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 We believe that good corporate governance is essential to creating long-term
value for our unitholders. Sustained financial success can only be achieved by
operating with integrity and in an ethical manner. As such, Enerplus is committed
to following corporate governance best practices.
The Board of Directors of EnerMark Inc. ('EnerMark'), a wholly-owned subsidiary of the Fund, is responsible for the overall governance of the Fund and is further supported by a number of Board committees, including an Audit and Risk Management Committee, a Corporate Governance and Nominating Committee, an Environment, Health and Safety Committee, a Compensation and Human Resources Committee and a Reserves Committee.
The Board of Directors
Currently, our Board is comprised of nine directors who are elected by our unitholders. Eight of the nine directors are independent pursuant to both the Toronto Stock Exchange ('TSX') guidelines and the New York Stock Exchange ('NYSE') listing standards.
The Board is charged with the overall stewardship of the Fund and monitors or supervises the business of the Fund and its management. Specifically, the Board's responsibilities include:
- Reviewing, adopting and monitoring our strategic planning process.
- Approving our goals and objectives.
- Reviewing and approving our operating budget.
- Ensuring policies and processes are in place for the identification of principal business risks and reviewing and approving risk management strategies.
- Approving corporate policies and other corporate protocols and controls.
- Succession planning, including nominating and monitoring the chief executive officer and senior management.
- Approving our policy on public disclosure.
- Ensuring the integrity of internal financial controls and reviewing management information systems.
In addition, the Board has the responsibility at all times to act in the best interest of the Fund and our unitholders.
The Board meets a minimum of six times per year. Each scheduled board meeting is followed by an in camera discussion of the independent directors without the presence of management. Directors assist in preparing the agenda for Board and committee meetings and receive a comprehensive package of information in advance of each meeting. Further, the Board attends an annual strategic planning session to review, amend or adopt long-term strategies and new corporate objectives for the upcoming year.
Board Initiatives to Improve Corporate Governance
The current corporate structures, policies and practices of the Board (including having a majority of independent directors and an independent chair) and its committees (all the Board committees' members are independent directors) has enabled the Board to conclude that Enerplus is in compliance with National Instrument
58-101, Disclosure of Corporate Governance Practices. This is more fully outlined in our Information Circular and Proxy Statement for the 2006 Annual General Meeting.
The Board continually reviews its practices and procedures and monitors the evolution of corporate governance practices in both Canada and the United States.
During 2005, the Board undertook a number of initiatives to improve its corporate governance practices:
- The committees of the Board undertook a general review and, where necessary, revised certain of the committees' charters to ensure compliance with all of the requirements of the TSX, the NYSE and the relevant securities administrators.
- The Board established a policy whereby each executive must hold certain levels of trust units within three years of the initial vesting date of their performance incentive plan entitlement.
- A Board committee was divided into separate committees (Corporate Governance and Nominating Committee and the Environment, Health and Safety Committee), thereby ensuring that the members of the Board can commit sufficient time and effort to discharge their responsibilities to these important matters.
- Position descriptions were adopted for the CEO, Chairman of the Board and the Chairman of all the Board Committees.
The Board discharges its responsibilities either acting on its own behalf or through one of its Board committees. The following is a general review of each Board Committee and their respective functions:
Corporate Governance and Nominating Committee
This Committee is currently comprised of three independent directors: Robert Zorich (Chairman of the Committee), Edwin Dodge and Mike Seth. They are appointed annually following our annual general meeting. The purpose of this Committee includes:
- Assessing and making recommendations to the Board as to the size, appropriate skills and characteristics required of Board members.
- Recommending nominees for election or re-election to the Board.
- Conducting an annual self-evaluation process of the Board and each of the directors.
- Conducting an annual evaluation process to assess the effectiveness of the President & Chief Executive Officer.
- Reviewing and monitoring the orientation of new directors.
- Regularly reviewing our corporate governance practices and recommending to the Board any changes that the Committee deems necessary or advisable.
- Reviewing our annual disclosure of corporate governance practices.
Environment, Health & Safety Committee
This Committee is currently comprised of three independent directors: Don West (Chairman of the Committee), Edwin Dodge and Robert Zorich. All are appointed annually following our annual general meeting and the Committee is responsible for the following matters:
- Reviewing our environment, health and safety ('EH&S') programs and policies.
- Reviewing management's performance related to EH&S matters.
- Reviewing significant external and internal EH&S reports on risk assessments, ongoing investigations and audits performed.
- Reviewing the status of significant remediation projects, developments and the environmental provisions.
- Ensuring that long-range preventive programs are in place to limit future risks.
- Participating in annual visits to one of our operating facilities.
- Receiving an annual compliance certificate from the Chief Operating Officer.
- Generally ensuring the integrity of our EH&S programs and policies.
Compensation and Human Resources Committee
This Committee is currently comprised of three independent directors: Glen Roane (Chairman of the Committee), Edwin Dodge and Robert Normand. All are appointed annually following our annual general meeting.
The purpose of this Committee is to assist the Board in fulfilling its duties regarding human resources, compensation matters and succession planning. The Committee's responsibilities include:
- Reviewing the Chief Executive Officer's compensation and recommending any amendments to the Board, having previously received an assessment of the Chief Executive Officer's performance from the Board or a committee thereof.
- Recommending executive compensation policies, programs and awards to the Board.
- Reviewing and recommending to the Board for its approval the granting of trust unit rights to officers and employees under the Trust Unit Rights Incentive Program, entitlements under the Full Value Unit Plan and the Restricted Unit Long-Term Incentive Plan.
- Reviewing overall compensation programs to ensure competitiveness and employee retention.
- Reviewing long-term succession plans for senior executive positions.
Audit and Risk Management Committee
The Audit and Risk Management Committee is currently comprised of three independent directors: Robert Normand (Chairman of the Committee), Glen Roane and Harry Wheeler. All are financially literate and are appointed annually following our annual general meeting. Mr. Robert Normand is a Chartered Accountant and has been identified as the Committee's 'Financial Expert' pursuant to applicable U.S. reporting rules. The Committee is primarily responsible for the quality of our financial reporting and operates pursuant to a charter that identifies its objectives and responsibilities.
The Committee's responsibilities include:
- Reviewing, with management and the external auditors, the integrity of the interim and annual financial statements as well as management's discussion and analysis of our financial condition and results of operations to be recommended for approval by the Board.
- Ensuring the Chief Executive Officer and the Chief Financial Officer certify the accuracy of the information set forth in the consolidated annual financial statements, the unaudited interim financial statements and related disclosure materials.
- Reviewing with the external auditors the use by management of Canadian generally accepted accounting principles, their consistent application, their appropriateness and their reconciliation with U.S. generally accepted accounting principles.
- Determining whether any restrictions affect the ability of the external auditor in reporting on our financial condition and operations.
- Engaging our external auditors, ensuring their independence and qualifications and assessing their performance annually.
- Reviewing and approving the annual audit plan and fees.
- Reviewing and pre-approving non-audit services.
- Reviewing financial reporting systems and monitoring management's initiatives with regard to internal controls.
- Reviewing the activities of the Management Disclosure and Oversight Committee to ensure compliance with U.S. and Canadian disclosure requirements.
- Reviewing the processes by which management identifies, measures and manages the various financial risks of the business and the proper disclosure respecting same.
- Reviewing the hedging and derivatives transactions entered into by management to ensure compliance with our policy.
- Holding regular meetings independent of management with the external auditors.
The charter of the Audit and Risk Management Committee can be found, in its entirety, on our website at www.enerplus.com.
The Committee has implemented a policy to encourage employees and consultants to disclose any perceived acts or circumstances of financial or ethical misconduct which may impact our assets or the interests of our unitholders. We have always been dedicated to the principles of honesty and integrity in all matters concerning the conduct of our business and expect that all employees and contract personnel share this commitment. As a result of this policy, any improprieties detected in the organization can be anonymously and directly reported to, among others, the Chairman of the Committee, on a confidential basis. Further, any person providing a report pursuant to this initiative shall be protected from any form of retaliation by any of our personnel.
Reserves Committee
The Reserves Committee is comprised of three independent directors: Harry Wheeler (Chairman of the Committee), Mike Seth and Donald West. All are appointed annually following our annual general meeting. The Committee's responsibilities include:
- Assessing the work of the independent reserves evaluators annually.
- Engaging of the independent reserve evaluators.
- Reviewing our procedures relating to the disclosure of information with respect to our reserves.
- Reviewing the scope of the annual review of the reserves by the independent reserves evaluator, including findings and any disagreements with management.
- Meeting independent of management with the reserve evaluators.
- Determining whether any restrictions affect the ability of the reserves evaluator in reporting on our reserves data.
- Receiving, annually, a signed reserves evaluator's report and a certificate of compliance/due diligence from management.
- Approving the year-end reserves evaluation.
Management Disclosure and Oversight Committee
In addition to the Board committees, management has formed an internal committee to enhance and ensure that we meet our increasing disclosure obligations. As a foreign private issuer listed on the NYSE, we abide by applicable U.S. law and regulations and generally follow the recommendations of the Securities and Exchange Commission ('SEC') and the NYSE. The Committee reports to senior management, including the Chief Executive Officer and the Chief Financial Officer, and also serves as the coordinating group for our public disclosure. The Committee's responsibilities include:
- Reviewing our internal, financial and disclosure controls and ensuring such controls are sufficient to discharge our legal and regulatory obligations.
- Ensuring that our internal, financial and disclosure controls are being observed by employees and are designed and operating effectively.
- Reviewing all periodic reports and disclosure documents.
- Reviewing press releases with respect to quarterly and annual financial results.
In addition, senior executives review all public presentation materials prior to dissemination.
We believe our approach to corporate governance observes the best practices. In this regard, we direct the reader to our Information Circular and Proxy Statement for our 2006 Annual General Meeting under the heading of 'Statement of Corporate Governance Practices'.
As a foreign private issuer listed on the NYSE, we are required, pursuant to Section 303A.11 of the NYSE Listing Manual, to compare our corporate governance practices to the NYSE corporate governance listing standards. We have undertaken a review of these listing standards and confirm that our practices in corporate governance are not significantly nor materially different from these standards. As a foreign private issuer, we are not obligated to and we do not have an internal audit function.
As a foreign private issuer, we are also subject to certain reporting, disclosure and certification obligations in the United States. We have complied with and will continue to comply with all of these obligations including all required certifications by our Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act, the rules of both the New York Stock Exchange and the Toronto Stock Exchange as well as Canadian securities laws.
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