STATEMENT OF CORPORATE GOVERNANCE PRACTICES

The Company is committed to implementing the highest standards of corporate governance.  In determining what those high standards should involve, the Company has considered the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.  The Company is pleased to advise that its practices are largely consistent with those of the ASX guidelines. 

As a result of the Company’s size, exceptional growth and short operational history the following practices did not correlate with the corporate governance guidelines recommended by the Council during the year and at the date of this report:

Independent Chairman
The Chairman should be an independent director (Recommendation 2.2). Mr O’Keeffe is both an executive and the Chairman of the Company. Mr Love, an independent, non executive director, was appointed as Deputy Chairman on 5 December 2006.

The following practice did not correlate with the corporate governance recommended by the Council during the year ended 30 June 2009:

Separate Chairman and CEO
The roles of Chairman and Chief Executive Officer (CEO) should not be exercised by the same individual (Recommendation 2.3). On the resignation of Mr Callaghan, as Managing Director on 11 August 2006, Mr O’Keeffe assumed the combined roles of CEO and Chairman. Steve Mallyon was appointed as Managing Director on 1 August 2008 and assumes the duties and responsibilities of the CEO.

Majority of directors independent
The majority of the Board should be independent directors (Recommendation 2.1). During the year the board comprised of 3 executive directors and 2 independent, non executive directors. The composition of the Board now has a majority of independent, non executive directors with the appointment of Mr Lawler on 28 January 2009 and Mr Redman on 27 May 2009 and the resignation of Mr Lenahan as a director on 27 May 2009.

Structure of the Audit Committee
The Audit Committee should consist of only non executive directors, with the majority being independent (Recommendation 4.2). Mr O’Keeffe an executive director was on the Audit Committee until he was replaced by Mr Redman during June 2009. The Audit Committee now comprises only independent, non executive directors.
Details of all of the Council’s recommendations can be found on the ASX Corporate Governance Council’s website at http://www.asx.com.au.

1.    Board of Directors
1.1    Role of the Board
The Board’s role is to govern the Company rather than to manage it.  In governing the Company, the directors must act in the best interests of the Company as a whole.  It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

In carrying out its governance role, the main task of the Board is to drive the performance of the Company.  The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body.  The Board has the final responsibility for the successful operation of the Company.

To assist the Board carry out its functions, it has developed a Code of Conduct to guide the directors and other key executives in the performance of their roles.

1.2    Composition of the Board
To add value to the Company, the Board has been formed so that it has effective composition, size, balance of skills and commitment to adequately discharge its responsibilities and duties. Directors are appointed based on the specific skills required by the Company and on the independence of their decision-making and judgment.

The Nomination and Remuneration Committee assist the Board in identifying candidates who may be qualified to become Directors. The nomination of all new Directors is considered by the full Board and is assessed against a range of specific criteria including their experience, professional skills and potential conflicts of interest. Directors are appointed and re-elected in accordance with the Company’s Constitution, a copy of which is available on this Website or by request from the Company. 
The Company recognises the importance of non executive directors and the external perspective and advice that non executive directors can offer. There are currently three non executive directors in the Company.

A non executive director will preferably meet the following criteria for independence adopted by the Company:
An independent director:
•    is a non executive director and:
•    is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;
•    within the last three years has not been employed in an executive capacity by the Company or another group member, or been a director after ceasing to hold any such employment;
•    within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provider;
•    is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
•    has no material contractual relationship with the Company or other group member other than as a director of the Company;
•    has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company; and
•    is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company.
Applying the above criteria, the Board considers that all Non-executive Directors are independent. The Board assesses the independence of new Directors upon appointment and reviews the independence of other Directors as appropriate.

1.3    Responsibilities of the Board
In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company.  It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following;
•    Leadership of the Organisation:  overseeing the Company and establishing codes of conduct that reflect the values of the Company and guide the conduct of the Board, management and employees.
•    Strategy Formulation:  working with senior management to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.
•    Overseeing Planning Activities: overseeing the development of the Company’s strategic plan and approving that plan as well as the annual and long-term budgets.


•    Shareholder Liaison:  ensuring effective communications with shareholders through an appropriate communications policy and promoting participation at general meetings of the Company.
•    Monitoring, Compliance and Risk Management:  overseeing the Company’s risk management, compliance, control and accountability systems and monitoring and directing the financial and operational performance of the Company.
•    Company Finances:  approving expenses in excess of those approved in the annual budget and approving and monitoring acquisitions, divestitures and financial and other reporting.
•    Human Resources:  appointing, and, where appropriate, removing the executive directors as well as reviewing and monitoring the performance of the executive directors and senior management in their implementation of the Company’s strategy.
•    Ensuring the Health, Safety and Well-Being of Employees:  in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company’s occupational health and safety systems to ensure the well-being of all employees.
•    Delegation of Authority:  Establishing and determining the powers and functions of the Committees of the Board and delegating appropriate powers to the Managing Director and other executives to ensure the effective day-to-day management of the Company. In carrying out this delegation the Managing Director reports routinely to the Board on the Company’s progress on achieving the short, medium and long term plans of the Company.  The Managing Director is accountable to the Board for the authority that is delegated by the Board. Riversdale Policy on Delegated Authorities sets out the delegation system extending authorities to the appropriate management level in order to improve participation in management decision-making and to ensure role clarity.
Full details of the Board’s role and responsibilities are contained in the Company’s Corporate Governance Policies and Procedures Manual, a copy of which is available on this Website or by request from the Company.

1.4    Board Policies
1.4.1  Conflicts of Interest
Directors must:
•    disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the director and the interests of any other parties in carrying out the activities of the Company; and
•    if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.
If a director cannot or is unwilling to remove a conflict of interest then the director must abstain from voting on the matter in question.

1.4.2    Commitments
Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a director of the Company.

1.4.3    Confidentiality
In accordance with legal requirements and agreed ethical standards, directors and key executives of the Company have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.
 


1.4.4    Continuous Disclosure
The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX.  In accordance with the ASX Listing Rules, the Company immediately notifies the ASX of information:
•    concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s securities; and
•    that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company’s securities.

Upon confirmation of receipt from the ASX, the Company makes all such information available to shareholders and other interested parties on request.

1.4.5    Education and Induction
New directors undergo an induction process in which they are given a full briefing on the Company.  This includes meetings with key executives, tours of the premises, an induction package and presentations.  Information conveyed to new directors includes:
•    details of the roles and responsibilities of a director with an outline of the qualities required to be a successful director;
•    formal policies on director appointment as well as conduct and contribution expectations;
•    details of all relevant legal requirements;
•    a copy of the Company’s Corporate Governance Policies and Procedures Manual;
•    guidelines on how the Board processes function;
•    details of past, recent and likely future developments relating to the Board including anticipated regulatory changes;
•    background information on and contact information for key people in the organisation including an outline of their roles and capabilities;
•    an analysis of the Company;
•    a synopsis of the current strategic direction of the Company including a copy of the current strategic plan and annual budget; and
•    a copy of the Constitution of the Company.

In order to achieve continuing improvement in Board performance, all directors are encouraged to undergo continual professional development.  Specifically, directors are provided with the resources and training to address skills gaps where they are identified. 

1.4.6    Independent Professional Advice
The Board collectively, and each director, has the right to seek independent professional advice at the Company’s expense, up to specified limits, to assist them to carry out their responsibilities. 

1.4.7    Related Party Transactions
Related party transactions include any financial transaction between a director and the Company and will be reported in writing to each Board meeting.  Unless there is an exemption under the Corporations Act 2001 from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.

 

1.4.8    Shareholder Communication
The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to:
•    communicating effectively with shareholders through releases to the market via ASX, information mailed to shareholders, the Company website and the general meetings of the Company;
•    giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;
•    making it easy for shareholders to participate in general meetings of the Company; and
•    requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report. 

The Company also makes available a telephone number for shareholders to make enquiries of the Company. 

1.4.9    Trading in Company Shares
The Company has a Share Trading Policy under which directors and certain employees and their associates may trade in the Company’s securities during the 2 weeks immediately after each of the following (“trading window”):
•    the release by the Company of its half-yearly results to the ASX;
•    the release by the Company of its annual results to the ASX;
•    the release by the Company of its quarterly reports to the ASX.

The Share Trading Policy also allows for individuals to trade in the Company’s securities at other times provided they advise specified Company officers and that such trades are consistent with the law. Officers are prohibited from trading in the Company’s securities while in the possession of unpublished price sensitive information concerning the Company.  Unpublished price sensitive information is information regarding the Company of which the market is not aware and that a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

Notice of an intention to trade must be given prior to trading in the Company’s securities as well as a confirmation that the person is not in possession of any unpublished price sensitive information.  The completion of any such trade by a director must also be notified to the Company Secretary who in turn advises the ASX.

1.4.10    Performance Review/Evaluation
Each year the Board conducts an evaluation of executives and its own performance.  The performance is measured against both qualitative and quantitative indicators.  Further detail is available in the remuneration section of the director’s report of the Annual Report.

1.4.11    Attestations by Managing Director and Chief Financial Officer
In accordance with the Board’s policy and section 295A of the Corporations Act, the Managing Director and Chief Financial Officer made the attestations as to the Company’s financial condition prior to the Board signing the Annual Report, including the integrity of the financial statements being founded on a sound system of risk management and internal control and that the system is working effectively in all material respects in relation to financial reporting risks.

 

2.    Board Committees
2.1    Audit Committee
The Audit Committee was formed by resolution of the Board on 25 August 2003.  Below is a summary of the role, composition and responsibilities of the Audit Committee.  Further details are contained in the Company’s Corporate Governance Policies and Procedures Manual which includes the Audit Committee Charter available on this website or by request to the Company.

2.1.1    Role
The Audit Committee is responsible for reviewing the integrity of the Company’s financial reporting and overseeing the independence of the external auditors. 

2.1.2    Composition
The Audit Committee consists of three members.  Members are appointed by the Board from the non executive directors if possible.  The current members of the Audit Committee are Mr Love, Mr Lawler and Mr Redman.  All members can read and understand financial statements and are otherwise financially literate.  Mr Love is the Chairman of the Audit Committee with experience in financial and accounting matters.

2.1.3    Responsibilities
The Audit Committee reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements before submission to the Board and recommends their approval.

The Audit Committee also recommends to the Board the appointment of the external auditor and reviews the appointment of the external auditor, their independence, the audit fee and any questions of resignation or retirement. A review is performed to ensure that external audit partners are not appointed for more than 5 years.

The Audit Committee is also responsible for establishing policies on risk oversight and management and supervision of the internal audit function.

2.2    Remuneration and Nomination Committee
The Remuneration and Nomination Committee consists of three members and the current members are Mr Love, who is the Chairman, Mr O’Keeffe and Mr Lawler. The committee was formed on 24 May 2009 by merger of the Remuneration and Nomination Committees and by a resolution of directors.

2.2.1 Remuneration Policy
The Remuneration Policy was approved by resolution of the Board on 17 August 2009.

The Company is committed to remunerating its directors and senior executives in a manner that is market competitive and consistent with best practice as well as supporting the interests of shareholders.  Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:
•    fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;
•    a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;
•    participation in an option scheme with thresholds approved by shareholders; 
•    statutory superannuation contributions.

 

By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.

Following discussions with shareholders and shareholder associations the Company engaged Guerdon Associates to perform an independent review of executive directors’ and executives’ remuneration. As a result of this review and the recommendation of the Remuneration Committee no further options will be issued to non executive directors and a new executive directors’ remuneration and option policy has been developed. This includes strategic milestones critical to realising the full potential of the Company's assets with mechanisms to provide flexibility to deal with uncontrollable issues within the foreign operating environment.

The Remuneration and Nomination Committee also:
•    conducts an annual review of the membership of the Board having regard to present and future needs of the Company;
•    conducts an annual review of and concludes on the independence of each director; and
•    proposes candidates for board vacancies.

2.2.2    Criteria for Selection of Directors
Directors are appointed based on their experience and specific skills required by the Company.  Given the size of the Company and the business that it operates, the Company aims at all times to have at least one director with experience in the Company’s industry, appropriate to the Company’s market.

2.3     Compliance Committee
The Compliance Committee was formed during May 2009 and is comprised of Non-Executive Directors, being Mr Lawler (Chairman), Mr Love and Mr Redman. The Compliance Committee role is to review Company releases of a material nature and, if appropriate, recommend these releases for approval by the Board.

3.    Company Code of Conduct
As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders.  These stakeholders include employees, clients, customers, government authorities, creditors and the community as a whole.  The Company Code of Conduct was adopted by resolution of the Board on 18 February 2004 and is available on this website or by request to the Company. 

This Company Code of Conduct includes the following:

Responsibilities to Shareholders and the Financial Community Generally
The Company complies with the spirit as well as the letter of all laws and regulations that govern shareholders’ rights.  The Company has processes in place designed to ensure the truthful and factual presentation of the Company’s financial position and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and financial reporting standards.

Responsibilities to Clients, Customers and Consumers
Each employee has an obligation to use their best efforts to deal in a fair and responsible manner with each of the Company’s clients, customers and consumers.  The Company for its part is committed to providing clients, customers and consumers with fair value.


Employment Practices
The Company endeavours to provide a safe workplace in which there is equal opportunity for all employees at all levels of the Company.  The Company does not tolerate the offering or acceptance of bribes or the misuse of Company assets or resources.

Obligations Relative to Fair Trading and Dealing
The Company aims to conduct its business fairly and to compete ethically and in accordance with relevant competition laws.  The Company strives to deal fairly with the Company’s customers, suppliers, competitors and other employees and encourages its employees to strive to do the same. 

Responsibility to the Individual
The Company is committed to keeping private information from employees, clients, customers, consumers and investors confidential and protected from uses other than those for which it was provided.

Conflicts of Interest
Employees and directors must avoid conflicts as well as the appearance of conflicts between personal interests and the interests of the Company.


4.    Risk Management Policy

The effective management of business risks is crucial to the continued growth and success of Riversdale. The purpose of the risk management policy statement is to emphasise Riversdale’s commitment to effective risk management as well as to communicate certain broad risk management principles to guide Riversdale’s businesses. Business risks are defined as ‘uncertain future events that could influence the achievement of the Company’s objectives’. In order to achieve those objectives and create shareholder value, considered risks are taken because without risk there is no reward. However, risks must be fully understood and effectively managed in order to minimise losses and maximise opportunities. Effective risk management considers both risk and reward and is an integral part of good management practice.

Riversdale takes a structured, consistent and continuous approach to risk management. All significant risks are assessed, managed and reported using a uniform risk management framework. Responsibility and accountability for the management of business risks is with the Managing Director, who may delegate specific responsibilities as appropriate. The aim is for risk management to become embedded into all decision making processes including planning, operations, new projects, business acquisitions, disposals and closures.

Significant risks and related mitigation plans will be reported on at different levels within the organisation (including Board level) in accordance with a defined risk reporting process and appropriate disclosure of material risks. Compliance with this policy and the effectiveness of risk management processes will be monitored by the Riversdale Audit Committee and the internal audit function.