Corporate Governance Statement
The Directors support high standards of corporate governance. As a UK listed company, Afren plc is required to state whether it has complied with the provisions in Section 1 of the Combined Code on Corporate Governance (Combined Code) throughout the year and, where the provisions have not been complied with, to provide an explanation. Afren is also required to explain how it has applied the principles in Section 1 of the Combined Code.
The Directors consider that the Company complied with the provisions set out in Section 1 of the Combined Code since admission to the Official List of the United Kingdom Listing Authority in December 2009. Throughout 2009 and up to the date of approval of this Annual Report, the Group has complied with the provisions of the Combined Code, save for the exceptions listed below. The Chairman on appointment as Chairman in December 2008 did not meet with the independence criteria set out in the Combined Code as he is a former Executive Director of the Company. The Board believes that the Chairman is in substance independent, being independent in character and judgement, however it recognises that at the time of his appointment as Chairman, he did not meet with the independence criteria set out in the Combined Code. The Board has considered this factor and remains satisfied that his role as Chairman of the Board is of considerable benefit to the Board given
his wealth of knowledge and experience of the Group, of Africa and of the oil and gas industry. The Board consulted major shareholders in advance of his appointment as Chairman and the consensus was that his appointment as Chairman was focal to our strategy of utilising relationships of the Board and management to partner with indigenous companies, national oil companies and host governments, in growing an upstream portfolio of significant scale. Prior to 26 June 2009, the Nomination Committee was not comprised of a majority of Non-executive Directors. Prior to 9 July 2009, the Chairman was a member of the Audit and Risk Committee. Also prior to 9 July 2009 the Remuneration Committee comprised of two independent Non-executive Directors in addition to the Non-executive Chairman instead of three independent Non-executive Directors in addition to the Non-executive Chairman. At that time the Company was an AIM Company and the composition of the Board and its committees was considered to be appropriate in the circumstances for the short period while the Board was considering candidates to appoint as Non-executive Directors. The imbalance was rectified by the appointment of two additional Non-executive Directors in June 2009 and the resignation of the Chairman from the Audit and Risk Committee and the Remuneration Committee on 9 July 2009.
The Board has appointed Mr Toby Hayward as the Senior Independent Director of Afren plc in accordance with the Combined Code. Mr Toby Hayward was a Managing Director in Jefferies International Limited. Jefferies International Limited was the Company’s Nomad prior to the move to the main market. Mr Toby Hayward is available to shareholders who have concerns that cannot be addressed through the Chairman, CEO or COO.
COMBINED CODE COMPLIANCE
This statement explains how the Directors applied the principles of the Combined Code during the year ended 31 December 2009.
INDEPENDENCE
The Board is committed to ensuring a majority of Directors are independent. The Board considers periodically the independence of each of the Non-executive Directors (and at any other time where the circumstances of a Director changes to warrant the reconsideration). Where a Director is considered by the Board to be independent but is affected by circumstances that may give rise to the perception that he is not independent, the Board has explained or will explain its reasons for determining that the Director is independent.
The Company regards all of the current Non-executive Directors to be independent within the meaning of ‘independent’ as defined in the Combined Code. The Board notes the following in relation to three of its Directors.
John St. John
Between 1 January 2009 and 31 December 2009, Mr John St. John, through his consultancy company St. John Advisers Ltd, received payments totaling approximately US$1.1 million from the Group for providing consultancy services to the Company. Mr St. John was also historically granted options over ordinary shares in the Company, as disclosed in the Directors’ Remuneration Report. In the opinion of the Board, these historic option grants, and these payments by the Company to Mr St. John, do not affect the ability of Mr St. John to be independent in character and judgement so as to prevent being considered independent for the purposes of the Combined Code. The Board considers this matter on an annual basis and does not consider Mr St. John’s independence to be compromised. The Board considers Mr St. John’s financial acumen to be important to the discharge of the Board’s responsibilities; accordingly his membership of the Board and Chairmanship of the Remuneration Committee is considered by the Board to be desirable and appropriate. For the purposes of the Combined Code, Mr St. John is considered by the Board to have recent and relevant financial experience. Furthermore, the Board is of the view that these historic option grants, and payments by the Company, do not interfere with his objective, unfettered or independent judgement or affect his ability to act in the best interests of the Company.
Peter Bingham
Mr Bingham has historically been granted options over ordinary shares in the Company, as disclosed on page 74. The Board considers this matter on an annual basis and does not consider Mr Bingham’s independence to be compromised. In the opinion of the Board, these historic option grants do not affect the ability of Mr Bingham to be independent in character and judgement so as to prevent him being considered independent for the purposes of the Combined Code. Furthermore, the Board is of the view that these historic option grants do not interfere with his objective, unfettered or independent judgement or affect his ability to act in the best interests
of the Company.
No further options have been granted to any Non-executive Director following admission to the Official List of the United Kingdom Listing Authority and the Share Option Scheme Rules have been amended to prohibit the award of share options to Non-executive Directors.