Adopted on: March 2005
Amended on: March 22, 2013
TURQUOISE HILL RESOURCES LTD.
1 Corporate Governance Practices
STATEMENT OF CORPORATE GOVERNANCE
The board of directors of Turquoise Hill Resources Ltd. (the "Corporation") considers good corporate governance an important factor in the continued and long-term success of the Corporation by helping to maximize shareholder value over time. As a corporation listed on the Toronto Stock Exchange (the "TSX") the Corporation is subject to Canadian securities requirements and the rules and policies of the TSX relating to corporate governance.
As a foreign private issuer listed on the New York Stock Exchange (the "NYSE") and the Nasdaq Capital Market ("Nasdaq"), the Corporation is not required to comply with most of the NYSE standards relating to corporate governance (the "NYSE Rules") and the Nasdaq standards relating to corporate governance (the "Nasdaq Rules"), and instead may comply with domestic requirements. However, the Corporation has voluntarily chosen to adopt corporate governance practices that comply with the NYSE Rules and Nasdaq Rules in all significant respects and, accordingly, the Corporation believes that its corporate governance practices do not differ in any significant way from those followed by U.S. companies under NYSE and Nasdaq listing standards. To the extent required by applicable law, rule, regulation or policy of an exchange, the Corporation will disclose any significant differences between its corporate governance practices and the NYSE Rules and Nasdaq Rules in its public filings.
The Corporation continues to review its corporate governance practices to ensure compliance with all of the applicable requirements under Canadian securities legislation and regulations and with the disclosure and listing requirements of the TSX, as well as the U.S. Sarbanes-Oxley Act of 2002
, other applicable U.S. securities legislation and regulations and the NYSE Rules and Nasdaq Rules.
2 Board of Directors
The board of directors of the Corporation is currently composed of 13 members, a majority of whom are independent directors within the meaning of Canadian securities legislation and the NYSE Rules and Nasdaq Rules.
The board has responsibility for supervising the conduct of the Corporation's affairs and the management of its business, with the objective of increasing shareholder value. The board fulfills its mandate through direct oversight, setting policy, appointing committees of the board and assigning their respective mandates, and appointing management.
Although management conducts the day-to-day operations of the Corporation, the board has oversight responsibilities and authority and regularly assesses and monitors management's performance.
The Corporation expects its directors to commit sufficient time and effort to the Corporation's business. The directors are expected to attend all board meetings and review in advance all meeting materials. The board also ensures that prospective board candidates understand the role of the board and its committees and the contribution that individual directors are expected to make, including, in particular, the time commitment that the Corporation expects of its directors.
- Conflicts of Interest
In accordance with applicable law and the Corporation's policies, each director is required to disclose to the board any potential conflict of interest he or she may have in a matter before the board or a committee thereof at the beginning of the board or committee meeting. A director who is in a potential conflict of interest must not participate in a vote on such matter.
- Majority Voting
The board has adopted a policy providing that in an uncontested election of directors, any nominee who receives a greater number of votes "withheld" than votes "for" will tender his or her resignation to the board promptly following the shareholders' meeting. The Nominating and Corporate Governance Committee will consider the offer of resignation and will make a recommendation to the board on whether to accept it. The board will make its final decision and announce it in a press release within ninety days following the shareholders' meeting. A director who tenders his or her resignation pursuant to this policy will not participate in any meeting of the board or the Nominating and Corporate Governance Committee at which the resignation is considered.
- Annual Performance Evaluation of the Board
The Nominating and Corporate Governance Committee establishes performance-enhancing measures, and assesses and reviews annually the performance and effectiveness of the board, board committees, the board and committee chairs and individual directors, the whole in accordance with its mandate.
- Director Compensation
The compensation of directors is determined periodically by the board based on the reviews and recommendations of its Compensation and Benefits Committee. In accordance with its mandate, the Compensation and Benefits Committee reviews periodically and makes recommendations to the board on the adequacy and form of the compensation for non-executive directors, taking into account the responsibilities and risks involved and the importance of not compromising directors' independence. It also reviews and makes recommendations on the amount and form of compensation for the board chair and committee chairs. The Compensation and Benefits Committee may retain and replace any independent firm to advise on directors' compensation, including fixing such firm's fees and other retention terms.
- Director Orientation and Continuing Orientation
The mandate of the Nominating and Corporate Governance Committee provides that this Committee is responsible for developing, monitoring and reviewing orientation and continuing education programs for directors. Senior management makes regular presentations to the board on the main areas of the Corporation's business.
- Retention of Independent Advisors
In performing its responsibilities, the board or any committee of the board may, as required and subject to advising the Chairman of the board, engage an outside advisor for advice and assistance at the expense of the Corporation.
- Direct Access to Management
Members of the board have full access to the management of the Corporation. In addition, the board encourages management to address the board in those instances where a manager's expertise and assistance can enhance the board's understanding of a particular issue under its consideration.
- Management Succession
The board, directly and through its Compensation and Benefits Committee, is responsible for overseeing the existence of appropriate mechanisms regarding succession planning for the Corporation's officers. It chooses the Chief Executive Officer of the Corporation (the "CEO") in agreement with its controlling shareholder and the CEO determines officer and manager positions at the Corporation. The Compensation and Benefits Committee oversees the succession planning systems and policies for management put in place by the CEO, including processes to identify, develop and retain the talent of outstanding personnel.
- Code of Business Conduct
The board has adopted a Code of Business Conduct and Ethics that governs the behaviour of the Corporation's directors, officers and employees.
- Complaints Regarding Auditing and Accounting Matters
Complaints from non-employees about accounting, internal accounting controls or auditing matters can be confidentially and anonymously submitted to the Controller of the Corporation by calling 1.888.273.9999 and asking to speak to the Controller. As for concerns of any employee of the Corporation concerning accounting or auditing matters, they can be submitted confidentially and anonymously through a well-defined reporting mechanism.
- Communication with the Board Chair
Shareholders and other interested parties may communicate confidentially with the board chair or with non-management directors as a group by mail at Suite 354 - 200 Granville Street, Vancouver, British-Columbia, Canada V6C 1S4. Communications received in this manner will be processed in accordance with procedures approved by the board's independent directors.
3 Board Committees
From time to time, the board may delegate certain tasks to its committees. However, such delegation does not relieve the board of its overall responsibilities. The Corporation has an Audit Committee, a Compensation and Benefits Committee, a Health, Safety and Environment Committee and a Nominating and Corporate Governance Committee, and has adopted formal mandates for each of its committees. These mandates describe the responsibilities delegated to each committee.
- Audit Committee
The primary objective of the Audit Committee is to act as a liaison between the board and the Corporation's independent auditors and internal auditors and to assist the board in fulfilling its oversight responsibilities with respect to: (a) the accounting and financial reporting processes of the Corporation, including the integrity of the financial statements and other financial information provided by the Corporation to its shareholders, the public and others; (b) the Corporation's compliance with legal and regulatory requirements; (c) the audit of the Corporation's financial statements; (d) the qualifications, independence and performance of the independent auditors; (e) the Corporation's risk management and internal financial and accounting controls, and management information systems, including the performance of the Corporation's internal audit function; and (f) such other matters as shall be mandated under applicable laws, rules and regulations.
Each member of the Audit Committee must be financially literate, independent and at least one member must have accounting or related financial experience and be an audit committee financial expert. In determining whether or not a director is independent, financially literate or is an audit committee financial expert, the board follows the applicable Canadian and U.S. securities legislation and regulations, as well as the NYSE Rules and Nasdaq Rules.
Because of the Audit Committee's demanding roles and responsibilities, the mandate of such committee provides that no member of the Audit Committee may serve simultaneously on the audit committees of more than three public companies, including the Corporation, unless the board of directors of the Corporation determines that such simultaneous service would not limit or impair the ability of such members to effectively serve on the Audit Committee. The basis for such determination shall be disclosed as required by law or stock exchange regulation.
- Compensation and Benefits Committee
The primary objective of the Compensation and Benefits Committee is to assist the board in discharging its responsibilities relating to compensation of the executive officers and directors of the Corporation.
- Nominating and Corporate Governance Committee
The primary objective of the Nominating & Corporate Governance Committee is to assist the board in fulfilling its oversight responsibilities by (a) identifying individuals qualified to become board and board committee members and recommending that the board select director nominees for appointment or election to the board; (b) developing and recommending to the board corporate governance guidelines for the Corporation and making recommendations to the board with respect to corporate governance practices; (c) recommending such permanent or ad hoc committees as it deems necessary for the purposes of assisting in the corporate governance of the Corporation; and (d) addressing such other matters as shall be mandated under applicable laws, rules and regulations.
- Health, Safety and Environment Committee
The Health, Safety and Environment Committee assists the board in fulfilling its oversight responsibilities by ensuring the Corporation has established appropriate practices with respect to health, safety and environmental matters affecting the Corporation. Click on the link below to view the Health, Safety and Environment Committee's charter.
These guidelines will be periodically reviewed by the board and may be amended from time to time.