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| 2001 Annual Report > Review of Operations > Corporate Governance Practices |
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The corporate governance structure of Enerplus
Resources Fund (the "Fund") is not the same as for a
conventional corporation. The way in which the Fund
is governed reflects its status as a trust. The Board
of Directors (the "Board") of EnerMark Inc.
("EnerMark"), a wholly-owned subsidiary of the Fund,
is responsible for the overall governance of the Fund.
The Board is currently comprised of nine members,
six of whom are unrelated (as defined in the Toronto
Stock Exchange Guidelines for Improved Corporate
Governance in Canada) and elected by the Fund’s
Unitholders. The remaining three directors are
nominated by the Manager pursuant to a Governance
Agreement regarding the Fund and its subsidiaries.
Because the Chairman of the Board is unrelated to
management, he fulfills the description of
"independent board leader" as set out in the
recommendations of the Joint Committee on
Corporate Governance, which issued a report on
corporate governance in Canada in November 2001.
The Board endeavours to ensure that its composition
includes as many as possible of the following
competencies: governance, strategic management,
leadership, risk management, oil and gas,
engineering, succession planning, financial
management, legal, and communications and
marketing expertise.
The Board has responsibility for stewardship
of Enerplus, including responsibilities for planning
and evaluation, financial management, operations,
human resources and environment and safety. As
part of its mandate, the Board has specific
responsibility for:
- adopting a strategic planning process
- identifying principal risks and implementing risk
management systems
- succession planning, including nominating,
training and monitoring senior management
- developing a communications policy
- ensuring the integrity of internal control and
management information systems
The Board meets a minimum of six times per year and
each scheduled board meeting is followed by a
meeting of the independent directors without the
presence of management.
The Board has timely access to the information it
needs to carry out its duties. Directors assist in
preparing the agenda for Board and committee
meetings, receive a comprehensive package of
information prior to each Board and committee
meeting, and attend an annual strategic planning
session each fall to review, amend or adopt new
corporate objectives.
The Board has approved a Code of Business Conduct
and Conflict of Interest which sets high standards for
ethical behaviour, and deals with conflict of interest,
compliance with laws, outside business interests,
entertainment, gifts and favours, disclosure,
confidential information, securities trading and
reporting. Each director must adhere to the standards
described in the Code and must review, sign and
deliver to the Chairman of the Board a copy of this
Code each year.
The Fund is committed to timeliness and continuous
disclosure in its communications. The investor relations
department is responsible for responding to inquiries
from Unitholders, (potential or existing). Senior
Management meets regularly with financial analysts
and institutional investors in Canada and the United
States. Presentations to institutions and at investors
conferences are promptly made available on the
investor relations website at www.enerplus.com. As
well, any major developments may be broadcasted
through a live conference call and made available on
the Internet or via telephone.
The Board of Directors discharges its responsibilities
either acting in its entirety, or through one of the
following board committees:
Corporate Governance Committee
The Corporate Governance Committee is currently
comprised of three unrelated directors. The
Committee is responsible for the governance of the
Board, including the responsibility of reviewing the
mandates of the Board’s committees, recommending
changes to the size and composition of the Board
and its committees and generally implementing good
corporate governance practices. It oversees the
effectiveness of management and management’s
interaction with and responsiveness to the Board, and
reviews succession planning with subsequent
approval of the full Board. The Committee assumes
the responsibilities of a Nominating Committee and
proposes to the full Board new nominees, assesses
the performance of the directors and the
Chief
Executive Officer on an annual basis, and reports the
results to the full Board. A corporate governance
manual is available for new and existing directors.
New directors meet with the Chairman of the Board
and senior management to discuss and familiarize
themselves with the business and activities of Enerplus.
An overview of the manual, with a focus on the
Enerplus corporate governance system, including,
roles, responsibilities and liabilities of directors is
provided on an ongoing basis. Annual environment
and safety field trips are organized for all directors to
allow them to review the conduct of field operations
first hand. The Committee also conducts an annual
survey to ensure that directors’ compensation is
consistent with industry standards.
Audit and Risk Management Committee
The Audit and Risk Management Committee is
currently comprised of three unrelated directors. The
Committee has two primary sets of responsibilities.
Audit responsibilities include reviewing and
recommending to the Board the approval of the
annual and interim financial statements, and the
engagement and audit plans of the Fund’s auditors;
communicating directly with the Fund’s auditors and
reviewing programs and policies regarding the
effectiveness of internal controls over the Fund’s
accounting and financial reporting systems. Risk
management responsibilities include reviewing, on a
quarterly basis, the hedging and derivatives policies
as well as the transactions entered into by the internal
risk management committee and reviewing insurance
coverage and directors’ and officers’ liability
insurance, all of which are a direct responsibility of
the full Board. The Audit and Risk Management
Committee meets a minimum of four times per year,
and meets with the external auditors, independently
of management, at least twice during the financial
year. Because the Fund is listed on the New York Stock
Exchange, the Committee follows the Blue Ribbon
Committee recommendations set out by the National
Association of Securities Dealers of America and the
New York Stock Exchange, including the qualification
of the Committee members and their financial literacy
and the requirement to adopt a formal charter. Once
a year, the Chairman of the Committee will present a
written statement to the full Board, certifying that
the members of the Committee are financially literate
and that the Committee has reviewed its charter and
determined that it meets the needs of the Board and
the Unitholders of the Fund.
Compensation and Human Resources Committee
The Compensation and Human Resources Committee
is comprised of two unrelated directors and one
related director. The Board believes that the related
director’s industry knowledge and familiarity with the
organization and its personnel, benefits the review
and decision processes of the Committee. As well, the
Board believes that because the other two members,
including the Chairman of the Committee, are
unrelated, the independence of the Committee is not
compromised. The Compensation and Human
Resources Committee is responsible for the
employment, remuneration, rights incentive plan,
employee savings plan and performance incentive
plan. It also reviews existing management resources
in terms of staffing and succession planning.
Environment, Safety and Reserves Committee
The Environment, Safety and Reserves Committee is
comprised of two unrelated directors and one related
director. The Board believes that the industry
knowledge of the related director benefits the review
and decision processes of the Committee. It also
believes that, as the other two members, including
the Chairman of the Committee, are unrelated, the
independence of the Committee is not compromised.
The Environment, Safety and Reserves Committee
reviews and approves Enerplus’ approach to
environmental and safety regulations as well as
Enerplus’ Environment and Safety Management
Program which encompasses internal environmental
and safety policies, procedures, emergency response
plans, and training. Twice yearly, Senior Management
will present to the full Board a signed Corporate
Environmental Due Diligence Statement, stating that
after due inquiry with the appropriate staff members,
Enerplus is not aware of any significant environmental
issues that have not been reported to the Committee
and that appropriate procedures are in place to
address any such issues, should they arise. It also
reviews reserves estimates prepared by the
independent evaluator and in-house staff, estimated
future net revenues, future development costs and
timing, remaining tax pools and price and cost
estimates used. Once a year, Senior Management will
present a signed Corporate Statement of Compliance,
stating that after due inquiry with the appropriate
staff members and the independent evaluator,
Enerplus is not aware of any significant reserves
evaluation issues that have not been reported to the
Committee and that appropriate procedures are in
place to address such issues, should they arise.
Enerplus believes its approach to corporate
governance is in compliance with the Toronto Stock
Exchange Guidelines for Improved Corporate
Governance in Canada. In addition, the Fund is
currently reviewing its compliance with the
recommendations contained in the final report of
the Joint Committee on Corporate Governance
published November 2001. A more detailed discussion
of Enerplus’ compliance in relation to these
documents can be found in the Fund’s Information
Circular and Proxy Statement for its 2002 annual
general and special meeting of Unitholders.
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