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ARGONAUT GOLD INC.
Corporate Governance Guidelines
Argonaut Gold Inc. (the “Corporation”) has been committed to good corporate governance since its formation in 2009. The Board maintains open and direct communications with management on all the major strategic, investment, operating, and management decisions. The Corporation is best served by an informed and interactive Board which has free access to all levels of management and to all of its operations. Through Board meetings, Board agendas and background briefing materials, monthly operating and financial reports, and frequent informal conversations, management shares information with the Board regarding outstanding issues. The cumulative experience and expertise of the Corporation’s directors enables the Board to bring sound business judgment to its decision making process. The independence of the Corporation’s directors has been fostered in order to bring an outside perspective to its deliberations.
The Board has responsibility for the stewardship of the Corporation, including supervision of management of the business and affairs of the Corporation, and our strategic planning process. The CEO and senior management are responsible for the management of our business, within the framework established by the Board and applicable law. The Board has developed and approved written position descriptions for the Chairman of the Board, the Chair of each Board Committee and the CEO of the Corporation.
The Board historically meets a minimum of four times annually on an approved schedule. Regularly scheduled Board meetings are supplemented with telephonic meetings on specific issues, as needed.
All directors are notified each year of the dates and locations of all regularly scheduled Board and Board Committee meetings for that year. Before each meeting, the Chairman of the Board of Directors (the “Chairman”) and CEO develop a preliminary agenda and the Chairman, with consultation from other Directors, formalizes the agenda. All necessary background information for matters relevant to the agenda is delivered to each director at least five days prior to the meeting.
The Board has established and follows a corporate governance program which is reviewed annually by the full Board. The following outlines our Corporate Governance Guidelines:
I. Chairman of the Board
The Chairman of the Board is nominated by the Committee (the “Committee”) and is elected by a majority of the directors. The roles of Chairman and of the President and CEO have been separated between two individuals, thus maintaining a formal separation between the Board and management. The Chairman presently is an independent, non-executive Director. The Chairman has the following responsibilities:
- to determine the time, place and agenda of each Board meeting;
- to act as chairman for each Board meeting;
- to prepare or cause to be prepared minutes of the Board and its committees and all other required reports;
- to chair shareholder meetings;
- to ensure the Board performs its duties and responsibilities;
- to ensure the Board understands its responsibilities and its appropriate role in the supervision of management;
- to interface with the CEO and senior management;
- to assist senior management and the Board in reviewing and monitoring the long-term business plans and strategies;
- to ensure legal counsel or other experts or consultants are retained when deemed necessary by the Board to assist it in discharging its duties and responsibilities;
- to ensure that Board committees are properly performing duties as outlined in each committee's charter and that each committee is reporting on actions taken by the committee;
- to assign, as necessary and appropriate, tasks to specific Board members;
- to review, with the Committee, the size of the Board; and
- to assess, with the Committee, the Board and its committees and members.
II. Board Size and Composition
The optimal number of Directors has currently been determined to be at least four, subject to annual review. The Board believes that this number is appropriate to ensure participation of directors with complementary expertise in key areas of exploration, operations, legal, finance, and general management. Although experience with mining is valuable, it is not an essential qualification. The Board is large enough to provide the experience and maintain a committee structure. Annually, the Board reviews its size and composition and will adjust its size as necessary.
Not more than two directors, nor greater than 1/3 of Board, whichever is less, may be inside directors (i.e., directors who are, or were within the previous five years, officers of the Corporation).
III. Director Independence
The Corporation is committed to governance standards to ensure that the Board has the capacity and independence, to fulfill its responsibilities and to make an objective assessment of management's record and its proposals and initiatives. Therefore, the Corporation is committed to the following practices:
i) the recruitment of capable, independent directors, who shall at all times compose not less than a majority of the Board;
ii) in the event that the Chairman is not an independent director, the Board shall appoint a Lead Director to provide leadership to the independent directors;
iii) any director who has previously been determined to be independent and whose circumstances change such that he or she might be considered to no longer be an independent director, shall promptly advise the Board of the change in circumstances;
iv) all committees of the Board are to be comprised entirely of independent directors.
The independence of a director is determined in accordance with National Instrument NI 52-110 and, as applicable, National Instrument NI 58-101 further to voluntary disclosure by each director. Evaluations of independence require the consideration of any “material relationship” being a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment and includes an indirect material relationship. In determining whether a director is independent, the Board applies standards derived from the Canadian Securities Administrators director independence rules noted above. The Board determines the independence of a director when it approves director nominees for inclusion in the Proxy Circular. Based on the results of independence questionnaires completed by each nominee and other information, the Board determines if the nominees proposed for election as directors are independent.
IV. Director Recruitment and Retirement
Under the leadership of the Committee, the Board pursues a policy of identifying potential new directors through the identification of candidates that will provide the Board with a balance of members who have diverse backgrounds, genders, complementary skill sets and relevant experience in any of the mining industry, international business, or matters relevant to the Corporation's operations, while balancing the need for renewal and the identification of fresh perspectives with the demands for experience and knowledge.
The Corporation does not impose term limits or have other mechanisms compelling retirement. The Corporation has determined that term limits may arbitrarily require some of its most valuable and experienced members to retire prematurely. The Board believes that its members should be reviewed regularly to ensure that they are making a meaningful contribution to the Board and the Corporation. The Committee regularly reviews board membership and performance and is empowered to recommend changes when appropriate. The Board believes that this Committee is best placed to make recommendations for renewal with a perspective focused on performance rather than arbitrary deadlines.
V. Election and Appointment of Directors
By law, the Board proposes nominees for election to the Board each year in the proxy statement for the Annual General Meeting of Shareholders (“AGM”). Between AGM’s, the Board may appoint additional or replacement Directors to serve until the next AGM, subject to the limitations of the Business Corporations Act (Ontario).
VI. Majority Voting Policy
The Board believes that each of its members should have the confidence and support of the Corporation's shareholders. On March 21, 2013, as recommended by the Committee, the Board adopted a majority voting policy for the election of directors at the Meeting. This policy provides that in an uncontested election, any nominee for director who receives more "withheld" votes than "for" votes will tender his or her resignation to the Board, effective on acceptance by the Board. The Board will refer the resignation to the Committee for consideration. The Board will promptly accept the resignation unless the Committee determines that there are extraordinary circumstances relating to the composition of the Board or the voting results that should delay the acceptance of the resignation or justify rejecting it. The Board will provide the TSX with a copy of the news release regarding its decision pursuant to TSX policies. In any event, it is expected that the resignation will be accepted (or in rare cases rejected) within 90 days of the Meeting.
VII. Director Orientation and Continuing Education
An orientation process is conducted for all new directors. The orientation consists of providing a new director with a copy of the Board of Directors’ Reference Book, of meetings with the CEO, Corporate Secretary, and members of senior management, of attendance at one corporate public presentation to investors/analysts and of a visit to and operating review of each major operation. Each new Director will try to complete this process within the first 12 months following election. The Corporation provides directors with a comprehensive briefing of its business activities and finances and in addition, encourages directors to undertake training and education as to corporate governance matters, all at the expense of the Corporation.
VIII. Committee Structure
The Board delegates certain of its powers to the Audit, Nominating, Compensation and Governance and Safety, Health, Environmental, Sustainability and Technical Committees. Each committee has a charter, approved by the Board that defines the scope of its duties and responsibilities. Each committee reviews its charter annually and recommends approval of appropriate charter amendments to the Board. Each charter requires the committee to evaluate its performance annually. The Audit, Nominating, Compensation and Governance and Safety, Health, Environmental, Sustainability and Technical Committees are comprised of independent directors only. Each outside Board member sits on at least one committee. The frequency, length, and agendas of committee meetings are determined by the committee chairman in consultation with committee members and appropriate members of senior management. The committee chairman reports to the full board on the matters undertaken at each committee meeting. Any independent director may attend any committee meeting but has no vote on committee business.
IX. Sessions of Outside Directors
The Chairman, or Lead Director, as appropriate will preside over in camera sessions of the independent directors which will be held during each regularly scheduled Board meeting, with neither inside directors nor management present.
X. Formal Evaluation of Chief Executive Officer
The Committee conducts an annual evaluation of the CEO which includes soliciting opinions from each director. The results of the annual evaluation are discussed by the Chairman of the Committee and one other Director with the CEO, and then in a meeting with the all the outside members of the Board.
XI. Succession Planning/Management Development
The CEO presents an annual report to the Committee on succession planning and the Corporation's program for management development. The Committee conducts its own independent deliberations and makes a recommendation to the Board.
XII. Access to Management and Independent Advisors
Directors are invited to have complete, unfettered access to senior management. Members of senior management normally attend portions of each regularly scheduled Board meeting. The Board may, when appropriate, obtain advice and assistance from outside advisors and consultants without prior approval of management.
XIII. Director Compensation
The Committee annually reviews the compensation of the Directors to ensure that it is competitive with comparable boards of directors and recommends changes to such compensation, as appropriate, to the Board for approval. Each director may elect to receive all or a part of his compensation in shares of the Corporation.
XIV. Director Share Ownership Guidelines
The Corporation requires that shares issued to the directors as part of their compensation be held by the director for a minimum of two years or six months after the director leaves the Board, whichever is sooner.
XV. Senior Executive Share Ownership Guidelines
The Corporation has compensated its senior management and key contributors with base salary, bonuses, and equity awards. Management compensation is reviewed at least annually by the Committee of the Board and adjustments may be made based upon competitive industry data, corporate performance against goals and objectives, and individual performance.
The purpose of the Corporation’s stock option and restricted shares plan is to develop the interest and incentive of eligible employees, officers and directors in the Corporation’s growth and development by providing an opportunity to purchase common shares, thereby advancing the interests of the Corporation, enhancing the value of the common shares for the benefit of all shareholders and increasing the ability of the Corporation to attract and retain skilled and motivated individuals.
The equity awards are made in accordance with the shareholder approved Argonaut Gold Inc. Amended and Restated 2010 Share Incentive Plan. These equity awards could be in the form of shares, option awards, restricted shares or any other award as allowed under the approved Share Incentive Plan of the Corporation. Awards may have a multiple year vesting requirement by management as determined by the Board of Directors. Consequently, senior management of the Corporation has a significant financial risk (or reward) based upon the ongoing performance of the Corporation. Accordingly, the Corporation has developed executive ownership guidelines that require senior management to maintain a minimum ownership holding in the Corporation, calculated as the greater of granted or market value. The Chief Executive Officer of the Corporation must maintain an ownership value of at least two times his base salary, and it is recommended that the other members of senior management maintain a value of at least one times their base salary. All members of senior management are provided a three year window from the time they join the Corporation in which to attain this level of executive ownership.
XVI. Extensions of Credit
No loan guarantee, financial assistance, or similar extension of credit will be made to officers of the Corporation without prior Board approval. It is the intent of the Corporation to make such loans only when business activity by the Corporation makes this necessary. In no case will the Corporation be permitted to hold shares of the Corporation as collateral security for a loan to an officer.
All such lending activity will be disclosed in the Corporation’s annual disclosure filings.
XVII. Board of Directors Self Assessment
The Board conducts an annual self-assessment process under the auspices of the Chairman, through questionnaires provided to all Board members. The completed questionnaires are reviewed by the Board and changes in the corporate governance process are considered based on the results of the Board’s review and analysis of the completed questionnaires. Pursuant to the self-assessment process, the Board reviews, among other matters, agenda items, meeting presentations, advance distribution of agendas and materials for Board meetings, interim communications to directors, and access to and communications with senior management. The self-assessment process also includes an evaluation of the Committees, the Chairman of the Board and an individual Director assessment.
XVIII. Board and Management Diversity
The Committee is committed to broadening the experience and diversity of the Corporation’s Board of Directors. The Committee considers candidates for Board and Executive Officer positions based on merit, background, skills, experience and knowledge, as well as considerations such as gender, ethnicity and race to broaden the overall diversity of the Board. The committee aims to promote or recruit the highest quality and caliber candidates for such positions. Eligible candidates are reviewed by the Chairman of the Committee, and those qualified are recommended to the Board for nomination.
XVIV. Clawback Provision Policy
The Committee has adopted a Clawback Policy applicable to compensation granted after April 2, 2015, pursuant to which, to the extent permitted by law, annual incentives, performance based compensation and short and long term incentives awarded, paid or payable, to officers of the Corporation may be forfeit or subject to repayment if:
- the payment, grant or vesting of such compensation was based on the achievement of financial results that were subsequently the subject of a material restatement of financial statements issued in the prior twelve month period;
- the Board of Directors determines that the officer engaged in fraud or gross misconduct that caused or meaningfully and directly contributed to the restatement;
- the amount of compensation that would have been received by the officer, had the financial results been properly reported, would have been lower than the amount actually received; and
- the Board, prior to any change of control, determines that the repayment or forfeiture is in the best interest of the Corporation and its shareholders, provided, however, that the Board may, in its sole discretion from time to time release or waive the application of this policy to compensation received by an officer.
XVV. Foreign Investment Policy
The Committee has adopted a corporate governance policy, which requires shareholder approval of any material investment in any country, other than those in which it has historically conducted business, which ranks in the lowest 10th percentile of the most recent Rule of Law indicator, as published by the World Bank Group, World Governance Indicators.
XVVI. Say on Pay Policy
The Committee has adopted a “Say on Pay” Policy, whereby the Corporation’s shareholders are to be provided with the opportunity to participate in an advisory vote on the annual remuneration of the Named Executive Officers (“NEO’s”) at the annual shareholder meeting.
While the advisory vote is non-binding, the Nominating, Compensation & Governance Committee and the Board of Directors will take into account the results of the vote, as they consider appropriate, when considering past, current and future compensation, policies, procedures and decisions. In addition, the Corporation is committed to ensuring that it communicates effectively and responsibly with shareholders, other interested parties and the public. As part of that commitment, the Corporation periodically engages certain shareholders and governance stakeholders directly to discuss the approach to executive compensation. The Corporation offers shareholders a method to communicate directly with the independent Chairman of the Board in writing to: James E. Kofman, Chairman of the Board, Argonaut Gold Inc., c/o Sander Grieve, Bennett Jones LLP, 3400 One First Canadian Place, 100 King Street West, P.O. Box 130, Toronto, Ontario, Canada, M5X 1A4.
If a majority or significant proportion of the shares represented in person or by proxy at the meeting are voted against the advisory resolution, the Chairman of the Board will oversee a process to seek a better understanding addressing the shareholders’ specific concerns. The Committee will consider the results of this process and, as it considers appropriate, will review the approach to the executive compensation in the context of shareholders’ specific concerns and may make recommendations to the Board of Directors. Following the review by the Committee, the Board intends to disclose a summary of the process undertaken and an explanation of any resulting changes to executive compensation.
The Corporation has three committees: the Audit Committee, Nominating, the Compensation and Governance Committee and the Safety, Health, Environmental, Sustainability and Technical Committee. The Committee Charters are available at the Company’s website at www.argonautgold.com.
The Audit Committee, on behalf of the Board of Directors, has responsibility for:
(a) reviewing the financial statements of the Corporation and recommending whether such statements should be approved by the Board of Directors;
(b) appointing, retaining and terminating the independent auditors;
(c) reviewing the scope of the audit to be conducted by the external and internal auditors of the Corporation;
(d) reviewing the auditors’ fees and assessing the performance of external and internal auditors and the nature and cost of other services provided by such auditors;
(e) reviewing all public disclosure documents containing financial information before release;
(f) reviewing all post-audit or management letters containing material recommendations of the external auditor and management’s response in respect of any identified material weakness; and
(g) having such other duties, powers and authorities as the Board of Directors may delegate to the Audit Committee from time to time.
The members of the Audit Committee have the right, for the purpose of performing their duties, to inspect all the books and records of the Corporation and its affiliates, and to discuss such accounts and records and any matters relating to the financial position or condition of the Corporation with the auditors of the Corporation or its affiliates. The Audit Committee is composed of a minimum of three directors. Each member of the Audit Committee must be independent and financially literate; as such terms are defined by National Instrument NI 52-110 – Audit Committees, published by the Canadian Securities Administrators.
Nominating, Compensation and Governance Committee
The Committee has responsibility to:
- recommend the compensation of the CEO to the Board of Directors and approve the compensation of the other officers of the Corporation;
- exercise the powers conferred on it by the Board of Directors with respect to option and share purchase plans;
- review annually, or more often if it deems appropriate, succession plans for key executives, performance appraisals (having regard to the criteria referred to under “Executive Annual Incentive Plan”), development of senior officers, senior management organization and reporting structure, contingency plans in the event of the unexpected disability of key executives, and performance and funding of pensions and other benefits.
- identify and recommend individuals for nomination as members of the Board and its committees;
- develop and recommend to the Board of Directors corporate governance principles applicable to the Corporation; and
- undertake such other duties as the Board of Directors may choose from time to time.
The Committee is composed of not fewer than three members, all of whom shall be independent directors.
Safety, Health, Environment, Sustainability and Technical Committee
The Safety, Health, Environment, Sustainability and Technical Committee has responsibility to:
- review and discuss with management the safety, health, sustainability and environmental policies of the Corporation and, where appropriate, recommend revisions to those policies to the Board;
- review management's plans and actions with respect to sustainable development and support for communities within the area of the Corporation's operations; and
- maintain oversight of the technical aspect of the Corporation's material exploration, development, permitting and mining operation and make recommendations to the Board.
The Safety, Health, Environment, Sustainability and Technical Committee shall be composed of a minimum of three members, all of whom shall be independent directors.
Board of Directors
The Board of Directors has a responsibility to:
- to the extent feasible, satisfy itself as to the integrity of the chief executive officer (the “CEO”) and other executive officers and that the CEO and other executive officers create a culture of integrity throughout the organization;
- adopt a strategic planning process and approving, on at least an annual basis, a strategic plan which takes into account, among other things, the opportunities and risks of the business;
- identify the principal risks of the Corporation’s business, and ensuring the implementation of appropriate systems to manage these risks;
- perform succession planning (including appointing, training and monitoring senior management);
- adopt and maintain a communication policy for the Corporation;
- monitor the Corporation’s internal control and management information systems;
- develop the Corporation’s approach to corporate governance, including developing a set of corporate governance principles and guidelines that are specifically applicable to the Corporation; and
- monitor compliance with the Corporation’s Code of Ethics and Business Conduct Guidelines.
As additional members join the Board of Directors and as the needs of the Corporation change, the Board of Directors will review the need for, and establish as appropriate, additional committees.
Code of Ethics and Business Conduct Guidelines
The Corporation maintains a written Code of Ethics and Business Conduct Guidelines (the “Code”) for all directors, executive officers and employees, requiring adherence to high standards of personal and corporate conduct. All directors, all U.S. employees and all managers at non-U.S. locations of the Corporation annually acknowledge (in writing) adherence to the Code. The Corporation’s Code and Guidelines are available for review at www.argonautgold.com, and are also filed with the Canadian Securities
Administrators in the SEDAR filing system.
Employees who know of violations of the Code or Guidelines are obligated to report them to management, to the Chairman of the Board, to the Committee, to the Corporation’s legal counsel or directly to the Corporation’s Chief Financial Officer (the “CFO”). The CFO is responsible for ensuring the Code is properly implemented and monitored. It is the Corporation’s policy and intent that, except for knowingly reporting false accusations, every employee may report Code, policy or law violations without fear of retaliation.
This statement of corporate governance practices has been developed and approved by the Board of Directors.
Amended and Restated as of February 3, 2016
Additional Corporate Committee Charters and Board Mandate