The Shipowners Club. Corporate Governance Charter

Transcription

1 The Shipowners Club Corporate Governance Charter

2 Contents Page Introduction Principle 1 Corporate Governance Framework Principle 2 Duties of the Board Principle 3 Composition of the Board and the Special Committees Principle 4 Appointments of Directors and Executive Managers Principle 5 Conflicts of Interest Principle 6 Evaluation of the Performance of the Board Principle 7 Management Structure Principle 8 Remuneration Policy Principle 9 Financial Reporting, Internal Control and Risk Management Principle 10 Shareholders Corporate Governance Charter Corporate Governance Charter 3

3 The Shipowners Club Introduction In its widest sense, the term 'corporate governance' covers the organisation of the control and management of a company including the relationship between the Members of the company and management and the operation of the company s Board. Corporate governance consists of a set of rules and conduct in accordance with which companies are managed and controlled. It should be noted that the current governance of P&I clubs in general owes much to their history and development as mutual insurers of P&I liabilities. While it is important that governance is transparent and robust there are idiosyncratic features of P&I clubs which have worked successfully and which we believe it is better to maintain than discard, even though they may not be completely aligned with modern principles of governance. In the context of a mutual, the shareholders are the Members of the Club who are themselves also the policy holders. The Board of the Club is largely drawn from the membership. While this might theoretically give rise to potential conflicts of interest, in practice it has not done so. In practice, we believe that the governance is strengthened by the Directors having a deep knowledge of the shipping markets in which the Club is providing insurance. Subject to these points, in considering matters of governance we, the Board of the Club, have adopted as guidance both 'The Ten Principles of Corporate Governance of the Luxembourg Stock Exchange' and the Annotated Combined Code on Corporate Governance which has been designed specifically for mutual insurers. Whilst the Club is not bound by either of these, we have embraced their general principles and key features in establishing a sound and transparent policy on governance. This Charter describes how we intend to apply these principles to our governance of the Club. It lists the principles with explanations under each heading of our intended practice. In the Annual Report each year we will report to Members on our compliance with these principles, or else explain why we have deviated from them. Reference annotated-v-combined-code-governance-lvcorporate.pdf The Board, being drawn from the membership, is very international and it is not practical for it to meet more frequently than quarterly. For this reason, and historically, the management of P&I Clubs has mainly been out-sourced, either to independent management firms or, as in our case, to a wholly owned subsidiary management company. In this sense, although the Club itself employs staff in its head office in Luxembourg for the purposes of regulatory and fiscal reporting, the Club s operational management is sub-contracted and the Board itself does not include any Executive Directors. In practice this does not affect the closeness or efficiency of the relationship between the Board and the management which is reinforced by regular meetings and conversations between the Chairman and other senior Directors and the Managers. 4 Corporate Governance Charter Corporate Governance Charter 5

4 Principle 1 Corporate Governance Framework The company will adopt a clear and transparent corporate governance framework for which it will provide adequate disclosure. - The ultimate governance of the Club is contained within the Constitution of the Club - The Board is responsible for all strategic aspects of the management of the Club - Ultimately, the Board is accountable to the Members in general meeting and one of the most important features of the Club is the representation of the membership at Board level by a significant proportion of Directors who are themselves Members - This Charter will provide a clear and transparent framework. Principle 2 Duties on Board The Board will be responsible for the management of the company. It will act in the best interests of the company and will protect the general interests of the shareholders by ensuring the sustainable development of the company. It will function in a well-informed manner as a collective body. - The Board has delegated to the Managers, being The Shipowners Protection Limited, a wholly owned subsidiary of the Club, the operational management of the Club, but maintains ultimate oversight of, and responsibility for, the management - The Board will meet as often as is necessary for the effective discharge of its obligations. The Board will meet at least once a quarter in order to monitor the development of the Club s activities - The Board will determine the strategic aim of the Club, its values and objectives, the acceptable level of risk for the Club, together with its key policies, and will prepare the annual financial statements - Following an initial, and regularly reviewed, risk assessment process, the Board has established a matrix of matters for regular report to the Board during the course of a policy year which includes an annual presentation of the Managers business plan and a compliance report - The Chairman will establish a close relationship with the Managers providing support and advice, without encroaching on their executive responsibilities - The oversight role of the Directors will be fulfilled by their scrutiny at every quarterly meeting of the Club s business operation on the basis of reports prepared by the Managers. In this sense, in the context of governance, the arrangements have the same effect as Executive Directors reporting to a Board of which the majority are non-executive Directors - The Directors will engage in constructive and critical discussion of the strategy and key policies put forward by the Managers and will contribute to their development. Principle 3 Composition of the Board and the Special Committees The composition of the Board will be balanced so as to enable it to take well-informed decisions. It will ensure that any special committees necessary for it to properly fulfil its duties are set up. - It is important that appointments to the Board should reflect a balance between the different membership and vessel sectors of the Club and the geographical areas where the Members operate - This unique structure is not in complete alignment with some of the principles of corporate governance which anticipate Boards with non-executive Directors who are mainly independent of the business of the companies on whose Boards they sit. Provided that they retain an ongoing involvement in shipping or a closely related sector we believe that it is valuable for the Club that the expertise in P&I of Directors who have retired from Member company Boards, which they may have developed over many years, is still available to the Board for a period after retirement 6 Corporate Governance Charter Corporate Governance Charter 7

5 - At the same time, it is important that a significant proportion of the Directors should be actively engaged with Member companies - The composition of the Board will be such that it includes a variety of individuals, providing complementary experience, knowledge and skills - The Board will ensure that any special committees necessary for it to fulfil its duties properly are set up - The Chairman of the Board will ensure, with the assistance of the Managers, that Directors receive timely and adequate information enabling them to perform their duties in an informed manner - The Directors will fully acquaint themselves with the information received. In addition, they may request additional information from the Chairman or the Chief Executive of the Managers whenever they consider it to be appropriate - Each Director undertakes to devote the necessary time and attention to his duties to the extent necessary for him to be able to discharge them properly - Members of the Board and the Managers are able to recommend to the Board suitable candidates for nomination as Directors. Any such nominations will be evaluated as to skills, knowledge and experience, and, if deemed acceptable, will be put to the Board for consideration and approval - The Chairman and Managers will ensure that new Directors receive an induction into the way the Club functions, enabling them to contribute in the best possible manner to the work of the Board - Directors should update their skills and improve their knowledge of the Club with a view to fulfilling their role both on the Board and, where relevant, on Committees of the Board. The Chairman will ensure that the necessary resources are available for improving and updating the knowledge and skills of the Directors - The Board will prepare plans for the succession of Directors, ensuring that a balance of skills is maintained within the Board at all times - The Committees of the Board will perform their tasks within the framework of the terms of reference that they have been given and ensure that they report regularly on their activity and on the results of their work to the Board. The Board is assisted in carrying out its duties by three Committees, the responsibilities of which are as follows: Audit and Risk Committee - To monitor the integrity of the financial statements of the Club and its reinsurance and management subsidiaries and any formal announcements relating to the Club s financial performance - To review the Club s significant accounting policies and any changes to them - To consider and make recommendations to the Board of the Club and its subsidiaries as to the terms of engagement (including the remuneration) of the external auditors - To review the external auditors independence and objectivity bearing in mind the engagement of the external auditors in non-audit services - To review with the external auditors the findings from their work (including a review of any representation or management letters) - To review the effectiveness of the Club's outsourced actuarial and internal audit function and to review with the actuaries and internal auditors the findings from their work - To review the effectiveness of the corporate governance framework and other operational matters required under Solvency II - To review the internal control and risk management systems of the Club and its subsidiary companies and the implementation of recommendations - To maintain oversight of the Club's risk and regulatory compliance processes and procedures and monitor their effectiveness - To monitor significant risk and regulatory issues affecting the Club, noting any material compliance/regulatory breaches or other issues arising, and to monitor their resolution. Finance Committee - To oversee the implementation of the Club s strategy for the maintenance and development of the financial integrity of the Club and its reinsurance subsidiaries, and in particular: - To monitor and report to the Board the quarterly financial position of the Club - To consider and make recommendations to the Board of the Club and its subsidiaries on: - annual expense plans and budgets - specific capital projects - acquisitions, joint ventures and divestitures - tax structures, initiatives and regulatory issues - the strategy to be followed for the investment of Club funds, including plans and strategies for hedging and mitigating risk, foreign currency exchange, interest rate exposure and other exposures to risk - the terms of engagement (including the remuneration) of the external investment managers - To monitor and report to the Board the performance of the external investment managers - To liaise with the reinsurance subsidiaries on investment matters. 8 Corporate Governance Charter Corporate Governance Charter 9

6 Remuneration Committee - To determine and agree with the Board employment and termination/retirement conditions, remuneration and benefit packages of the Club s senior employees and those of the senior employees in its management subsidiary companies - To review the overall annual percentage increase in the salaries of the staff of the management subsidiary company and the structure and application of the company s bonus scheme - To consider and agree with the Board appropriate levels of remuneration for Directors of the Club and of the reinsurance subsidiary companies - To monitor and review succession planning for senior management including prospective senior appointments. Membership of Committees is determined by, and comprises, Directors of the Club. The Committees meet on a regular basis and report their findings and recommendations to the Board. Principle 4 Appointments of Directors and Executive Managers The company will establish a formal procedure for the appointment of Directors and Executive Managers. - The Board will adopt the procedure outlined above in relation to the appointment of Directors - The role of Executive Managers is fulfilled by the Directeur of the Club in Luxembourg, and by the Directors of the management company, The Shipowners Protection Limited, which is a wholly owned subsidiary of the Club. The management services are subject to a Management Services Agreement dating from 23rd June Principle 5 Conflicts of Interest The Directors will take decisions in the best interests of the company and will refrain from taking part in any deliberation or decision that creates a conflict between their personal interests and those of the company or any subsidiary controlled by the company. - Each Director will inform the Chairman of any other directorship, office or responsibility, including executive positions that he takes up outside the Club during the term of his directorship - There will be maintained a register of Directors interests, listing directorships, memberships of professional organisations and other appointments - A Director may have an interest in a claim. This may be a direct or beneficial interest, through employment, a significant shareholding or a directorship in the relevant Member company, or its management or operating companies, or in any other related companies which could directly or indirectly benefit. Alternatively, it may be an indirect commercial or competitive interest in the claim. In either event the Director will declare the interest - In the case of a direct interest the Director concerned will take no part in the discussion of the claim in the Board meeting, and if the claim itself is a discretionary claim that Director will leave the meeting room during the discussion - In the case of an indirect interest in a claim it will be up to the Board to decide if it is relevant and whether the Director concerned should leave the room. Principle 6 Evaluation of the Performance of the Board The Board will regularly evaluate its performance and its relationship with the executive management. - The Board will regularly carry out an evaluation of its performance. It will likewise examine its composition, organisation and effectiveness as a collective body. It will draw the necessary conclusions from this evaluation and, where necessary, take appropriate steps to improve its performance. A similar evaluation will be carried out by each Committee 10 Corporate Governance Charter Corporate Governance Charter 11

7 - The Board keeps the services of the Managers under regular review by means of the formal reporting requirements at each quarterly meeting of the Board - At the end of each Board meeting the Directors review the performance of the Managers without the Managers being present - The Chairman maintains a close working relationship with the Chief Executive of the management company and he, and other senior Directors, participate regularly in sundry management meetings, also attending the meetings of the Board of the management company. Principle 7 Management Structure The Board will set up an effective structure of executive management. It will clearly define the duties of executive management and delegate to it the necessary powers for the proper discharge of these duties. - The Directeur of the Club, based in Luxembourg, and the Managers, are collectively responsible for the day-to-day management of the Club s activities - The Management Services Agreement of 23rd June 2004 sets out in detail the powers and responsibilities of the Managers. Principle 9 Financial Reporting, Internal Control and Risk Management The Board will establish strict rules, designed to protect the company s interests, in the areas of financial reporting, internal control and risk management. - The Board delegates to the Audit and Risk Committee, in accordance with its terms of reference, power to establish the reporting requirements and timetable for reporting financial information - The Audit and Risk Committee will report to the Board accordingly - In accordance with its terms of reference the Audit and Risk Committee will report quarterly to the Board on the Managers internal controls which will also be subject to an out-sourced internal audit process - The Board will receive an annual Compliance Report from the Managers, covering all aspects of the business operation and corporate compliance. Principle 8 Remuneration Policy The company will secure the services of good quality Directors and executive managers by means of a suitable remuneration policy that is compatible with the long term interests of the company. - The Remuneration Committee meets at least once a year and reports back to the Board after its meeting - In accordance with its terms of reference it reviews Directors remuneration every three years and the salaries of the senior management staff every year, for which purpose market surveys are undertaken regularly. 12 Corporate Governance Charter Corporate Governance Charter 13

8 Principle 10 Shareholders The company will respect the rights of its shareholders and ensure they receive equitable treatment. The company will establish a policy of active communication with shareholders. - For the purposes of this Charter, the shareholders are the Club s Members - The Managers will devote a specific section of the Club s website to the disclosure of relevant information for Members, including a description of the conditions for access to, and procedures for, voting at General Meetings of Members. The Managers will give Members the opportunity to submit proxies or to download proxy and/or registration forms - The Managers will give Members the option to raise issues via the website. General meetings should enable the Members to exercise their rights fully. The Board will encourage dialogue at such general meetings and will encourage Members to take part in meetings. Members who cannot attend are able to vote by proxy - At least 21 days prior to general meetings the Managers will make relevant information accessible by all useful means and in particular via the Club s website - When calling general meetings, the Managers will communicate the agenda and resolutions put forward by the Board to all Members in a timely fashion, at least 21 days before the meeting, and with due regard for the geographic dispersal of the Members - The Managers will post the results of votes and the minutes of General Meetings on its website as soon as possible after the meeting. 14 Corporate Governance Charter Corporate Governance Charter 15

9 The Shipowners Mutual Protection and Indemnity Association (Luxembourg) 16, Rue Notre-Dame L-2240 Luxembourg Tel: Fax: info@shipowners.lu The Shipowners Protection Limited St Clare House, Minories London EC3N 1BP Tel: +44 (0) Fax: +44 (0) info@shipowners.co.uk The Shipowners Mutual Protection and Indemnity Association (Luxembourg) (Singapore Branch) 6 Temasek Boulevard #36-05 Suntec Tower 4 Singapore Tel: Fax: info@shipowners.com.sg Shipowners North America Protection Limited Suite West Hastings Street Vancouver BC V6C 2W2 Tel: Fax: info@shipownersclub.ca