shareholder Advisory Vote on Approach to Executive Compensation
On July 16, 2014, the Board asked shareholders to vote on the way the Corporation compensates its executives. The Final Proxy Tabulation Report for the Corporation’s 2014 annual meeting of shareholders showed that 76.61% of shareholders voted in favour of the Corporation’s approach to executive compensation.
The Board will continue to hold an advisory shareholder vote on the Corporation’s approach to executive compensation annually and is submitting to shareholders a non-binding advisory vote relating to executive compensation to provide shareholders with the opportunity to vote “For” or “Against” the Corporation’s approach to executive compensation, through the following advisory resolution:
“Resolved, on an advisory basis and not to diminish the role and responsibilities of the Board, that the shareholders accept the approach to executive compensation disclosed in the Corporation’s information circular delivered in advance of the 2015 Annual Meeting of shareholders.”
The “Compensation Discussion and Analysis” found on pages 25 to 34 of this Management Proxy Circular discusses the Corporation’s compensation philosophy and strategy, the components of the Corporation’s compensation programs, mix of compensation elements, and how compensation is determined. The Corporation’s policy for determining executive compensation is based on the following fundamental principles:
- Management’s fundamental objective is to maximize long term shareholder value;
- Compensation should provide for internal equity;
- Performance is an important determinant of pay for executive officers; and
- Compensation levels and programs should support recruitment and retention of key employees.
Since this vote is advisory, it will not be binding upon the Board. However, the Board and, in particular, the Human Resources & Compensation Committee, will consider the outcome of the vote as part of its ongoing review of executive compensation.The Board recommends a vote FOR the advisory resolution to accept the approach to executive compensation disclosed in this Management Proxy Circular.
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BOARD OF DIRECTORS
Nominees for Election to the Board of Directors
The following are the nominees for election to the Board of the Corporation:
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(1) | Member of the Audit Committee. |
(2) | Member of the Human Resources & Compensation Committee. |
(3) | Member of the Nominating & Corporate Governance Committee. |
(4) | Member of the Health, Safety & Environmental Committee. |
(5) | “Independent” refers to the standards of independence established under Section 1.2 of Canadian Securities Administrators’ (“CSA”) National Instrument 58-101 – Disclosure of Corporate Governance Practices, Section 1.4 of the CSA National Instrument 52-110 – Audit Committees, Section 303A.02 of the New York Stock Exchange Listed Company Manual, and Section 301 of theSarbanes-Oxley Act of 2002(“SOX”). The Board, in its annual review of Director independence, considers employment status of the Director (and his or her spouse and children, if applicable), other board memberships, company shareholdings and business relationships, to determine whether there are any circumstances which might interfere with a Director’s ability to exercise independent judgment. |
(6) | “Common Shares” refers to the number of Common Shares owned by each nominee for election as director and includes all Common Shares beneficially owned, directly or indirectly, or over which such nominee exercised control or direction, as of May 15, 2015. Such information, not being within the knowledge of the Corporation, has been furnished by the respective directors individually. |
(7) | “Value of Shares” represents the total market value of the Common Shares held by each nominee as of May 15, 2015. Value is determined by multiplying the number of Common Shares held by each nominee as of May 15, 2015 by the closing price of the Common Shares on the Toronto Stock Exchange (“TSX”) on such date (Cdn$23.45) (in this section the “Closing Price”), converted at the May Exchange Rate. |
(8) | “Value of Options” represents the total market value of the unexercised stock options held by each nominee. The value is determined by multiplying the number of unexercised options held by each nominee as of May 15, 2015 by the difference between the Closing Price of the Common Shares on the TSX and the exercise price of such options, converted at the May Exchange Rate. |
(9) | “Value of DSUs” represents the number of DSUs outstanding at May 15, 2015 multiplied by the Closing Price of the Common Shares on the TSX on May 15, 2015 converted at the May Exchange Rate. |
(10) | “Value of RSUs” represents the number of Share RSUs outstanding at May 15, 2015 multiplied by the Closing Price of the Common Shares on the TSX on May 15, 2015 converted at the May Exchange Rate. |
(11) | Mr. Gannicott was granted medical leave of absence on November 20, 2014. Mr. Gannicott attended 100% of the board meetings in Fiscal 2015 up to such date. Ollie Oliveira and Fiona Perrott-Humphrey each missed one unscheduled board meeting during Fiscal 2015. |
Compensation of Directors
The Human Resources & Compensation Committee is responsible for reviewing the adequacy and form of compensation for non-executive directors at the Corporation as required, with the goal that it:
• | Remains competitive in light of the time commitments required from directors; and |
• | Aligns directors’ interests with those of the shareholders. |
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These reviews are conducted with the assistance of compensation consultants, but the decisions are made by, and are the responsibility of, the Human Resources & Compensation Committee, and may reflect factors and considerations other than the information and recommendations provided by its consultants. The Human Resources & Compensation Committee ultimately recommends the directors’ compensation to the Board for approval.
The Human Resources & Compensation Committee is composed entirely of unrelated and independent directors, namely Graham G. Clow (Chair), Daniel Jarvis, Tom Kenny and Chuck Strahl. The biographies of each of these directors can be found on pages 11 to 14 of this Management Proxy Circular (see “Nominees for Election to Board of Directors”). The Human Resources & Compensation Committee’s responsibilities are set out in its Charter, a summary of which can be found on page 22 of this Management Proxy Circular (see “Report of the Human Resources & Compensation Committee”). The Charter of the Human Resources & Compensation Committee is available on the Corporation’s website.
Directors who are not officers or employees of the Corporation or any of its subsidiaries are compensated for their services as directors through a combination of retainer and meeting fees and DSUs. A DSU is a notional share that has the same value as a Common Share. DSUs earn dividend equivalents at the same rate as dividends paid on Common Shares. DSUs are paid out when directors retire from the Board. A full description of DSUs is on page 17 of this Management Proxy Circular.
Robert A. Gannicott, the Chief Executive Officer, is the only management director, and does not receive compensation for his services as a director.
Meridian Compensation Partners (“Meridian”), reviewed director compensation relative to the same comparator group as is used for benchmarking executive compensation (see“Compensation Peer Group” on pages 28 and 29 of this Management Proxy Circular). No changes to director compensation were recommended to, or approved by, the Board for the current fiscal year, ending January 31, 2016 (“Fiscal 2016”), with the exception of establishing the fee to be paid to Daniel Jarvis in his capacity as Acting Chairman and the fee to be paid to Ollie Oliveira in his capacity as Co-Acting Chairman.
The following table sets out the non-executive directors’ compensation, payable in four equal quarterly installments, for Fiscal 2016:
Compensation | Fiscal 2016(1) |
Board Service | |
Annual cash retainer | Cdn$80,000 |
Meeting fee | Cdn$1,500 |
Annual equity grant | Nil |
Committee Service | |
Annual Chair's retainer for Audit Committee | Cdn$15,000 |
Annual Chair's retainer for Human Resources & Compensation Committee | Cdn$10,000 |
Annual Chair’s retainer for Nominating & Corporate Governance Committee | Cdn$5,000 |
Annual Chair’s retain for Health, Safety & Environmental Committee | Cdn$5,000 |
Meeting fee | Cdn$1,500 |
Board Leadership | |
Annual Lead Director’s retainer(2) | Cdn$20,000 |
Other | |
Initial equity grant | Cdn$50,000 (paid in DSUs) |
Travel fee (for out-of-province) | Cdn$1,500 |
Meeting expenses | Reimbursement of expenses |
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Compensation | Fiscal 2016(1) |
Share ownership | |
Guideline | 3 x annual cash retainer |
(1) | Directors can elect to receive all or a portion of their cash remuneration in the form of DSUs (see “Deferred Share Unit Plan” on page 17). |
(2) | Effective December 1, 2014, Daniel Jarvis assumed the temporary role of Acting Chairman. The Board determined that he should be paid a fee of $120,000.00 per annum, and that this remuneration while serving as Acting Chairman is in lieu of receiving the Lead Director retainer. Also effective December 1, 2014, Ollie Oliveira assumed the temporary role of Co-Acting Chairman and as a result the Board approved a fee of $75,000 per annum to be paid to him for serving in this capacity. |
Director Summary Compensation Table
The following table sets forth the compensation awarded, paid to or earned by the non-executive directors of the Corporation during Fiscal 2015:
Name | Fees Earned (US$)(1) | Share- Based Awards (US$)(2) | Option- Based Awards (US$) | Non-Equity Incentive Plan Compensation (US$) | Pension Value (US$) | All Other Compensation (US$) | Total (US$) |
Graham G. Clow | 106,330 | Nil | Nil | Nil | Nil | Nil | 106,330 |
Daniel Jarvis | 149,550 | Nil | Nil | Nil | Nil | Nil | 149,550 |
Tom Kenny(3) | 110,817 | 10,742 | Nil | Nil | Nil | Nil | 121,559 |
Ollie Oliveira(3) | 120,238 | 10,742 | Nil | Nil | Nil | Nil | 130,980 |
Chuck Strahl | 107,227 | Nil | Nil | Nil | Nil | Nil | 106,330 |
Fiona Perrott-Humphrey(4) | 104,087 | 43,232 | Nil | Nil | Nil | Nil | 147,319 |
(1) | Fees earned are converted into United States dollars at the Average Exchange Rate. |
(2) | These amounts represent the initial grants of DSUs converted into United States dollars using the Quarterly Exchange Rate, and do not include director compensation the directors have elected to take in the form of DSUs. Initial grants of DSUs are only made to new directors of the Board. |
(3) | Tom Kenny and Ollie Oliveira were appointed as directors of the Corporation on July 19, 2013. |
(4) | Fiona Perrott-Humphrey was appointed as a director of the Corporation on February 24, 2014. |
The following table sets forth the compensation awarded, paid to or earned by Noel Harwerth, aformer non-executive director of the Corporation during Fiscal 2015:
Name | Fees Earned (US$)(1) | Share- Based Awards (US$)(2) | Option- Based Awards (US$) | Non-Equity Incentive Plan Compensation (US$) | Pension Value (US$) | All Other Compensation (US$) | Total (US$) |
Noel Harwerth(3) | 35,892 | Nil | Nil | Nil | Nil | Nil | 35,892 |
(1) | Fees earned are converted into United States dollars at the Average Exchange Rate. |
(2) | These amounts represent the initial grants of DSUs converted into United States dollars using the Quarterly Exchange Rate, and do not include director compensation the directors have elected to take in the form of DSUs. Initial grants of DSUs are only made to new directors of the Board. |
(3) | Ms. Harwerth did not stand for re-election at the July 16, 2014 annual general meeting. |
The breakdown of the fees earned for the non-executive directors in Fiscal 2015, and the percentage of the total fees taken in DSUs, is as follows (all amounts converted into United States dollars using the Average Exchange Rate):
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Directors | Board Retainer (US$) | Committee Chair Retainer (US$) | Board Meeting Fees (US$) | Committee Meeting Fees (US$) | Travel Fees (US$) | Total Fees Earned (US$) | % and Value of Retainer & Meeting Fees Taken in DSUs | |
% | (US$) | |||||||
Directors Standing For Re-Election | ||||||||
Graham G. Clow | 71,784 | 8,973 | 14,805 | 6,730 | 4,038 | 106,330 | 50 | 53,165 |
Daniel Jarvis | 89,730(1) | 19,442 | 16,151 | 16,151 | 8,076 | 149,550 | 0 | - |
Tom Kenny | 71,784 | - | 16,151 | 14,805 | 8,076 | 110,817 | (2) | 26,021 |
Ollie Oliveira | 71,784 | 13,460 | 14,805 | 12,114 | 8,076 | 120,238 | 100 | 120,238 |
Chuck Strahl | 71,784 | 4,487 | 16,151 | 9,422 | 5,384 | 107,227 | 50 | 53,614 |
Fiona Perrott-Humphrey | 71,784 | - | 14,805 | 9,422 | 8,076 | 104,087 | 50 | 52,043 |
Former Director | ||||||||
Noel Harwerth | 35,892 | - | - | - | - | 35,892 | 25 | 8,973 |
(1) | The Board Retainer for Daniel Jarvis includes Lead Director fees paid during Fiscal 2015. |
(2) | Tom Kenny received 100% of his retainer and meeting fees in DSUs from February 1, 2014 until April 30, 2014. Effective May 1, 2014, he elected to receive 0% of his retainer and meeting fees in DSUs. |
Deferred Share Unit Plan
The Corporation has a Deferred Share Unit Plan (the “DSU Plan”) for its directors.
DSUs granted under the DSU Plan vest immediately, but are only redeemable following retirement from the Board, or upon death. When a dividend is paid on the Common Shares, each director’s DSU account is allocated additional DSUs equal in value to the dividend paid on an equivalent number of the Common Shares. The value of the DSUs credited to a director is payable after he or she ceases to serve as a director of the Corporation. The value is calculated by multiplying the number of DSUs in the director’s account by the market value of a Common Share at the time of payment. Non-executive directors are not entitled to stock option grants.
Non-executive directors receive an initial grant of Cdn$50,000 in DSUs when they are first appointed to the Board. Directors may also elect to take all or a portion of their annual retainer and meeting fees in the form of DSUs.
Evaluation of Board Performance
In Fiscal 2015, an annual formal Board, committee and individual director evaluation, including a peer review, was conducted. Board members completed a written survey designed to assess the Board’s effectiveness as a whole, and the effectiveness and contribution of its committees and individual directors. The individual surveys were sent to the Lead Director accompanied with a summary of the responses. The Lead Director reviewed the surveys with each of the directors individually.
Share Ownership Guidelines
The share ownership guidelines for directors of the Corporation provide that all directors must within five years of January 12, 2012, or within five years of joining the Board in the case of directors who joined the Board after January 12, 2012, have, and retain, share ownership of a minimum of three times the annual cash retainer. One half of such ownership may be in DSUs, but the remaining one half must be in Common Shares.
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Robert A. Gannicott is subject to and has complied with the share ownership guidelines for executive officers of the Corporation (see “Share Ownership Guidelines”on pages 31 and 32). The remaining directors still have time remaining for which to meet the ownership guidelines. The following table sets forth the share ownership (including DSUs) of each director in the Corporation as of January 31, 2015:
Directors | Years of Service | Value of Common Shares (Cdn$)(1) | Value of DSUs (Cdn$)(1) | Total (Cdn$) | Ownership Guidelines Met |
Graham G. Clow | 2 Year | 52,775 | 212,472 | 265,247 | Not Yet Met |
Robert A. Gannicott | 22 Years | 23,517,596 | N/A | 23,517,596 | Met |
Daniel Jarvis | 7 Years | 147,770 | 825,971 | 973,741 | Met |
Tom Kenny | 1.5 Years | 720,463 | 226,785 | 947,248 | Met |
Ollie Oliveira | 1.5 Years | Nil | 358,701 | 358,701 | Not Yet Met |
Fiona Perrott-Humphrey | 1 Year | Nil | 138,249 | 138,249 | Not Yet Met |
Chuck Strahl | 2 Years | 73,209 | 223,112 | 296,321 | Not Yet Met |
(1) | Based on the last trading price of the Common Shares on the TSX prior to the close of business on January 30, 2015, being Cdn$21.11. |
Incentive Plan Awards
Outstanding Share-Based Awards and Option-Based Awards
The following table provides a breakdown of the outstanding share-based awards and option-based awards of the non-executive directors as of January 31, 2015:
Option-Based Awards | Share-Based Awards(1) | ||||||
Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price (Cdn$) | Option Expiration Date (M/D/Y) | Value of Unexercised In-the- Money Options (US$) | Number of Shares or Units of Shares that Have Not Vested (#) | Market or Payout Value of Share- Based Awards that Have Not Vested (US$) | Market or Payout Value of Vested Share-Based Awards Not Paid Out or Distributed (US$) |
Current Directors | |||||||
Graham G. Clow | Nil | N/A | N/A | N/A | N/A | Nil | 167,152l |
Daniel Jarvis | Nil | N/A | N/A | N/A | N/A | Nil | 649,791 |
Tom Kenny | Nil | N/A | N/A | N/A | N/A | Nil | 178,412 |
Ollie Oliveira | Nil | N/A | N/A | N/A | N/A | Nil | 282,190 |
Fiona Perrott- Humphrey | Nil | N/A | N/A | N/A | N/A | Nil | 108,760 |
Chuck Strahl | Nil | N/A | N/A | N/A | N/A | Nil | 175,522 |
Former Director | |||||||
Noel Harwerth | Nil | N/A | N/A | N/A | N/A | Nil | Nil |
(1) | Value attributed to DSUs held by directors on January 31, 2015 based on the last trading price of the Common Shares on the TSX prior to the close of business on January 30, 2015, being Cdn$21.11, converted into United States dollars using the Year-End Exchange Rate. |
Incentive Plan Awards – Value Vested or Earned During the Year
The following table provides a breakdown of the incentive plan awards of the non-executive directors as of January 31, 2015:
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Name | Option-Based Awards – Value Vested During the Year (US$) | Share-Based Awards – Value Vested During the Year (US$)(1) | Non-Equity Incentive Plan Compensation –Value Earned During the Year (US$) |
Current Directors | |||
Graham G. Clow | Nil | Nil | Nil |
Daniel Jarvis | Nil | Nil | Nil |
Tom Kenny | Nil | 10,742 | Nil |
Ollie Oliveira | Nil | 10,742 | Nil |
Fiona Perrott-Humphrey | Nil | 43,232 | Nil |
Chuck Strahl | Nil | Nil | Nil |
Former Director | |||
Noel Harwerth | Nil | Nil | Nil |
(1) | These amounts represent the initial grants of DSUs converted into United States dollars using the Quarterly Exchange Rate, and do not include director compensation the directors have elected to take in the form of DSUs. Initial grants of DSUs are only made to new directors of the Board. |
Meetings Held and Attendance of Directors
The information presented below reflects meetings of the Board and Committees held and attendance of the directors proposed for election for Fiscal 2016, and for Noel Harwerth, a former director. Robert A. Gannicott was not a member of any of the Corporation's Committees during the year.
Summary of Board and Committee Meetings Held
Scheduled Meetings | Unscheduled Meetings (called on short notice) | Total | |
Board of Directors | 7 | 5 | 12 |
Audit Committee | 6 | 0 | 6 |
Nominating & Corporate Governance Committee | 4 | 0 | 4 |
Human Resources & Compensation Committee | 4 | 0 | 4 |
Health, Safety & Environmental Committee | 3 | 0 | 3 |
Summary of Attendance of Director Nominees
Names | Board Meetings Attended | Committee Meetings Attended | |||
Audit | Nominating & Corporate Governance | Human Resources & Compensation | Health, Safety & Environmental | ||
Graham G. Clow(1) | 11 of 12 | N/A | N/A | 4 of 4 | 3 of 3 |
Robert A. Gannicott(2) | 9 of 12 | N/A | N/A | N/A | N/A |
Daniel Jarvis | 12 of 12 | 6 of 6 | 4 of 4 | 4 of 4 | N/A |
Tom Kenny | 12 of 12 | 6 of 6 | N/A | 4 of 4 | 3 of 3 |
Ollie Oliveira(3) | 11 of 12 | 6 of 6 | 4 of 4 | N/A | N/A |
Chuck Strahl(4) | 12 of 12 | N/A | 4 of 4 | 2 of 2 | 3 of 3 |
Fiona Perrott-Humphrey(5) | 11 of 12 | 3 of 3 | 2 of 2 | N/A | 2 of 2 |
(1) | Mr. Clow missed one scheduled meeting of the Board. |
(2) | Mr. Gannicott was granted medical leave of absence on November 20, 2014. Mr. Gannicott attended 100% of the board meetings in Fiscal 2015 up to such dateand attended one Board meeting during his medical leave. |
(3) | Mr. Oliveira attended 100% of the scheduled meetings of the Board and missed one unscheduled meeting of the Board. |
(4) | Mr. Strahl was appointed a member of the Human Resources & Compensation Committee on July 16, 2014. |
(5) | Ms. Perrott-Humphrey attended 100% of the scheduled meetings of the Board and missed one unscheduled meeting of the Board. She was appointed a member of the Audit Committee, Nominating & Corporate Governance Committee and Health, Safety & Environmental Committee on July 16, 2014. |
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Summary of Former Director
Name | Board Meetings Attended | Committee Meetings Attended | |||
Audit | Nominating & Corporate Governance | Human Resources & Compensation | Health, Safety & Environmental | ||
Noel Harwerth(1) | 0 of 3 | N/A | N/A | N/A | N/A |
(1) | Ms. Harwerth did not stand for re-election at the 2014 AGM. |
Directors’ and Officers’ Liability Insurance
The Corporation maintains a directors' and officers' liability insurance program with a total limit of $60,000,000 that is subject to deductibles between $100,000 and $250,000. The policy is renewed annually. The current policy has an annual premium of $531,905 and expires September 30, 2015.
The policy provides protection to directors and officers against liability incurred by them in their capacities as directors and officers of the Corporation and its subsidiaries. The policy also provides protection to the Corporation for claims made against directors and officers for whom the Corporation has granted directors and officers indemnity, as is required or permitted under applicable statutory or by-law provisions.
Retirement Policy
The Corporation does not have a retirement policy in place for the directors.
CORPORATE GOVERNANCE DISCLOSURE
The Corporation is listed on the TSX and on the New York Stock Exchange (the “NYSE”). The Corporation is required to comply with theSarbanes-Oxley Act of 2002, the rules adopted by the United States Securities and Exchange Commission (“SEC”) pursuant to that Act, and the NYSE corporate governance rules as they apply to foreign private issuers. The Canadian Securities Administrators (“CSA”) has also adopted rules relating to audit committees and disclosure of corporate governance practices under National Instrument 52-110 – Audit Committees (“NI52-110”) and National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI58-101”).
The Corporation has complied with Section 5.1 of NI52-110, and the disclosure required by Form 52-110F1 is included in the Corporation’s Annual Information Form on pages 45 to 47 under “Audit Committee”.
The Corporation has amended its governance practice as regulatory changes have come into effect in recent years and will continue to follow regulatory changes and consider amendments to its governance practices as appropriate. The disclosure required pursuant to Form 58-101F1 of NI58-101 is set out in Schedule 1 of this Management Proxy Circular.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibilities with respect to the integrity and accuracy of financial statements, compliance with legal and regulatory requirements, the qualifications of the independent auditors and their performance, and the performance of the internal audit function. The Audit Committee serves as an independent and objective party to monitor and be custodian of the Corporation’s operational policies, oversees the Corporation’s process for identifying and managing enterprise risk, and reviews and appraises the audit activities of the Corporation’s independent auditors and the internal audit function.
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In Fiscal 2015, both the Audit Committee and the Nominating & Corporate Governance Committee reviewed the Audit Committee Charter and made recommendations to update it in accordance with best practices and with applicable laws and rules of the stock exchanges on which the Corporation's securities are listed. These recommendations were approved by the Audit Committee on January 13, 2015, and by the Nominating & Corporate Governance Committee on January 14, 2015. The Charter is attached as Appendix 1 to the Corporation’s Annual Information Form, and is available on the Corporation's website.
To assist in the timely fulfillment of its Charter, the Audit Committee approved a detailed Work Plan for Fiscal 2015. The Work Plan prescribed actions to be taken at each of the scheduled meetings of the Committee. In the course of following the Work Plan, the Committee:
• | reviewed with management and the independent auditors the Corporation’s Quarterly and Annual Financial Statements and Management’s Discussion and Analysis. The Committee approved the Corporation’s Quarterly Financial Statements and accompanying Management’s Discussion and Analysis, and approved and recommended for approval by the Board the Annual Financial Statement and Annual Management’s Discussion and Analysis; |
• | arranged for and reviewed the reports provided to the Committee by management and the independent auditors on the Corporation’s internal control environment as it pertains to the Corporation’s financial reporting process and controls; |
• | reviewed and discussed significant financial risks or exposures and assessed the steps management had taken to monitor, control, report and mitigate such risks to the Corporation; |
• | reviewed the effectiveness of the overall process for identifying the principal risks affecting the achievement of business plans, and provided the Committee’s view to the Board; |
• | reviewed legal and regulatory matters that could have a material impact on the interim or annual financial statements, related corporation compliance policies, and programs and reports received from regulators or governmental agencies; |
• | reviewed policies and practices with respect to hedging activities; |
• | reviewed reports of the external auditors related to the interim financial statements, annual audit plan and annual audit findings report; |
• | met on a regular basis with the independent auditors without management present, and arranged for the independent auditors to be available to attend Committee meetings; |
• | reviewed and discussed with the independent auditors all significant relationships that the independent auditors and their affiliates had with the Corporation and its affiliates in order to determine independence; |
• | reviewed and evaluated the performance of the independent auditors and the lead partner of the independent auditors’ team, made a recommendation to the Board regarding the reappointment of the independent auditors at the annual meeting of the Corporation’s shareholders, the terms of engagement of the independent auditors, together with their proposed fees, independent audit plans and results, and the engagement of the independent auditors to perform non-audit services, together with the fees therefor, and the impact thereof, on the independence of the independent auditors; |
• | reviewed the Risk & Internal Audit Function Charter and submitted it to the Nominating & Corporate Governance Committee for approval; |
• | reviewed the financial information in the Annual Information Form and submitted it to the Board for approval; |
• | approved the Risk & Internal Audit Function FY2016 Proposed Audit Plan; and |
• | approved all financial information and its report for disclosure in the 2014 Management Proxy Circular. |
The Committee is satisfied that it has appropriately fulfilled its mandate for Fiscal 2015.
This report has been approved by the members of the Audit Committee: Ollie Oliveira (Chair), Daniel Jarvis, Tom Kenny and Fiona Perrott-Humphrey.
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REPORT OF THE HUMAN RESOURCES & COMPENSATION COMMITTEE
The primary functions of the Human Resources & Compensation Committee are to assist the Board in carrying out its responsibilities by reviewing compensation and human resources issues and to make recommendations to the Board as appropriate.
In Fiscal 2015, both the Human Resources & Compensation Committee and the Nominating & Corporate Governance Committee reviewed the Human Resources & Compensation Committee Charter and made recommendations to update it in accordance with best practices and with applicable laws and rules of the stock exchanges on which the Corporation's securities are listed. These recommendations were approved by the Human Resources & Compensation Committee and the Nominating & Corporate Governance Committee on January 14, 2015. The Charter is available on the Corporation's website.
To assist in the timely fulfillment of its Charter, the Human Resources & Compensation Committee approved a detailed Work Plan for the Fiscal 2015 year. The Work Plan prescribed actions to be taken at each of the scheduled meetings of the Committee. In the course of following the Work Plan, the Committee:
• | reviewed and submitted to the Board: |
• | the corporate compensation plan and benefit plans including proposed salary ranges, merit increases, annual incentive bonuses, long term incentive awards and any other compensation; | |
• | the key performance indicators for short term bonuses in FY2015 for the Named Executive Officers and their direct reports; | |
• | the performance of the Named Executive Officers and their direct reports; | |
• | salary increases for the Named Executive Officers and , direct reports to the Chief Executive Officer and officers and employees earning in excess of $250,000; | |
• | the base salary merit increase budget for Fiscal 2015; | |
• | the recommendation for annual incentive bonuses, long term incentive awards, and succession planning for the Named Executive Officers; | |
• | the appointment of new officers; | |
• | the objectives, performance appraisal and compensation of the Chief Executive Officer; |
• | reviewed the compensation consultant’s performance, approved their re-appointment and established the compensation consultant’s budget; |
• | approved and reported to the Board the terms of new employment contracts with senior management, including termination benefits; |
• | reviewed material issues relating to the negotiation of the collective agreement for matters at the Ekati mine; |
• | reviewed its performance, and reported to the Board thereon; |
• | reviewed, and recommended to the Board, the“Compensation Discussion and Analysis”included in the 2014 Management Proxy Circular; and |
• | approved its report for disclosure in the 2014 Management Proxy Circular. |
Succession Planning
The Human Resources & Compensation Committeeannually reviews and assesses the Talent Management and Development programs to enhance individual effectiveness and preparedness for greater responsibilities. As part of this planning process, the Committee reviews management’s specific plans and updates to the Key Successors Development Plans. Succession planning is conducted for the Chief Executive Officer position, Chief Financial Officer position and the Presidents. Recommendations are made to the Board in support of succession planning as deemed appropriate.
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The Committee is satisfied that it has appropriately fulfilled its mandate for Fiscal 2015.
This report has been approved by the members of Human Resources & Compensation Committee: Graham G. Clow (Chair), Daniel Jarvis, Tom Kenny and Chuck Strahl.
REPORT OF THE NOMINATING & CORPORATE GOVERNANCE COMMITTEE
The mandate of the Nominating & Corporate Governance Committee is to manage the corporate governance system for the Board, to assist the Board in fulfilling its duty to meet the applicable legal, regulatory and self-regulatory business principles and applicable codes of best practice of corporate behaviour and conduct for comparable issuers and to recommend to the Board the director nominees to be put before the shareholders at each annual meeting.
In Fiscal 2015, the members of the Nominating & Corporate Governance Committee reviewed its Charter and made recommendations to update it in accordance with best practices and with applicable laws and rules of the stock exchanges on which the Corporation's securities are listed. These recommendations were approved by the Board on January 14, 2015. The Charter is available on the Corporation's website.
To assist in the timely fulfillment of its Charter, the Nominating & Corporate Governance Committee approved a detailed Work Plan for the 2014 calendar year. The Work Plan prescribed actions to be taken at each of the scheduled meetings of the Committee. In the course of following the Work Plan, the Committee:
• | developed and recommended to the Board a corporate governance system and monitored the effectiveness of the corporate governance system regularly and recommended changes to the Board; |
• | considered the effectiveness of the Board as a whole, the Committees of the Board and the contribution of individual members; |
• | reviewed Director Self Evaluations; |
• | reviewed the relationship between management and the Board and recommended changes to the Board; |
• | reviewed polices governing Board size, composition, selection criteria, nominating process, succession planning and retirement age; |
• | developed, reviewed and approved: |
• | Charter for the Audit Committee; | |
• | Charter for the Human Resources & Compensation Committee; | |
• | Charter for the Health, Safety & Environmental Committee; | |
• | Risk & Internal Audit Function Committee Charter; | |
• | The Board of Directors Guidelines and Responsibilities; | |
• | Chairman and Chief Executive Officer Guidelines and Responsibilities; | |
• | Lead Director Guidelines and Responsibilities; | |
• | Committee Chairman Guidelines and Responsibilities; | |
• | Code of Ethics and Business Conduct; | |
• | Policy on Corporate Disclosure, Confidentiality and Employee Trading; | |
• | Policy on Insider Trading; | |
• | Whistleblower Protection Policy; | |
• | Corporate Security Policy; | |
• | Corporate Donations Policy; | |
• | Corporate Governance Guidelines; |
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• | reviewed, and approved and recommended to the Board for approval the charter of the Committee, the Majority Voting Policy and the new Board of Directors Diversity Policy; |
• | prepared for disclosure to shareholders a report which describes the Corporation’s governance practices; |
• | reviewed, and approved and recommended to the Board for approval the 2014 Management Proxy Circular, the 2014 Annual Information Form and 2014 Form 40F; |
• | identified individuals qualified to become new directors and recommended to the Board new nominees for election by shareholders based on selection criteria and individual characteristics; |
• | recommended to the Board the allocation and removal of Board members to the various Committees of the Board; |
• | reviewed, approved and reported to the Board on directors and officers insurance; |
• | determined orientation and education programs for new Board members and continued development of all members of the Board; |
• | reviewed its performance, and reported to the Board thereon; and |
• | approved its report for disclosure in the 2014 Management Proxy Circular. |
The Committee is satisfied that it has appropriately fulfilled its mandate for Fiscal 2015.
This report has been approved by the members of the Nominating & Corporate Governance Committee: Daniel Jarvis (Chair), Ollie Oliveira, Chuck Strahl and Fiona Perrott-Humphrey.
REPORT OF THE HEALTH, SAFETY & ENVIRONMENTAL COMMITTEE
The mandate of the Health, Safety & Environmental Committee is to assist the Board in fulfilling its responsibilities under its mandate and applicable laws and regulations in respect of environmental, health and safety matters at all projects and properties of the Corporation.
In Fiscal 2015, both the Health, Safety & Environmental Committee and the Nominating & Corporate Governance Committee reviewed the Health, Safety & Environmental Committee Charter and made recommendations to update it in accordance with best practices and with applicable laws and rules of the stock exchanges on which the Corporation's securities are listed. These recommendations were approved by the Health, Safety & Environmental Committee and the Nominating & Corporate Governance Committee on January 14, 2015. The Charter is available on the Corporation's website.
To assist in the timely fulfillment of its Charter, the Health, Safety & Environmental Committee approved a detailed Work Plan for the 2014 calendar year. The Work Plan prescribed actions to be taken at each of the scheduled meetings of the Committee. In the course of following the Work Plan, the Committee:
• | developed short and long term policies and standards; |
• | reviewed the Sustainable Development Policy and the Crisis and Emergency Management Plan; |
• | reviewed management’s reports on compliance with internal environmental, health and safety policies; |
• | reviewed management’s reports on compliance or non-compliance with applicable regulatory requirements; |
• | reviewed with management the Company’s emergency response procedures; |
• | reviewed all environmental, health and safety policies, and recommended changes in such policies to the Board or management; |
• | monitored the effectiveness of the Corporation’s health, safety and environmental systems; |
• | reviewed its performance, and reported to the Board thereon; and |
• | approved its report for disclosure in the 2014 Management Proxy Circular. |
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The Committee is satisfied that it has appropriately fulfilled its mandate for Fiscal 2015.
This report has been approved by the members of the Health, Safety & Environmental Committee: Chuck Strahl (Chair), Tom Kenny, Graham G. Clow and Fiona Perrott-Humphrey.
STATEMENT OF EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes and explains the significant elements of the Corporation’s compensation programs, with particular emphasis on the process for determining compensation payable to the Chief Executive Officer, the Chief Financial Officer, the former Chief Financial Officer, and the three other most highly compensated executive officers, during the most recently completed financial year (collectively, the “Named Executive Officers”). For Fiscal 2015, our Named Executive Officers were:
Robert A. Gannicott, Chief Executive Officer of the Corporation;
Ron Cameron, Chief Financial Officer of the Corporation;
Brendan Bell, Executive Vice-President-Community Affairs of the Corporation;
Chantal Lavoie, Chief Operating Officer of the Corporation;
James R.W. Pounds, Executive Vice-President, Diamonds of the Corporation; and
Wendy Kei, former Chief Financial Officer of the Corporation
Executive Summary
1. | Fiscal 2015 Financial Performance |
• | The Corporation’s executive compensation program and compensation of the Named Executive Officers are tied to the performance of the Corporation. The Named Executive Officer’s performance is measured based on specific safety, financial, production, and sustainability metrics. |
2. | Key Compensation Actions for Fiscal 2015 |
• | Reviewed the 19-company comparator group of mining companies (the “Comparator Group”) ranging from one third to three times the asset size of the Corporation, with the Corporation positioned at approximately the median of the group, for benchmarking compensation; | |
• | Benchmarked Named Executive Officer compensation relative to the Comparator Group; | |
• | Reviewed annual and long-term incentive compensation design, metrics and structure; | |
• | Retained a “profit cap” for Named Executive Officer bonuses to better reflect affordability and the application of a rigorous pay-for-performance design; aggregated Name Executive Officer bonuses may not exceed 10% of the Corporation’s consolidated operating profit for the fiscal period; | |
• | Reviewed succession and development plans to ensure that the Corporation has the talent to deliver its business objectives in the immediate and long-term future; and | |
• | Reviewed the Corporation’s compensation policies and practices to ensure that they do not encourage inappropriate risk taking. |
3. | Highlights of the Chief Executive Officer’s Performance and Compensation for Fiscal 2015 |
• | Given the financial results referenced above, the Human Resources & Compensation Committee determined that the CEO’s annual incentive award should be paid out at 92.5% of target. The CEO was awarded long-term incentive compensation in Fiscal 2015, 50% of which took the form of options which vest over three years and have a ten-year term and the remaining 50% of which took the form of RSUs. Options have value only to the extent that share price increases, aligning the interests of the CEO with the interests of shareholders. RSUs cliff vest after three years. |
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Compensation Governance: Senior Officers’ Compensation
The Human Resources & Compensation Committee recommends the senior officers’ compensation to the Board for approval. The Human Resources & Compensation Committee is composed entirely of unrelated and independent directors, namely, Graham G. Clow (Chair), Daniel Jarvis, Tom Kenny and Chuck Strahl. The biographies of the directors can be found on pages 11 to 14 of this Management Proxy Circular (see “Nominees for Election to Board of Directors”). The Human Resources & Compensation Committee’s responsibilities are set out in the Work Plan of the Committee. A list of these responsibilities can be found on page 22 of this Management Proxy Circular (see “Report of the Human Resources & Compensation Committee”). The Charter of the Human Resources & Compensation Committee is available on the Corporation’s website.
To ensure the Human Resources & Compensation Committee has the expertise to carry out its mandate, the Nominating & Corporate Governance Committee determines appropriate orientation and education programs for new Board and Committee members and the continued development of all members of the Board. All of the Committee members have gained experience in human resources and compensation matters; specifically, the Committee members have the following skills:
- Human resources – experience with benefit, pension and compensation programs (in particular, executive compensation);
- Risk management – knowledge and experience with internal risk controls, risk assessments and reporting; and
- Executive leadership – experience as senior executive/officer of a public company or major organization.
In addition, continuing education helps the Committee members keep abreast of industry developments and changing governance issues and requirements. The following is a list of the internal and external conferences, seminars, courses and site tours that our Committee members attended during the year:
- Senior Management presentations on finance, production, operations, road haulage, health, safety and environmental status; diamond market, security, community affairs and succession planning;
- Canadian Corporate and Securities Law Update and information presentations by Stikeman Elliott LLP;
- Presentations by Rothschild Consultants and Golder Associates;
- Governance and Regulatory Updates and Trends presentations by Meridian;
- Current Accounting and Auditing Developments presentations by KPMG LLP;
- Site visits to the Toronto and Northwest Territories sorting facilities; and
- Site visits to the Diavik and Ekati Diamond Mines.
The following topics will be presented in Fiscal 2016:
- Diamond stock management system;
- Mining methods;
- State of capital markets for mining companies;
- Community relations; and
- Diamond “NI43-101” presentation.
Independent Consultant
The Human Resources & Compensation Committee engaged Meridian as an independent consultant to provide the Committee with support on determining levels of executive compensation. Meridian has provided such services since February 1, 2010, including:
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- Compensation philosophy validation;
- Market data and other market intelligence, including benchmarking analysis of executive pay levels;
- Compensation plan design support;
- Governance and regulatory practices/requirements input; and
- Assistance in facilitating the management of executive compensation and the execution of the Committee’s mandate.
The decisions made by the Human Resources & Compensation Committee are the responsibility of the Human Resources & Compensation Committee, and may reflect factors and considerations other than the information and recommendations of the Human Resources & Compensation Committee’s independent consultant.
Fees paid to Meridian during Fiscal 2015 and 2014 were as follows:
Fiscal 2015 (Cdn$)(1) | Fiscal 2014 (Cdn$)(1) | |
Executive Compensation-Related Fees(2) | 200,583 | 136,455 |
All other Fees | Nil | Nil |
Total Fees | 200,583 | 136,455 |
(1) | Fees inclusive of GST/HST. |
(2) | Includes executive compensation work and review and design of non-executive directors’ compensation for the Nominating & Corporate Governance Committee. |
Meridian did not perform any other services for the Corporation, its affiliated or subsidiary entities, or any of its directors or members of management during the foregoing fiscal periods. The Human Resources & Compensation Committee confirms annually the independence of its advisor and reviews whether the work provided by the independent consultants raises any conflict of interest. The Human Resources & Compensation Committee determined that Meridian did not have any such conflicts in Fiscal 2015 and also determined that they were independent.
Compensation Philosophy and Strategy
The objectives of the Corporation’s compensation programs are to attract, retain and motivate highly qualified executive officers who will drive the success of the Corporation, while at the same time promoting a greater alignment of interests between such executive officers and the Corporation’s shareholders.
The Corporation’s compensation programs are designed to reward individual and corporate performance with compensation that has mid and long-term growth potential, while recognizing that the executives work as a team to achieve corporate results.
Components of Compensation
The compensation program for Fiscal 2015 was comprised of the following main components.
Corporate Compensation Program at a glance | ||
Component | What it pays for | How it is determined |
Base salary | • Fixed compensation to reflect market competitive base pay • Attract/retain key talent | • Market competitive • Confirmed near beginning of year |
STIP (annual incentive bonus) | • Variable compensation that rewards individual contribution to corporate performance and achievement of individual objectives | • Market-based percentage of salary • Target/goals confirmed near beginning of year, final amount determined at year-end based on performance |
LTIP (long-term incentive) | • Variable compensation • Rewards long-term shareholder value creation • Provides for retention | • Initially based on multiple of salary and market competitive practice • Awards adjusted based on changes in equity value and share price |
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Corporate Compensation Program at a glance | ||
Component | What it pays for | How it is determined |
Benefits | • Indirect compensation • Attract/retain key talent | • Market competitive |
Share Ownership | • Rewards for financial market performance • Aligns interest with those of shareholders | • Share ownership guidelines |
Mix of Compensation Elements
To support a strong pay-for-performance orientation, linking each executive’s compensation to the achievement of business results, the Corporation’s compensation strategy provides an appropriate balance of fixed and variable (at-risk) compensation with cash and share-based awards, and short and long term incentives. The overall weighting of total compensation elements reflects the degree to which executives at each level of the Corporation’s organizational structure are expected to assume greater compensation risk and reward, reflected by increasing levels of variable compensation. Executives at all levels of the Corporation’s organizational structure have a mix of fixed and variable compensation with executives at the higher levels of the Corporation’s organizational structure having more compensation at risk. As a result, executives at higher levels receive higher resulting rewards when corporate performance exceeds targets and lower awards when performance falls short of targets. The chart below illustrates the approximate mix of fixed and variable compensation at target (excluding benefits) for the Chief Executive Officer and all other executives relative to market. Though the last formal review of compensation mix against comparators was completed during the last fiscal year, since executive salaries have not changed since the last formal review, the approximate mix identified below are still considered to be accurate:
CompensationPeer Group
In January 2014, based on advice from its independent consultant, Meridian, the Human Resources & Compensation Committee reviewed and approved a new compensation peer group, designed to reflect the significant change in the Corporation’s business as a result of the sale of its Harry Winston business and the acquisition of the Ekati Diamond Mine. The peer group was reviewed by Meridian in December 2014 for continued appropriateness.
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The peer group includes direct competitors for talent, especially for industry-specific roles among publicly traded Canadian companies in the businesses of precious metals and minerals and gold, diversified metals and mining. The peer group is limited to companies with operating mines and North American operations. The peer companies are roughly 1/3× to 3× the Corporation’s size in terms of assets, which is a proxy for complexity in capital intensive businesses like mining, with revenue used as a secondary size reference; and the Corporation was positioned at approximately the median of the comparator group in terms of assets, at the 87th percentile in terms of revenue and at the 66th percentile in terms of market capitalization.
It is important to note that there are no size appropriate diamond mining, processing and marketing companies in North America, so the peer group does not include companies that have comparable executive positions to those at the Corporation which require specific and unique diamond mining, processing and marketing expertise. Accordingly, the Human Resources & Compensation Committee and its advisors were not able to directly benchmark compensation practices for executives with these very specialized skills. The companies in the peer group were unchanged from Fiscal 2014 and are as follows:
6 Precious Metals & Minerals | 6 Diversified Metals & Mining | 7 Gold Companies |
Dundee Precious Metals Inc. Franco-Nevada Corporation Katanga Mining Limited Pan American Silver Corp. Silver Standard Resources Inc. Silver Wheaton Corp | Capstone Mining Corp. HudBay Minerals Inc. Lundin Mining Corporation Nevsun Resources Ltd. Taseko Mines Limited Thompson Creek Metals Company Inc. | Alamos Gold Inc. Argonaut Gold Inc. AuRico Gold Inc. Centerra Gold Inc. Eldorado Gold Corporation New Gold Inc. OceanaGold Corporation |
Competitive Positioning of Compensation
The Corporation’s intent is to provide appropriate total compensation opportunities that are competitive with the market in which the Corporation competes for talent, including specific recognition for skills and experience related to diamond mining, processing and marketing.
Meridian regularly provides competitive benchmarking information to the Human Resources & Compensation Committee as a key input for the Committee to assess the competitive level of Named Executive Officer compensation. The Human Resources & Compensation Committee has determined that compensation is at an appropriate level, particularly in light of the specialized skills and expertise required for operating diamond mines and the Corporation’s decision to base its head office in Yellowknife, Northwest Territories.
Determination of Compensation
The Corporation’s policy for determining executive compensation is based on the following fundamental principles:
- Management’s primary objective is to maximize long-term shareholder value;
- Compensation should be competitive with the external market and provide for internal equity;
- Pay for executive officers should be closely linked with performance; and
- Compensation should support recruitment and retention of key employees.
Performance of the Named Executive Officers is considered in determining base salary increases, annual incentive awards, and long term incentive awards.
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1. Base Salaries –An important element of the Corporation’s compensation program is base salary. A competitive base salary is necessary to retain qualified executive officers. The amount payable to an executive officer as base salary is determined primarily by market survey data and internal equity.
Any increase to the base salary of the Chief Executive Officer is determined by the Board, based on recommendations from the Human Resources & Compensation Committee. The Human Resources & Compensation Committee determines whether any increases to the base salary of the other Named Executive Officers are appropriate.
For Fiscal 2015, management recommended, and the Human Resources & Compensation Committee agreed, that there would not be any increases in salary for the Named Executive Officers.
2. Annual Incentives– A key objective of the executive compensation strategy is to encourage and recognize strong levels of performance by linking achievement of specific goals with variable cash compensation in the form of annual incentive awards. Target annual incentive award is 100% of base salary for the CEO and 50% of base salary for other Named Executive Officers. The annual incentive award can range from no bonus to a maximum of 120% of the target award based on performance achieved. In addition, aggregate bonuses for the Named Executive Officers as initially determined based upon the metrics applicable to the various executives are not allowed to exceed 10% of the Corporation’s consolidated operating profit for the fiscal period (the “Profit Cap”).
(a) For the Named Executive Officers, performance is weighted 75% based on the achievement of corporate metrics, and 25% based on the achievement of personal key performance indicators. The maximum payout under the annual incentive plan is 150% of target, to provide upside leverage for the achievement of superior results. The corporate metrics and weighting were as follows:
Metric | Weighting |
Safety – Reduction in All Injury Frequency Rate (AIFR) | 10% |
Sustainability – Northern Employment | 10% |
Financial – Operating, Maintenance and Capital Expenses relative to Budget | 40% |
Production – Production Rock Value | 40% |
For Fiscal 2015, the threshold, target and maximum performance goals, actual performance and resulting payout level are set out in the chart below:
Metric | Threshold | Target | Maximum | Fiscal 2015 Actual | Payout Level |
Safety (AIFR) | 0.90 | 0.76 | 0.60 | 1.12 | 0.0% |
Sustainability | 60% | 62% | 65% | 64% | 13.3% |
Financial – Operating & Maintenance (Cdn millions) | 410 | 373 | 336 | 385.6 | 18.3% |
Financial – Capital (Cdn millions) | 204 | 170 | 136 | 156.3 | 26.0% |
Production (USD millions) | 477 | 530 | 583 | 503 | 34.9% |
Total | 92.5% |
3. Long Term Incentives –The LTI awards made to the Named Executive Officers for Fiscal 2015 were made 50% in the form of Share RSUs, which cliff vest three years after the grant, and the remaining 50% in the form of Options, which vest rateably one-third per year over the three years subsequent to the grant date.
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The initial determination of an LTI award for a Named Executive Officer is made by the Human Resources & Compensation Committee, based on the executive’s salary multiplied by an appropriate LTI multiplier. In Fiscal 2015, the Human Resources & Compensation Committee applied multipliers for the Named Executive Officers (other than the Chief Executive Officer) ranging from 1.0x to 1.4x base salary. The CEO’s LTI is determined by the Human Resources & Compensation Committee taking into account market practice, sustained performance, internal equity and seniority. The LTI multipliers are derived from current North American market competitive practices for comparable executive levels based on market analysis conducted by Meridian, with consideration also for the long term performance of the executive, internal equity and the Corporation’s organizational structure.
The number of Options to be awarded is determined by dividing the dollar value of compensation to be provided in Options, by the Black Scholes value of each Option. The number of RSUs to be awarded is determined by dividing the dollar value of compensation to be provided in RSUs by the price of a Common Share of the Corporation.
The Human Resources & Compensation Committee annually reviews all long-term incentive plans of the Corporation, including the LTI plans, and reports to the Board on suggestions to modify such plans, as appropriate. When considering the making of a new grant under the Corporation’s LTI plans, the Human Resources & Compensation Committee takes into account previous grants made under such plans.
The long term incentive awards made to the Named Executive Officers in Fiscal 2015 are set out in the summary compensation table on pages 35 to 37 of this Management Proxy Circular.
Additional information regarding the Corporation’s Stock Option Plan can be found on pages 41 and 42 of this Management Proxy Circular (see “Securities Authorized for Issuance under Equity Compensation Plans”).
4. Benefits – Benefits for the Named Executive Officers, including life insurance, health and dental plans, and short and long-term disability plans, and defined contribution retirement plans are maintained at a level that is considered competitive and similar to what all employees receive (see“Pension Plan Benefits and Deferred Compensation Plan”on page 38 of this Management Proxy Circular).
Share Ownership Guidelines
The Corporation has Share Ownership Guidelines for selected executive officers to further align the interests of senior executives with the interests of shareholders. These guidelines apply to all of the Named Executive Officers. The guidelines, as outlined in the table below, can be complied with through the ownership of shares outright (by the executive and immediate family members residing in the same household), and Share RSUs issued as part of an executive’s long-term compensation (whether vested or not).
Executive Level | Guideline |
Chairman and Chief Executive Officer | 5 x annual base salary |
Chief Financial Officer and Presidents of Subsidiaries | 1.5 x annual base salary |
Guidelines are expressed and determined as a multiple of an executive’s base salary. Participants are required to achieve their assigned guidelines within five years of becoming subject to the guidelines. If a participant’s guideline increases, the participant has an additional five years to achieve the incremental increase in ownership required.
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The Human Resources & Compensation Committee regularly reviews share ownership guidelines and, with advice from its independent consultant, Meridian, ensures that its practices meet appropriate governance standards. The Committee may, in its sole discretion, impose such conditions, restrictions or limitations on any executive as it determines appropriate in order to achieve the underlying purposes of these guidelines.
The Chief Executive Officer of the Corporation has achieved the share ownership guidelines for executive officers of the Corporation. The remaining Named Executive Officers have until 2019 to meet the ownership guidelines. The following table sets forth the share ownership (including RSUs) of each Named Executive Officer of the Corporation as of January 31, 2015:
Executive | Target Ownership (multiple of base salary) | Value of Common Shares (Cdn$)(1) | Value of Share RSUs (Cdn$)(1) | Total (Cdn$) | Ownership Guidelines Met(2) |
Robert A. Gannicott | 5.0 X | 23,517,596 | 2,190,395 | 25,707,991 | Met |
Ron Cameron | 1.5 X | 1,434 | Nil | 1,434 | Not Yet Met |
Brendan Bell | 1.5 X | 12,285 | 595,450 | 607,735 | Not Yet Met |
Chantal Lavoie | 1.5 X | 12,381 | 595,450 | 607,831 | Not Yet Met |
James R.W. Pounds | 1.5 X | 12,285 | 591,840 | 604,125 | Not Yet Met |
(1) | Based on the last trading price of the Common Shares on the TSX prior to the close of business on January 30, 2015, being Cdn$21.11. |
(2) | The Named Executive Officers have until 2019 to achieve the share ownership guidelines. |
Other Compensation Policies of the Corporation
Change of Control
The selection of the events that trigger payment to a Named Executive Officer in the event of a Change of Control are negotiated and documented in each employment contract, with the attempt to balance the protection of the executive upon a Change of Control with the continuation of employment of the executive in the event such a Change of Control occurs. As noted on pages 39 and 40 of this Management Proxy Circular under the heading “Termination and Change in Control Benefits”, there are certain circumstances that trigger payment, vesting of stock options or RSUs, or the provision of other benefits to a Named Executive Officer upon termination and Change of Control.
Risk
In Fiscal 2015 the annual compensation-related risk assessment was conducted by the Committee’s independent consultant, Meridian, with input from management. The assessment was based on a scorecard that reviewed 52 factors across the following four categories:
- Pay philosophy and governance
- Pay mix, structure and balance
- Performance metrics
- Risk mitigation practices
The Human Resources & Compensation Committee concluded that the pay programs and policies reflected in the review are not reasonably likely to have a material adverse effect on the Corporation, its business and its value. In particular, the capital intensive nature of the business, with its long term investment cycle, makes it difficult for management to significantly influence share price based on controllable short term factors.
The report prepared by the independent consultant, noted the following design features of the Corporation’s compensation programs and its policies and practices that mitigate compensation risk.
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Program Structure
• | There is a good mix of fixed and variable compensation and short and long term incentives. The CEO’s total direct compensation mix at target is: |
• | Salary—20% | |
• | Short term incentive—20% | |
• | Long term incentive—60% |
• | Awards to Named Executive Officers under the Corporation’s annual incentive plan are based on company-wide financial and qualitative measures, which balance financial, operational and sustainability metrics to ensure that incentives cannot be achieved “at any cost”. |
• | Payouts for the Named Executive Officers under the annual incentive plan are determined by the Committee and are capped at 150% of target and also on an aggregate basis at a maximum of 10% of operating profit. |
• | Options and RSUs are awarded annually and vest over three years, which provides an overlap of vesting periods which addresses longer “tail” risks. This overlapping of vesting periods combined with Named Executive Officers’ share ownership requirements maintains their exposure to the risks of their decision making through their unvested share based awards. |
Compensation Risk Mitigation
• | The Corporation does not have a culture of hiring or promoting excessive risk takers. |
• | The Corporation has adopted a Code of Business Conduct and a Whistleblower Protection Policy. |
Committee and Process
• | The Committee is comprised entirely of independent directors, it engaged Meridian to review the risks associated with its compensation programs, it exercises discretion in determining equity based awards and it reviews the payouts under the annual incentive program. |
• | Daniel Jarvis and Tom Kenny are currently members of both the Audit Committee and the Human Resources & Compensation Committee. This crossover ensures that the Human Resources & Compensation Committee has a deep understanding of the Corporation’s enterprise risks and financial results when making its decisions respecting compensation. |
• | The Audit Committee is responsible for reviewing enterprise risks and significant financial risks and exposures and for monitoring the management of these risks. |
• | The Human Resources & Compensation Committee is responsible for evaluating compensation related risk and for reviewing incentive compensation arrangements to confirm that incentive pay does not encourage inappropriate or excessive risk taking. |
• | The Human Resources & Compensation Committee reviews executive succession planning at least annually. |
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Hedging Prohibition
Under the Corporation’s Insider Trading Policy, officers, directors and employees are prohibited from engaging in short-term, speculative transactions involving the Corporation’s securities, including hedging, short sales and buying or selling put or call options or other derivative securities relating to the Corporation’s shares. In the Corporation’s view, such trading is an activity more normally associated with “professional” traders and is, therefore, inconsistent with an insider’s role with, and duties to, the Corporation.
Clawback Policy
The Corporation has a Clawback policy set out in its Code of Ethics and Business Conduct that permits the Board to require reimbursement of annual and long term incentive compensation if:
1. | Incentive compensation received by the executive (or former executive) was based upon financial results that were materially restated; |
2. | The executive engaged in intentional misconduct or fraud that caused or partially caused the need for the restatement; and |
3. | The amount of compensation would have been lower had the financial results been properly reported. |
Discretion
The Human Resources & Compensation Committee has the authority to set performance measures and targets in relation to incentive programs for executives. It also has the general authority to amend such measures and targets, and the measurement of results to reflect business conditions, circumstances, and events not predicted when setting targets. The application of this authority is at the sole discretion of the Committee. In addition, the Committee does make some qualitative assessments of the individual performance and achievement of personal goals in incentive programs (e.g. assessment of non-financial goals).
Performance Graph
The following graph compares the yearly percentage change in the Corporation's cumulative total shareholder return on its Common Shares with the cumulative total return of the S&P/TSX Composite Index (assuming reinvestment of dividends and considering a $100 investment in Common Shares on January 31, 2010). For this purpose, the yearly change in the Corporation's cumulative total shareholder return is calculated by dividing the difference between the price for the Common Shares at the end and the beginning of the "measurement period" by the price for the Common Shares at the beginning of the measurement period. "Measurement period" means the period beginning at the market close on the last trading day before the beginning of the Corporation's fifth preceding fiscal year, through and including the end of the Corporation's most recently completed fiscal year.
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Fiscal Years ended January 31st | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 |
Dominion Diamond Corporation | $9.83 | $10.83 | $11.73 | $14.72 | $16.22 | $21.11 |
Value of $100 Investment | $100.00 | $110.17 | $119.33 | $149.85 | $165.01 | $214.75 |
S&P/TSX Composite | 29,360.52 | 36,840.37 | 34,759.27 | 36,500.63 | 40,663.61 | 44,835.91 |
Value of $100 Investment | $100.00 | $125.48 | $118.39 | $124.32 | $138.50 | $152.71 |
(1) | All Dollars Amounts referenced in the performance graph are in Canadian Dollars. |
A significant portion of Named Executive Officers’ compensation is performance based and in the form of share based long term incentives. Accordingly, the value of pay received by the Named Executive Officers is closely aligned with share performance.
SUMMARY COMPENSATION TABLE
Summary Compensation Table
The following table sets forth the compensation awarded, paid to or earned by the Named Executive Officers, during Fiscal 2015, Fiscal 2014 and Fiscal 2013.
Name and Principal Position | Year Ended January 31st | Salary (US$)(1) | Share- Based Awards (US$)(2) | Option- Based Awards (US$)(3) | Non-Equity Incentive Plan Compensation (US$) | Pension Value (US$) | All Other Compensation (US$) | Total Compensation (US$) | |
Annual Incentive Plans(4) | Long- Term Incentive Plans | ||||||||
Robert A. Gannicott Chief Executive Officer | 2015 2014 2013 | 924,219 986,620 997,805 | 1,215,453 - - | 1,545,114 2,164,761 1,888,335 | 986,620 1,528,061(5) 1,002,707 | - - - | - - - | 305,273(6) - - | 4,976,679 4,679,442 3,888,850 |
Ron Cameron(7) Chief Financial Officer | 2015 | 224,325 | 660,740 | - | 94,501 | - | - | 45,644(8) | 1,025,210 |
Brendan Bell(9) Executive Vice-President | 2015 2014 | 538,380 265,426 | 330,416 664,801 | 420,015 - | 218,309 159,473(5) | - - | - - | 122,033(10) 70,047 | 1,629,153 1,159,747 |
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Name and Principal Position | Year Ended January 31st | Salary (US$)(1) | Share- Based Awards (US$)(2) | Option- Based Awards (US$)(3) | Non-Equity Incentive Plan Compensation(US$) | Pension Value (US$) | All Other Compensation (US$) | Total Compensation (US$) | |
Annual Incentive Plans(4) | Long- Term Incentive Plans | ||||||||
Chantal Lavoie Chief Operating Officer | 2015 2014 | 538,380 332,858 | 330,416 797,711 | 420,015 - | 218,309 141,354(5) | - - | 43,972 - | 122,033(11) 127,571 | 1,673,125 1,399,494 |
James R.W. Pounds Executive Vice-President | 2015 2014 2013 | 535,123 571,253 577,729 | 328,413 792,850 805,597 | 417,483 - - | 216,988 344,681(5) 290,284 | - - - | - - - | 27,980(12) - - | 1,525,987 1,708,784 1,673,610 |
Wendy Kei(7), Former Chief Financial Officer | 2015 2014 2013 | 209,370 326,697 276,725 | 137,674 332,337 194,725 | 175,009 - - | - 374,073(5) 112,303 | - - - | - - - | 991,899(13) 100,463 11,719 | 1,513,952 1,133,570 595,472 |
(1) | Converted into United States dollars at the Average Exchange Rate. |
(2) | The table below shows the share-based long term incentive awards outstanding for each Named Executive Officer, and the value of the RSUs at January 31, 2015 converted as applicable into United States dollars at the Year-End Exchange Rate. Details of the Long Term Incentive Plans can be found on page 30 of this Management Proxy Circular (see “Long-term Incentives”). |
LONG TERM INCENTIVES OUTSTANDING AS OF JANUARY 31, 2015
Name | Number of Cash RSUs | Value of Cash RSUs (US$) | Number of Share RSUs | Value of Share RSUs (US$) |
Robert A. Gannicott | - | - | 103,761 | 1,723,184 |
Ron Cameron | 56,903 | 945,002 | - | - |
Brendan Bell | 34,646 | 575,375 | 28,207 | 468,440 |
Chantal Lavoie | 41,573 | 690,413 | 28,207 | 468,440 |
James R. W. Pounds | 59,826 | 993,545 | 28,036 | 465,601 |
Wendy Kei | - | - | - | - |
The table below shows the long term incentive awards granted in Fiscal 2015. The payout value of the RSUs will be based upon the 5 day average closing price of the Common Shares prior to the payout date, and will include accumulated dividend equivalents automatically credited.
LONG TERM INCENTIVE AWARDS GRANTED IN FISCAL 2015
Name | Cash RSUs Granted | Share RSUs Granted | Period until Payout |
Robert A. Gannicott | - | 103,761 | Latest Settlement Date is March 31, 2024 |
Ron Cameron | 56,903 | - | 18,968 on March 31, 2015 18,968 on March 31, 2016 18,967 on March 31, 2017 |
Brendan Bell | - | 28,207 | Latest Settlement Date is March 31, 2024 |
Chantal Lavoie | - | 28,207 | Latest Settlement Date is March 31, 2024 |
James R. W. Pounds | - | 28,036 | Latest Settlement Date is March 31, 2024 |
Wendy Kei | - | 11,753 | Latest Settlement Date is March 31, 2024 |
RSUs granted in Fiscal 2013 vest one-third on March 31, 2013, and one-third on each anniversary thereafter. The value of these RSUs was determined based on a share price of Cdn$14.60 on April 4, 2012 (Human Resources & Compensation Committee approval date), the average closing price of the Common Shares on the five trading days prior to April 4, 2012 converted at the Year-End Exchange Rate. RSUs granted in Fiscal 2014 vest one-third on March 31, 2014, and one-third on each anniversary thereafter. The value of these RSUs was determined based on a share price of Cdn$13.47 on September 2, 2013 (Human Resources & Compensation Committee approval date), the average closing price of the Common Shares on the five trading days prior to September 2, 2013 converted at the Year-End Exchange Rate. Share RSUs granted in Fiscal 2015 vest on March 31, 2018. The value of these RSUs was determined based on a share price of Cdn$14.89 on April 2, 2014 (Human Resources & Compensation Committee approval date), the average closing price of the Common Shares on the five trading days prior to April 2, 2014 converted at the Year-End Exchange Rate.Cash RSUs granted in Fiscal 2015 vest one-third on March 31, 2015, and one-third on each anniversary thereafter. The value of these RSUs was determined based on a share price of Cdn$14.76 on September 5, 2014 (Human Resources & Compensation Committee approval date), the average closing price of the Common Shares on the five trading days prior to September 5, 2014 converted at the Year-End Exchange Rate.
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(3) | For the options granted on April 23, 2012, the Corporation used a Black-Scholes option pricing model in accordance with IFRS 2 Share Based Payments. The Corporation used the following assumptions: average risk-free rate of 1.17%, dividend yield of 0%, volatility factor of 50%, and expected life of the options of 3.5 years. The options were granted at an exercise price of Cdn$14.00, being the closing price of the Corporation’s shares on the TSX on the date immediately preceding the date of grant. Each option expires five years after the date of its grant. For the options granted on September 3, 2013, the Corporation used a Black-Scholes option pricing model in accordance with IFRS 2 Share Based Payments. The Corporation used the following assumptions: average risk-free rate of 1.68%, dividend yield of 0%, volatility factor of 50%, and expected life of the options of 3.5 years. The options were granted at an exercise price of Cdn$13.19, being the closing price of the Common Shares on the TSX on the date immediately preceding the date of grant. Each option expires five years after the date of its grant. For the options granted on April 7, 2014, the Corporation used a Black-Scholes option pricing model in accordance with IFRS 2 Share Based Payments. The Corporation used the following assumptions: average risk-free rate of 2.27%, dividend yield of 0%, volatility factor of 57%, and expected option life of ten years after grant. The options were granted at an exercise price of Cdn$14.75, being the closing price of the Corporation’s share on the TSX on the date immediately preceding the date of grant. |
(4) | Converted into United States dollars at the Year-End Exchange Rate. |
(5) | Given the significant effort required by management to complete both the Swatch Transaction and the Ekati Transaction in Fiscal 2014 and the positive and transformational nature of these transactions, the Human Resources & Compensation Committee determined to award transactional bonuses to the following Named Executive Officers, which are included as part of the Annual Incentive Plan amounts listed above: Robert A. Gannicott ($700,305), Wendy Kei ($233,435), Brendan Bell ($46,687) and James R.W. Pounds ($105,046). |
(6) | This amount includes housing allowance and medical expenses of approximately $294,000. |
(7) | Ms. Kei resigned as the Chief Financial Officer and Mr. Cameron was appointed Chief Financial Officer on September 8, 2014. |
(8) | This amount includes northern living allowance, relocation allowance, travel allowance, housing allowance and the Corporation’s deferred profit sharing match. |
(9) | Mr. Bell is also currently the Acting Chief Executive Officer of the Corporation. |
(10) | This amount includes northern living allowance, northern travel allowance, housing allowance and the Corporation’s deferred profit sharing match. |
(11) | This amount includes northern living allowance, site allowance, housing allowance, relocation allowance and the Corporation’s contributions to defined contribution plan. |
(12) | This amount includes housing allowance. |
(13) | This amount includes northern travel allowance, northern living allowance, relocation allowance, severance, vacation payout and extended benefits payout. |
Incentive Plan Awards
Outstanding Share-Based Awards and Option-Based Awards as at January 31, 2015
Option-Based Awards | Share-Based Awards(1) | ||||||
Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price (US$)(2) | Option Expiration Date (M/D/Y) | Value of Unexercised In-the- Money Options (US$)(3) | Number of Shares or Units of Shares that Have Not Vested (#) | Market or Payout Value of Share- Based Awards that Have Not Vested (US$) | Market or Payout Value of Vested Share-Based Awards Not Paid Out or Distributed (US$) |
Robert A. Gannicott | 416,000 300,000 350,000 350,000 435,000 209,282 | 2.97 9.71 13.14 11.01 10.38 11.60 | 04/07/2019 09/07/2020 04/07/2016 11/12/2017 09/09/2018 04/07/2024 | 5,672,690 2,070,637 1,215,239 1,958,670 2,711,541 1,047,702 | 103,761 | 1,723,184 | - |
Ron Cameron | - | - | - | - | 56,903 | 945,002 | - |
Brendan Bell | 56,892 | 11.60 | 04/07/2024 | 284,811 | 62,853 | 1,043,815 | - |
Chantal Lavoie | 56,892 | 11.60 | 04/07/2024 | 284,811 | 69,780 | 1,158,853 | - |
James R.W. Pounds | 207,000 56,548 | 2.97 11.60 | 04/07/2019 04/07/2024 | 2,822,709 283,089 | 87,862 | 1,459,146 | - |
Wendy Kei | 8,250 23,705 | 2.97 11.60 | 04/07/2019 04/07/2024 | 112,499 118,671 | - | - | - |
(1) | Share-based awards represent outstanding RSUs. The payment value of the RSUs is based on the last trade of the Common Shares on the TSX prior to the close of business on January 30, 2015, of Cdn$21.11 converted into United States dollars at the Year End Exchange Rate. |
(2) | Options are granted in Canadian dollars. The option exercise price has been converted into United States dollars at the Year End Exchange Rate. |
(3) | Based on the last trade of the Common Shares on the TSX prior to the close of business on January 30, 2015, of Cdn$21.11 converted at the Year End Exchange Rate. |
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Incentive Plan Awards – Value Vested or Earned During the Year
Name | Option-Based Awards – Value Vested During the Year (US$) | Share-Based Awards – Value Vested During the Year (US$) | Non-Equity Incentive Plan Compensation – Value Earned During the Year (US$) |
Robert A. Gannicott | 306,132 | - | 749,528 |
Ron Cameron | - | - | 94,501 |
Brendan Bell | - | 231,462 | 218,309 |
Chantal Lavoie | - | 277,731 | 218,309 |
James R.W. Pounds | - | 704,208 | 216,988 |
Wendy Kei | - | 211,314 | - |
Pension Plan Benefits and Deferred Compensation Plan
No Named Executive Officer is a member of a defined benefit pension plan.
No Named Executive Officer, except Mr. Lavoie, is a member of the Corporation's Canadian registered defined contribution plan whereby the Corporation matches an employee's contribution to his or her registered retirement savings plan to a maximum of 3% and contributes 8% of the employee's earnings up to 2.5 times the year’s maximum pensionable earnings and 12% of the employee’s earnings in excess of 2.5 times the year’s maximum pensionable earnings. An amount up to the maximum contribution limits under the Income Tax Act (Canada) is contributed to the Corporation's registered defined contribution pension plan and any amounts in excess of the contribution limit is contributed to the Corporation's Supplementary Pension Plan Fund. Mr. Lavoie reached the maximum limit under the Income Tax Act (Canada) and earned an amount paid into Corporation's Supplementary Pension Plan Fund.
Mr. Cameron and Mr. Bell are members of the Corporation’s Canadian deferred profit sharing plan whereby the Corporation matches an employee’s contribution to his or her registered retirement savings plan to a maximum of 6% of the employee’s salary and subject to the maximum contribution limits under theIncome Tax Act (Canada).
The following table outlines the change in value of the defined contribution plan holdings of the Named Executive Officers over the course of Fiscal 2015.
Defined Contribution Plans
Name | Accumulated Value at February 1, 2014 (US$) | Compensatory (US$)(1) | Accumulated Value at January 31, 2015 (US$) |
Robert A. Gannicott | - | - | - |
Ron Cameron | - | - | - |
Brendan Bell | - | - | - |
Chantal Lavoie | 49,353 | 43,972 | 64,845 |
James R.W. Pounds | - | - | - |
Wendy Kei | - | - | - |
(1) | Contribution by Dominion Diamond Ekati Corporation to defined contribution plan. |
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Termination and Change in Control Benefits
The Corporation has entered into employment agreements with Robert A. Gannicott, Ron Cameron, James R. W. Pounds, Chantal Lavoie and Brendan Bell. The following table sets out five scenarios of termination and explains the compensation that would be paid to the Named Executive Officers in event of such termination:
Compensation Element | Resignation | Termination with Cause | Termination Without Cause(1) | Retirement | Change in Control |
Base Salary | Ends immediately | Ends immediately | As negotiated, paid in lump sum, generally within 5 business days of termination | Ends immediately | As negotiated |
Annual Incentives (Bonus) | Entitled to unpaid Bonus | Forfeited | As negotiated, paid in lump sum, generally within 5 business days of termination | Entitled to unpaid Bonus | As negotiated |
Long Term Incentives Stock Options | Unvested options cancelled, vested options expire in 60 days | Unvested options cancelled, vested options expire in 60 days | Unvested options cancelled, vested options expire in 60 days | Unvested options cancelled, vested options expire in 60 days | Options become fully vested |
Long Term Incentives RSUs | Receive the value of vested RSUs, unvested RSUs cancelled | Receive the value of vested RSUs, unvested RSUs cancelled | Receive the value of vested RSUs, unvested RSUs cancelled | Receive the value of vested RSUs, unvested RSUs cancelled | Unvested RSUs which would have vested within one year of a Change in Control will vest immediately, balance continue to vest and be payable in accordance with Plan. |
Benefits(2) | None | None | Coverage as negotiated | None | Coverage as negotiated |
(1) | The following table sets out the amount to be paid to the Named Executive Officers upon termination or a triggering event as of January 31, 2015: |
Named Executive Officer | Type of Termination or Triggering Event | Payment |
Robert A. Gannicott | Termination without just cause, or if he elects to terminate his agreement within six months of a Change in Control | (a) A payment equal to three times his then current annual salary; and (b) an amount equal to three times the greater of: (i) his last year’s bonus; or (ii) the average of his bonuses for the last two fiscal periods. |
Ron Cameron | Termination without just cause, or if he elects to terminate the agreement within six months of a Change in Control for Good Reason(A) | (a) A payment equal to two times his then current annual salary; and (b) an amount equal to two times the greater of: (i) his last year’s bonus; or (ii) the average of his bonuses for the last two fiscal periods. |
Brendan Bell | Termination without just cause, or if he elects to terminate the agreement within six months of a Change in Control for Good Reason(A) | (a) A payment equal to two times his then current annual salary; and (b) an amount equal to two times the greater of: (i) his last year’s bonus; or (ii) the average of his bonuses for the last two fiscal periods. |
Chantal Lavoie | Termination without just cause, or if he elects to terminate the agreement within six months of a Change in Control for Good Reason(A) | (a) A payment equal to two times his then current annual salary; and (b) an amount equal to two times the greater of: (i) his last year’s bonus; or (ii) the average of his bonuses for the last two fiscal periods. |
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Named Executive Officer | Type of Termination or Triggering Event | Payment |
James R. W. Pounds | Termination without just cause, or if he elects to terminate the agreement within six months of a Change in Control for Good Reason(A) | (a) A payment equal to two times his then current annual salary; and (b) an amount equal to two times the greater of: (i) his last year’s bonus; or (ii) the average of his bonuses for the last two fiscal periods. |
(A) Which is generally defined as events which constitute a constructive termination. | |
(2) | The executive employment agreements obligate the Corporation to pay for existing benefit plan coverage for certain period of time: Mr. Gannicott, 3 years; Messrs., Cameron, Bell, Lavoie and Pounds, 2 years. |
The estimated additional payment to certain Named Executive Officers in the case of termination under the above-noted scenarios, assuming that the triggering event took place on the last business day of the Corporation’s most recently completed financial year, are set out in the following table:
Named Executive Officer(1) | Compensation Element | Resignation (US$) | Termination With Cause | Termination Without Cause (US$) | Retirement (US$) | Change in Control (US$) |
Robert A. Gannicott | Salary & Bonus Stock Options RSUs Total | - 9,057,118 - 9,057,118 | - - - - | 5,563,588 9,057,118 - 14,620,706 | - 9,057,118 - 9,057,118 | 5,563,588 14,670,786 - 20,234,374 |
Ron Cameron | Salary & Bonus Stock Options RSUs Total | - - - - | - - - - | 1,133,042 - - 1,133,042 | - - - - | 1,133,042 - 315,005 1,448,047 |
Brendan Bell | Salary & Bonus Stock Options RSUs Total | - 284,811 - 284,811 | - - - - | 1,380,659 284,811 - 1,665,470 | - 284,811 - 284,811 | 1,380,659 284,811 287,667 1,953,137 |
Chantal Lavoie | Salary & Bonus Stock Options RSUs Total | - 284,811 - 284,811 | - - - - | 1,380,659 284,811 - 1,665,470 | - 284,811 - 284,811 | 1,380,659 284,811 345,198 2,010,668 |
James R. W. Pounds | Salary & Bonus Stock Options RSUs Total | - 3,105,798 - 3,105,798 | - - - - | 1,457,336 3,105,798 - 4,563,134 | - 3,105,798 - 3,105,798 | 1,457,336 3,105,798 343,106 4,906,204 |
(1) Converted into United States dollars at the Year End Exchange Rate.
Mr. Gannicott’s executive employment agreements contain an indefinite non-disclosure provision. Messrs. Cameron, Bell, Lavoie and Pounds executive employment agreements contain an indefinite non-disclosure provision and a 12 month non-solicitation provision following termination of employment.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following tables provide information as of January 31, 2015, concerning options outstanding, and Common Shares available for future issuance, pursuant to the Stock Option Plan (as defined below) and the Amended and Restated 2010 Restricted Share Unit Plan, which have been approved by the shareholders of the Corporation and which are currently the only compensation plans of the Corporation under which equity securities of the Corporation are authorized for issuance:
Stock Option Plan
Number of Common Shares to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of Common Shares remaining available for future issuance under the stock option plan |
2,695,819 | Cdn$10.91 | 1,986,101 |
The Corporation currently has in place a stock option plan (the “Stock Option Plan”), which was adopted by the directors of the Corporation on June 12, 2000 and approved by the shareholders of the Corporation on July 27, 2000, and which was most recently amended on January 14, 2015 by the Board with respect to certain administrative matters pursuant to Section 15.1 of the Stock Option Plan. The maximum number of Common Shares issuable pursuant to the Stock Option Plan is 6,000,000, which represents 7% of the currently outstanding Common Shares.
The material provisions of the Stock Option Plan are as follows:
(a) | the persons who are eligible to be granted options under the Stock Option Plan are “service providers”, which means (i) any officer, or full or part-time employee of the Corporation or any of its affiliates, and (ii) any other person or company engaged to provide ongoing consulting, technical, management or other services to the Corporation or any affiliated entity of the Corporation (and upon the receipt of a grant of options, each an “Optionee”); |
(b) | as of the date hereof, there are stock options outstanding in respect of an aggregate of 2,889,150 Common Shares, representing approximately 3.4% of the currently outstanding Common Shares; |
(c) | the Corporation has adopted policies which impose trading restrictions preventing officers, directors and employees from trading in securities of the Corporation (including exercising stock options) during certain periods (“Black-Out Periods”), and the Stock Option Plan provides that if the expiry date of an option granted under the Stock Option Plan would otherwise occur during or within ten calendar days following a Black-Out Period, the expiry date of such option shall be extended to the first business day which is at least ten calendar days after the end of the Black-Out Period; |
(d) | the number of Common Shares reserved for issuance to any one person, shall not exceed 2% of the number of Common Shares issued and outstanding on a non-diluted basis (the “Outstanding Issue”), at the time of such grant; |
(e) | the number of Common Shares reserved for issuance to Optionees who are, at the time of the particular grant, Related Persons (as defined in the Stock Option Plan), shall not exceed 10% of the Outstanding Issue, at the time of such grant; |
(f) | the number of Common Shares issued within any one year period pursuant to the exercise of options to Optionees who are, at the time of issuance, Related Persons, shall not exceed 10% of the Outstanding Issue at that time, less the number of Common Shares which have been issued pursuant to the Stock Option Plan in the twelve month period immediately preceding such time (the “Adjusted Outstanding Issue”); |
(g) | the number of Common Shares issued within any one year period pursuant to the exercise of Options and options granted under a share compensation arrangement existing prior to effective date of the Stock Option Plan to any one Related Person and his or her associates shall not exceed 2% of the Adjusted Outstanding Issue; |
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(h) | the exercise price for the Common Shares under each option granted under the Stock Option Plan is be determined by the Board, or by a committee appointed for this purpose by the board, on the basis of the market price at the time of granting of each option. If at the time of grant of an Option the shares of the Corporation are listed on the TSX, the exercise price may not be less than the market price on the TSX, where “market price” means the prior trading day closing price of the shares of the Corporation, or where there is no such closing price, the average of the most recent bid and ask of the shares of the Corporation on the TSX; |
(i) | options granted under the Stock Option Plan may, at the discretion of the Board or Human Resources & Compensation Committee, provide that the number of shares which may be acquired pursuant to the option shall not exceed a specified number or percentage each year (or other specified period) during the term of the option (a "vesting restriction"); however, all options become immediately exercisable upon the occurrence of an “Acceleration Event” as defined in the Stock Option Plan, which includes a take-over of the Corporation, a merger of the Corporation where the Corporation is not the continuing or surviving corporation, the sale of all or substantially all of the assets of the Corporation, or the liquidation or dissolution of the Corporation; |
(j) | options may be granted under the Stock Option Plan for a term not exceeding ten years; |
(k) | if a holder of an option ceases to be a service provider to the Corporation (other than as a result of the death of such holder), such holder’s options terminate on the earlier of (i) 60 days after the holder ceases to be a service provider, and (ii) the original expiry date of the option; |
(l) | if a holder of an option dies while he or she is a service provider, such holder’s options terminate on the earlier of (i) one year after the date of death of the holder, and (ii) the original expiry date of the option; |
(m) | if a holder of an option has their position terminated by the Corporation for reasons that would constitute either termination without cause or resignation due to constructive dismissal, within twenty four months following an Acceleration Event (as defined in the Stock Option Plan), any option held by such holder (whether or not such option could have been exercised prior to the date of such termination or resignation) will be exercisable by such holder for a period which is the shorter of (i) the remaining term of the option and (ii) two years from the date of such termination or resignation. |
(n) | options may not be assigned or transferred, except (i) by will or by the laws of descent and distribution, or (ii) transfers to (A) personal holding companies controlled by a service provider, the shares of which are held directly or indirectly by the service provider, his or her spouse, minor children and/or minor grandchildren, or (B) a registered retirement savings plan established by and for the sole benefit of a service provider, or (C) aninter vivostrust if the service provider is the trustee, and the beneficiaries of which trust include only the service provider, his or her spouse, minor children and minor grandchildren; |
(o) | the Board may from time to time amend the Stock Option Plan without approval from shareholders of the Corporation, other than with respect to the following matters: (i) the maximum number of Common Shares reserved for issuance under the Stock Option Plan; (ii) a reduction in the exercise price for options held by insiders of the Corporation; (iii) an extension to the term of any option held by insiders of the Corporation; and (iv) an increase in any limit on grants of options to insiders set out in the Stock Option Plan; and |
(p) | the Corporation has not provided, and does not provide, any financial assistance to Optionees to facilitate the exercise of options granted pursuant to the Stock Option Plan. |
Amended and Restated 2010 Restricted Share Unit Plan
Number of Common Shares to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of Common Shares remaining available for future issuance under the stock option plan |
188,211 | Nil | 411,789 |
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In September, 2010, the 2010 Restricted Share Unit Plan was adopted by the Corporation, which originally granted restricted share units that would be settled in cash. On July 19, 2013, shareholders of the Corporation approved the adoption of the Amended and Restated 2010 Restricted Share Unit Plan (the “2010 RSU Plan”), which allows the Corporation to settle restricted share units (“Units”) that are granted under the 2010 RSU Plan in either Common Shares issued from treasury (“Common Share Units”) or cash (“Cash Units”). The maximum number of Common Shares issuable pursuant to the 2010 RSU Plan is 600,000, which represents 0.7% of the currently outstanding Common Shares.
The material provisions of the 2010 RSU Plan are as follows:
(a) | employees of the Corporation and its affiliates who are designated by the Human Resources & Compensation Committee (a “Participant”) are eligible to participate in the 2010 RSU Plan; |
(b) | at the time of grant, the Human Resources & Compensation Committee will designate whether the award to a Participant is to be settled as Cash Units or Common Share Units; |
(c) | as of the date hereof, there are Common Share Units outstanding in respect of an aggregate of 342,961 Common Shares, representing approximately 0.4% of the currently outstanding Common Shares; |
(d) | under no circumstances may the 2010 RSU Plan, together with all of the Corporation’s other share compensation arrangements, result in: (a) the aggregate number of Common Shares issued to insiders of the Corporation within any one year period or issuable to insiders at any time exceeding 10% of the total number of issued and outstanding Common Shares; (b) the number of Common Shares issued to any insider (including such insider’s associates) within any one year period exceeding 5% of the then total number of issued and outstanding Common Shares; or (c) the number of Common Shares reserved for issuance to any one person exceeding 5% of the then total number of issued and outstanding Common Shares; |
(e) | in the event a dividend becomes payable on the Common Shares, on the payment date for such dividend, each Participant’s account shall be credited with a number of Units (including fractional Units) equal to: (a) the amount of the dividend paid per Common Share multiplied by the number of Units credited to the Participant’s account as of the record date for payment of the dividend, divided by (b) the average closing price for the Common Shares on the TSX on the five trading days prior to that date (the “Fair Market Value”) as of the date for payment of the dividend. Subject to the Plan, Units credited to a Participant’s account will generally vest at the same time as the related Units vest and will generally be settled in the same form, in cash or Common Shares, as the related Units; |
(f) | Participants do not have any rights as a shareholder of the Corporation in respect of the Units. Accordingly, Participants are not entitled to vote the Common Shares underlying the Common Share Units; |
(g) | Units are not assignable by a Participant; |
(h) | if the employment of a Participant is terminated for any reason other than death or disability, the Participant will forfeit all right, title and interest with respect to any unvested Units awarded to the Participant under the 2010 RSU Plan and such Units will immediately expire and be cancelled on such termination date, unless otherwise determined by the Human Resources & Compensation Committee in its sole discretion. Any vested Units will continue to be governed by the 2010 RSU Plan (see “Settlement” below). If a Participant dies or becomes disabled, his or her Units will vest immediately; |
(i) | Units will vest in accordance with the terms set by the Human Resources & Compensation Committee at the time of grant; |
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(j) | for Common Share Units, the number of Common Shares received by a Participant upon vesting shall be equal to the number of such Units vested on the settlement date. Also, at any time prior to the settlement date, Participants may request that such Common Share Units be settled in cash, and the Human Resources & Compensation Committee may, in its absolute discretion, agree to settle such Units in cash; |
(k) | for the purpose of determining the cash amount payable by the Corporation to a Participant in respect of Cash Units, the number of Units will be valued by multiplying the number of such Units by the Fair Market Value on the date a determination is required, namely the earliest of: (a) the date of the Participant’s death or disability; (b) the last day of employment of the Participant; or (c) the settlement dates set out in any grant instrument. The value will be paid to a Participant net of all applicable taxes and other amounts required to be withheld determined in the sole discretion of the Corporation, within 30 days of the date the fair market value of the applicable Units was determined; |
(l) | upon a change in control of the Corporation and the termination, without cause, of the Participant within twelve months thereafter, the Participant’s Units will vest on the date of termination; and |
(m) | The Board may make amendments to the 2010 RSU Plan without seeking shareholder approval including, but not limited to, housekeeping amendments, amendments to satisfy changes in applicable tax law, amendments to outstanding Units in the event of certain corporate transactions and the addition of covenants for the protection of Participants. However, shareholder approval is required for: (i) an increase in the maximum number of Common Shares reserved for issuance under the 2010 RSU Plan or a change from a fixed maximum number of Common Shares to a fixed percentage; (ii) an amendment to the amendment provisions of the 2010 RSU Plan; (iii) an expansion of insider participation; (iv) an amendment extending the term of any award beyond its original expiry date; (v) the addition of any new provision which will result in Participants receiving Common Shares while no cash consideration is received by the Corporation; and (vi) any amendment to the assignment provisions. |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As of the date hereof, no current or former director or executive officer or employee of the Corporation or any of its subsidiaries, or proposed nominee for election as director, or any of their respective associates, is indebted to the Corporation or any of its subsidiaries or has indebtedness to another entity which has been the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Corporation or any of its subsidiaries.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
No informed person of the Corporation, proposed director of the Corporation and no associate or affiliate of such informed person or proposed director has any material interest, direct or indirect, in any transaction since the commencement of the Corporation’s last completed fiscal year or in any proposed transaction, which, in either case, has materially affected or would materially affect the Corporation or any of its subsidiaries.
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ADDITIONAL INFORMATION
Financial information relating to the Corporation is contained in its comparative annual financial statements and Management’s Discussion and Analysis of the results of operations for Fiscal 2015. Copies of this Management Proxy Circular, the Annual Report which contains the comparative audited financial statements of the Corporation, any interim financial statements subsequent to those statements contained in the Annual Report and Management’s Discussion and Analysis of the results of operations for the Corporation for an annual or interim period, the Annual Information Form, and copies of charters of the committees of the Board and the Corporate Governance Guidelines may be obtained from SEDAR at www.sedar.com or free of charge upon request from Investor Relations of the Corporation at P.O. Box 4569, Station “A”, Toronto, Ontario M5W 4T9, 416-362-2237 ext. 1 or by emailinginvestor@ddcorp.caor by viewing the Corporation’s web site. Throughout this Management Proxy Circular, references to documents and/or information available on the Corporation’s website can be found atwww.ddcorp.ca.
BOARD APPROVAL
The directors of the Corporation have approved the contents and sending of this Management Proxy Circular to the shareholders.
Lyle R. Hepburn
Corporate Secretary
June 2, 2015
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SCHEDULE 1 - STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Board of Directors
(a) | The Board is currently comprised of seven directors, of which six are considered to be unrelated and independent directors within the meaning of Canadian and United States securities laws and the NYSE Rules. A director is considered to be unrelated and independent by the Board if the Board determines that the director has no direct or indirect material relationship with the Corporation. A material relationship is a relationship that could, in the view of the Board, be reasonably expected to interfere with the exercise of the director’s judgment independent of management. The independent directors of the Corporation are currently Graham G. Clow, Daniel Jarvis, Tom Kenny, Ollie Oliveira, Fiona Perrott- Humphrey and Chuck Strahl. |
(b) | Robert A. Gannicott, Chief Executive of the Corporation, is the only related and non-independent director of the Corporation. |
(c) | A majority of the directors of the Corporation are independent as defined in Section 1.2(1) of NI58-101. |
(d) | Some of the directors of the Corporation, and the proposed nominees, are also directors of other reporting issuers, or the equivalent of a reporting issuer in a foreign jurisdiction. The following table outlines such directorships held by the members of the Board as of June 2, 2015. No members of the Board served together on the boards of other public companies: |
Name of Current Director | Other Directorships Held |
Graham G. Clow | Acacia Mining PLC |
Robert A. Gannicott | None |
Daniel Jarvis | None |
Tom Kenny | None |
Ollie Oliveira | Antofagasta PLC and Ferrous Resources Limited |
Fiona Perrott-Humphrey | None |
Chuck Strahl | None |
(e) | Each face to face scheduled meeting of the Board includes an executive session with only non- management directors present. The Lead Director, or in his absence another independent director, presides over all executive sessions. The Board held seven scheduled meetings and five unscheduled meetings during Fiscal 2015. The independent directors held private sessions at five directors meetings during Fiscal 2015. The independent directors sitting on committees also held private sessions at five of six Audit Committee Meetings; at three of four Human Resources & Compensation Committee meetings, at one of four Nominating & Corporate Governance Committee meetings and at two of three Health, Safety & Environmental Committee meetings. |
(f) | The Chairman of the Corporation, Robert A. Gannicott, is a non-independent director. Daniel Jarvis, who is not a member of management and who is unrelated and independent, is the Lead Director for the Corporation. He was appointed as the Lead Director on June 2, 2010. The principal responsibilities of the Lead Director include overseeing the Board processes so that it operates efficiently and effectively in carrying out its duties, acting as a liaison between the Board and management, and presiding over all executive sessions of the Board. The Corporation has written guidelines for the Lead Director. These guidelines are available on the Corporation's website. |
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Interested parties may contact the Lead Director by mail addressed to Mr. Jarvis c/o Dominion Diamond Corporation, P.O. Box 4569, Station A, Toronto ON Canada M5W 4T9 or in accordance with the procedure set out in the Corporation’s Whistleblower Protection Policy which is available on the Corporation’s website. On December 1, 2014, Mr. Jarvis assumed the role of Acting Chairman due to the medical leave of Mr. Gannicott. | |
(g) | The attendance at Board and Committee meetings for the directors that held office during Fiscal 2015 can be found on page 19 of this Management Proxy Circular (see “Meetings Held and Attendance of Directors”). |
Majority Voting Policy
Board policy requires that, in an uncontested election, any nominee for director with respect to whom a majority of the votes represented by proxies validly deposited prior to the Annual Meeting of the shareholders (the ‘‘Meeting’’) are ‘‘withheld’’ from his or her election (a ‘‘Majority Withheld Vote’’), shall submit his or her resignation to the Nominating & Corporate Governance Committee for consideration promptly following the Meeting.
The Nominating & Corporate Governance Committee shall consider the resignation, and shall recommend to the Board whether or not to accept it. The Board shall consider the recommendation of the Nominating & Corporate Governance Committee, and determine whether or not to accept the recommendation. A press release disclosing the Board’s determination (and the reasons for rejecting the resignation, if applicable) shall be issued within 90 days following the date of the Meeting.
Any director who tenders his or her resignation shall not participate in any meeting of the Nominating & Corporate Governance Committee, if he or she is a member of that Committee, or of the Board to consider whether his or her resignation shall be accepted. However, if the number of members of the Nominating & Corporate Governance Committee who received a Majority Withheld Vote at the Meeting is such that the remaining members of this Committee do not constitute a quorum, then the directors who did not receive a Majority Withheld Vote shall appoint a committee to consider the resignations and recommend to the Board whether to accept them.
In a contested election, where the number of director nominees exceeds the number of directors to be elected, a plurality vote standard will continue to apply.
The majority voting policy, together with the change to give shareholders the option of voting for or withholding their votes in respect of individual director nominees, provides enhanced director accountability. These measures combined encourage individual board members to be diligent in the performance of their duties by providing shareholders with the right to vote for individual directors based on their individual performance as a director, or withhold their votes for a director who fails to meet the standards required by the shareholders.
Board of Directors Diversity Policy
On January 14, 2015 the Board adopted a Board of Directors Diversity Policy. The Board is committed to continued growth and development with respect to diversity among its board members and senior management.In addition, the Board is committed to ensuring that its members are reflective of diverse professional experience, skills, knowledge and other attributes that are essential to its successful operation and the achievement of the Corporation’s current and future plans and objectives.
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Pursuant to the Policy, the Nominating & Corporate Governance Committee is authorized to:
oversee the periodic evaluation and assessment of individual board members as well as board committees and the Board as a whole to identify strengths and areas for improvement;
develop and maintain a director skills matrix that identifies the skills and expertise required for the Board along with potential areas for growth and improvement;
take measures designed to ensure that nominee recruitment and identification processes are appropriate in terms of depth and scope to foster identification and progression of diverse candidates;
maintain an evergreen list of potential candidates, to the extent feasible, that addresses the needs identified through the processes undertaken above;
recommend to the Board appropriate targets and timelines for achieving such targets in respect of representation of women on the board;and
as required, engage qualified independent external advisors to assist the board in conducting its search for candidates that meet the Board’s criteria regarding skills, experience and diversity.
Director Term Limits and Other Mechanisms of Board Renewal
The Board does not believe it should establish term limits. While the Board acknowledges the benefit of fresh ideas and viewpoints, it encourages alternative means of ensuring Board renewal as opposed to the imposition of arbitrary thresholds given the value of the contribution of directors who have been able to develop, over a period of time, increasing insight into the Corporation and its operations and, therefore, provide an increasing contribution to the Board as a whole.
Representation of Women on the Boardand in Executive Officer Positions
Although the Corporation has not adopted a formal written policy or target relating to the representation of women on the Board or in Executive Officer Positions, the Nominating & Corporate Governance Committee takes into account the diversity of candidates when filling Board vacancies and senior management positions. When identifying candidates to nominate for election to the Board or recommend for appointment as senior management, the primary objectives of the Board and the Nominating & Corporate Governance Committee are to ensure consideration of individuals who are highly qualified, based on their talents, experience, functional expertise and personal skills, character and qualities, having regard to the Corporation’s current and future plans and objectives, as well as anticipated regulatory and market developments.
In furtherance of the Corporation’s commitment to diversity, the Board and the Nominating & Corporate Governance Committee will have due regard for the need to identify and promote individuals who are reflective of diversity for nomination for election to the Board and appointment as senior management.
As of the date of this Management Proxy Circular, there is one woman on the Board, namely Fiona Perrott-Humphrey, representing 14% of the directors. As of the date of this Management Proxy Circular, no women hold positions on the Corporation's executive team.
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Targets
Given the nature and size of the Corporation’s business and its industry, it may be challenging for the Corporation to identify a qualified pool of candidates that adequately reflects the various diverse characteristics that the Corporation seeks to promote. The Corporation has therefore not adopted any specific targets as to the number of women Board members or the number of women in executive positions, but will promote its objectives through the initiatives set out in this Policy with a view to identifying and fostering the development of a suitable pool of candidates for nomination or appointment over time.
The Nominating & Corporate Governance Committee will monitor the success of this Policy by measuring the relative increase of diversity on the Board and in senior management over time, as well the implementation of specific processes designed to foster the progression of diverse candidates to be considered for nomination or appointment.
Board Mandate
The Board has the responsibility to manage, or supervise, the management of the business and affairs of the Corporation. The Board selects and appoints the Corporation’s Chief Executive Officer and, through him, other officers and senior management to whom the Board delegates certain of its power of management. The Board approves strategy, sets targets, performance standards and policies to guide management, monitors and advises management, sets their compensation and, if necessary, replaces them.
To assist the Board in the implementation of key policies, it delegates some of its responsibility to committees. As part of its duties, the Board reviews, through reports from the Nominating & Corporate Governance Committee, and approves the structure, charters and composition of its committees. It also receives and reviews regular and timely reports of the activities and findings of those committees.
The fundamental responsibility of the Board is to appoint a competent executive team and to oversee the management of the business, with a view to maximizing long-term shareholder value and ensuring corporate conduct in an ethical and legal manner via an appropriate system of corporate governance and internal control. The Board has adopted specific corporate governance guidelines which are posted on the Corporation’s website under the name Corporate Governance Guidelines.
Position Descriptions
The Corporation has written guidelines for the Chairman and Chief Executive Officer, and for the Chairs of the Committees. These guidelines are available on the Corporation's website.
The Chief Executive Officer’s position description is reviewed by the Board on an on-going basis. Annual objectives for the Corporation and the Chief Executive Officer are developed jointly by the Board and the Chief Executive Officer. The attainment of these objectives is reviewed by the Board. The Chief Executive Officer is also responsible and accountable for pursuing the strategic goals which are considered and adopted by the Board at its annual strategy meetings.
Orientation and Continuing Education
New directors are provided with a comprehensive information package on the Corporation and its management, and are fully briefed by senior management on the corporate organization and key current issues. Site visits to the Diavik Diamond Mine and the Ekati Diamond Mine are arranged for new directors.
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Ongoing training and development of directors consists of similar components, i.e., updated written corporate information, site visits and presentations by experts in numerous fields that are important to the Corporation’s interests. The following is a list of the internal and external conferences, seminars, courses and site tours that our Board members attended during the year:
- Senior Management presentations on finance, production, operations, road haulage, health, safety and environmental status; diamond market, security, community affairs and succession planning;
- Canadian Corporate and Securities Law Update and information presentations by Stikeman Elliott LLP;
- Presentations by Rothchild Consultants and Golders Associates;
- Governance and Regulatory Updates and Trends presentations by Meridian;
- Current Accounting and Auditing Developments presentations by KPMG LLP;
- Site visits to the Toronto and Northwest Territories sorting facilities; and
- Site visits to the Diavik and Ekati Diamond Mines.
Individual directors may engage outside advisors, with the authorization of the Nominating & Corporate Governance Committee.
Ethical Business Conduct
The Nominating & Corporate Governance Committee is responsible for developing and reviewing, with recommendations to the Board where appropriate, the Corporation’s approach to all matters of corporate governance, and reporting thereon to the Board. The Corporation has adopted a Code of Ethics and Business Conduct, a Policy on Corporate Disclosure, Confidentiality and Employee Trading, an Insider Trading Policy and a Whistleblower Protection Policy. All of these policies are available on the Corporation's website, and will be provided to any Shareholder who requests them. The Code of Ethics and Business Conduct of the Corporation, as amended, has been filed on SEDAR at www.sedar.com.
The SEC and National Instrument 52-110 – Audit Committees require a corporation to disclose if it has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller. The Corporation is in compliance. The Corporation has adopted a code of ethics entitled Code of Ethics and Business Conduct which is applicable to all directors, officers and employees of the Corporation and its subsidiaries. The Code of Ethics and Business Conduct provides a framework for directors, officers and employees on the conduct and ethical decision making integral to their work. Management of the Corporation is committed to fostering and maintaining a culture of high ethical standards and compliance, and ensuring a work environment that encourages employees to raise concerns to the attention of management and promptly addressing any employee compliance concerns.
The Code of Ethics and Business Conduct provides that management is responsible for monitoring compliance with the Code and for communicating the Code to employees. Employees are advised that they have a duty to report any known or suspected violation of the Code, including any violation of the laws, rules, regulations or policies that apply to the Corporation. Employees are to report such violations to their supervisor, the Corporate Secretary, or by following the procedures set out in the Corporation’s Whistleblower Protection Policy. It is ultimately the Board’s responsibility for monitoring compliance with the Code. The Board, through its Nominating & Corporate Governance Committee, reviews the Code annually to ensure that it complies with legal requirements and is in alignment with best practices.
The Board has not granted any waiver of the Code of Ethics and Business Conduct. Accordingly, no material change report has been required or filed.
Individual directors are expected to indicate a material interest in any transaction or agreement that the Corporation is considering. Directors who have a material interest in a transaction or agreement would not be present for discussions on such transaction or agreement, and would not participate in any vote on the matter.
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Nomination of Directors
The Nominating & Corporate Governance Committee, composed entirely of unrelatedand independent directors, considers all proposed nominees for the Board and recommends nominees to the Board. The Committee periodically assesses the skill sets of current directors and recommends desired background and qualifications for director nominees, taking into account the needs of the Board at the time. Breadth of perspective, experience and judgment are critical qualities of a director, and strongly influence the selection criteria for Board membership. All directors, except one, serve, or have served, on a number of corporate boards, and all bring a broad base of international experience and expertise to Board deliberations.
The Board assessment is done periodically, and consists of an interview and discussion by the Lead Director with each director on an informal basis. The Committee addresses issues such as director representation in terms of expertise and experience, Board size, director succession planning, meeting quality and efficiency, director contribution and interaction, management effectiveness and the Board’s relationship with management. Directors complete an evaluation form for each fiscal year which contains questions concerning the effectiveness of the Board and its committees, operation of the Board, Board size, number of meetings held per annum, meeting quality and efficiency, individual director contribution and interaction, strategic planning opportunities, management effectiveness and the Board’s relationship with management. The responses are reviewed by the Lead Director and presented to the Board.
The Board and the Nominating & Corporate Governance Committee monitor the size of the Board to facilitate effective decision-making. The Nominating & Corporate Governance Committee also develops, reviews and monitors criteria for selecting directors by assessing their qualification, personal qualities, geographical representation, business background and diversified experience. The directors have proposed nine nominees for the position of director in the upcoming year.
The Board has implemented a policy that if, during a director’s service on the Board, he or she: (a) joins or resigns from another public company’s board of directors; or (b) significantly changes his or her primary employment or occupation (any such event shall be referred to as a “Status Change”), that director shall immediately notify the Nominating & Corporate Governance Committee. The Nominating & Corporate Governance Committee should re-evaluate the appropriateness of the continuing membership of the director on the Board in light of the Status Change and recommend to the Board the appropriate action, if any, to be taken with respect to the director. If the Board concludes that the Status Change is significant and requires a resignation of the director, the director shall immediately tender his or her resignation from the Board.
Compensation
Disclosure regarding Compensation set out in Article 7 of National Instrument 58-101F1 can be found on page 26 of this Management Proxy Circular (See “Compensation Governance”).
Board Committees
The Board has four Committees: Audit, Nominating & Corporate Governance, Human Resources & Compensation and Health, Safety & Environmental. The Committees are composed entirely of independent directors. The roles and responsibilities of the Committees are set out in Charters which are available on the Corporation’s website. These Charters are reviewed annually to ensure that they comply with legal requirements and are in alignment with best practices. To assist the Committee in fulfilling their respective responsibilities, such responsibilities are set out in Work Plans which are approved at the beginning of each year. The Charter of each Committee requires that each member of the Committee be an independent director.
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Assessments
Strategic planning is at the forefront of deliberations at meetings of the Board. Management is responsible for the development of overall corporate strategies. These strategies are under constant review by the Board and senior management.
The Board conducts an annual evaluation of the effectiveness of the Board as a whole, and the effectiveness and contribution of its committees and individual directors.
Throughout the year, the Board reviews the performance of management and the Corporation against approved business plans and policies. The Board also reviews and approves specific proposals for all major capital expenditures, checking for consistency with budgets and strategic plans, and deals with a large number of individual issues and situations requiring decision by the Corporation, such as acquisitions, investments and divestitures.
The Board ensures that an appropriate risk assessment process is in place to identify, assess and manage the principal risks of the Corporation's business. Management reports regularly to the Board in relation to principal risks which potentially affect the Corporation's business activities.
The Board regularly reviews management succession plans and, where necessary, initiates and supervises searches for replacement candidates. It also sets objectives for, and reviews the performance of, the senior officers of the Corporation, and approves their appointments and compensation.
The Board ensures that mechanisms are in place to guide the organization in its activities. The Board reviews and approves a broad range of internal control and management systems covering, for example, expenditure approvals, financial controls, environmental and health and safety matters. Such systems are designed to inform the Board of the integrity of the financial and other data of the Corporation, and are subject to audit reviews. Management is required to comply with legal and regulatory requirements with respect to all of the Corporation’s activities.
The Corporation has a sound governance structure in place at both management and Board levels, and a comprehensive system of internal control relating to financial record reliability. These structures and systems are continually assessed, reviewed and enhanced in light of ongoing Canadian and United States regulatory developments affecting corporate governance, accountability and disclosure.
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