CORPORATE GOVERNANCE DISCLOSURE
We aim to be the leading mining company focused on gold, growing our cash flow per share by developing and operating high quality assets through disciplined allocation of human and financial capital and operational excellence. Our purpose is to create wealth for our owners, our people, and the countries and communities with which we work by building partnerships of depth and trust. By treating our external partners’ interests as our own, we become the preferred partner of host governments and communities, the most sought-after employer among the world’s best talent, and the natural choice for the most thoughtful long-term investors. A partnership culture is Barrick’s most authentic, distinctive, and sustainable competitive advantage.
We have also made a partnership culture central to our distinctive structure for governance and management, one that is best suited to this moment in Barrick’s history.
We recognize this structure is unconventional, and in the section entitled Our Governance and Leadership Structure below we explain in detail how it works and delineate clearly and specifically the responsibilities of our Board, our Executive Chairman, our Lead Director, and our President. We also explain why we continue to believe this is the appropriate structure for Barrick today.
The Board works continuously and carefully to review and enhance our corporate governance policies and practices. These are consistent with the Canadian Securities Administrators’ National Policy 58-201 – Corporate Governance Guidelines, and they also take into account rules of the TSX (TSX Rules) and the NYSE (NYSE Standards), even though most of the NYSE Standards do not directly apply to us as a Canadian company. We have summarized below the significant difference between our corporate governance practices and the NYSE Standards which are applicable to U.S. companies:
- Section 303A.08 of the NYSE Standards requires shareholder approval of all “equity compensation plans” and material revisions. The definition of equity compensation plans under the NYSE Standards covers plans that provide for the delivery of newly issued securities, as well as plans that rely on securities reacquired on the market by the issuing company for the purpose of redistribution to employees and directors. In comparison, the TSX Rules require shareholder approval of security-based compensation arrangements only in respect of arrangements which involve the delivery of newly issued securities or specified amendments thereto. Therefore, Barrick does not seek shareholder approval for equity compensation plans and amendments unless they involve newly issued securities or constitute specified amendments under the TSX Rules.
Barrick’s corporate governance framework includes the mandates and key practices of the Board and its committees, position descriptions for our Executive Chairman, Lead Director, and President, as well as a set of Corporate Governance Guidelines available on our website at www.barrick.com/company/governance. Additional governance information is available on Barrick’s website, including our Code of Business Conduct and Ethics, and our Disclosure Policy. Detailed information on our committees of the Board (Audit, Compensation, Corporate Governance & Nominating, Corporate Responsibility, and Risk) can be found under the heading Committees of the Board.
Board Mandate and Responsibilities
Our Board serves as the voice of all owners by setting the Company’s policies and priorities in keeping with its purpose and values, and ensuring that management carries out those priorities to the highest possible standard. The Board has adopted a formal mandate which describes its major responsibilities, goals, and duties. The Board is satisfied that it is not constrained in its access to information, in its deliberations, or in its ability to satisfy its legal mandate to supervise the business and affairs of the Company, and that there are sufficient systems and procedures in place to enable the Board to function independently of management. In performing its role, our Board makes major policy decisions, participates in strategic planning, delegates to management the authority and responsibility for day-to-day affairs, and reviews management’s performance and effectiveness. The full text of the Board’s mandate is set out in Schedule B of this Circular. Since our last annual meeting, the Board reviewed and re-approved its mandate.
Some of the Board’s major supervisory responsibilities are described below.
One of the Board’s major responsibilities is to review, with management, our strategic goals and objectives. Throughout the year, the Board reviews the Company’s operating plans and budgets, which take into account the opportunities and principal risks of our business. The Board is provided with regular updates on the implementation of our strategies, plans, and budgets and any regulatory, environmental, or social constraints that may impact the achievement of the Company’s business objectives. In July 2017, the Board conducted an in-depth review of the Company’s strategy which included consideration of Barrick’s financial and operating plan and strategic objectives.
The Board believes that talent management and succession planning are critical to Barrick’s continued success. At each regularly scheduled Board meeting, the Board receives a Talent Report covering succession planning, recruitment, development considerations, and retention of senior leaders and employees who have been identified as high potential executives. This ensures that the Board is kept apprised of our pipeline of talent at all levels of the business. In addition, Barrick focuses on ensuring the development of its high potential partners and employees through development moves to other positions, on-the-job mentoring and training, and internal and external courses. In addition, in 2017, the Board participated in an in-depth succession planning session to discuss and establish succession plans for key roles ranging from management at the mine sites to members of the Executive Committee.
The Corporate Governance & Nominating Committee assists the Board in reviewing senior leadership succession, including for the Executive Chairman and the President. The succession plans are based on Barrick’s talent management systems that identify candidates who have the skills, experience, and leadership needed for progression to a senior leadership role. The Corporate Governance & Nominating Committee supports the Board in its review of succession plans for the role of President and other senior management roles and is introduced to high-potential individuals in the Company. The Company also has in place an emergency succession plan to deal with a situation which requires the immediate replacement of the President.
In addition, the Board meets regularly with our senior partners through their participation in Board and Committee meetings and continuing education sessions. Our senior partners also participate in informal meetings with members of the Board throughout the year. This regular interaction with the Board ensures that directors get to know the individuals who have been identified as potential future leaders of the Company.
Evaluating Our Executive Chairman and Executive Committee
The Lead Director works with the Executive Chairman to set the Executive Chairman’s objectives annually, which are then recommended to the whole Board for approval concurrently by the Corporate Governance & Nominating Committee and the Compensation Committee. Both Committees are composed entirely of independent directors.
The Corporate Governance & Nominating Committee, in consultation with the Lead Director, conducts an annual performance evaluation of the Executive Chairman against those objectives and provides a report on the performance evaluation to the Compensation Committee and the Board. The Compensation Committee recommends to the Board the Executive Chairman’s annual compensation. A more detailed description of the criteria and methodology used to assess the Executive Chairman’s performance and compensation awards in 2017 is set out at Assessment of the Executive Chairman’s 2017 Performance.
The Executive Chairman conducts an annual performance evaluation of the Executive Committee with input from the Lead Director and reports to the Board and the Compensation Committee, as appropriate, regarding such review. The Compensation Committee recommends to the Board the annual compensation for the President. The compensation of the Executive Chairman and President is approved by our independent directors. The Compensation Committee reviews and approves the annual compensation of the other Executive Committee members based on the annual performance evaluation of such executives and the compensation recommendations provided by the Executive Chairman, with input from the Lead Director. The Compensation Committee bases its recommendations and approvals on Barrick’s established policies on the performance of each individual executive as measured against the annual performance incentive scorecard disclosed to shareholders in advance and on the performance of the Company as measured against the long-term company scorecard disclosed to shareholders in advance. Executive compensation is considered in the context of the overall stewardship and governance of the Company. A more detailed description of the criteria and methodology used to assess performance and determine the compensation for our President and other Executive Committee members is set out at 2017 Compensation of our Named Partners.
Our Governance and Leadership Structure
We have consciously established a distinctive structure for the governance and management of Barrick. In this section, we lay out the responsibilities of our Board, our Executive Chairman, our President, and our Lead Director, and we explain how they work together. We also explain why we continue to believe this is the right structure for Barrick at this time.
Under our Executive Chairman’s stewardship, four years ago Barrick undertook a “Back to the Future” strategy to recapture and make relevant the original, authentic DNA of this company as it existed when Peter Munk and his partners created it. Specifically, the phrase referred to re-establishing four core elements: one, a partnership culture; two, a lean, nimble, decentralized business model; three, an intensive focus on creating long-term value as measured by free cash flow per share; and four, financial rigor and prudence as evidenced by discerning portfolio management and a healthy balance sheet. Today, the Company has embraced and executed on each of these elements.
We have eliminated all management layers and established a clear division of responsibility between the head office and the mines. The head office sets strategy and allocates people and capital according to the Company’s strategic priorities. Operational leaders of each mine determine how best to maximize the long-term value of their business, with advice and assistance from head office experts. Those mine leaders work side-by-side with our Country Executive Directors to maintain and enhance our license to operate, building partnerships of depth with host governments and communities. This lean, decentralized model allows information to flow freely and swiftly throughout the organization, and ensures that problems are solved quickly by the people closest to them. It also empowers our partners to work together as a team as they understand and manage the complex matters of our business, and assess and reduce risk.
Having re-established the model that drove Barrick’s early success, our ambition is to become a leading twenty-first century company, not just in mining, but in any industry. We are cultivating a high-performance culture defined by the following principles: a deep commitment to partnership; consistent high-level execution; operational excellence; disciplined capital allocation; and continual self-improvement. We are obsessed with talent, and seek out fresh perspectives from other industries, challenging ourselves to think differently. We are investing in digital technology in a disciplined manner to make us faster, safer, more efficient, and more transparent with our partners. Our Board of Directors serves as the voice of all owners. It sets the Company’s strategic priorities in keeping with our purpose and values. The Executive Chairman is a meaningful owner himself and serves as the representative of the Board and the owners. He ensures that the strategic priorities set by the Board are executed to the highest possible standard by the Executive Committee and the partnership – Barrick’s most senior and engaged leaders in both management and operations. The Executive Committee, comprised of the most senior partners, makes decisions collectively. Within it, the President is by definition the primus inter pares – first among equals.
Board of Directors
In carrying out its oversight function, our Board of Directors, as the voice of all owners, reviews with management and sets the Company’s priorities in keeping with our purpose and values.
Our priorities are executed by our partnership, created in early 2015. Today we have 61 partners, eight of whom comprise an Executive Committee. Partners are those who consistently demonstrate the highest qualities of transformational leadership: a tireless dedication to Barrick’s values, the pursuit of excellence and innovation, and a capacity to motivate and inspire others. Our partners approach their work with a balance of boldness and prudence: acting with urgency, but also with discipline and care. Our partners are owners of the Company, and rise and fall together with shareholders. A significant portion of their total compensation is long-term in nature, in the form of PGSUs which convert to Common Shares that cannot be sold until a partner retires or leaves the Company.
We hold a formal nomination process for new partners every year. Existing partners may nominate new partners, and must provide references from across the organization, including partners and other employees. A vetting committee of existing partners is established each year to undertake a rigorous review of all nominations, gathering feedback and references through a formal evaluation process. The outcome of their work is presented to the Executive Committee, who use the information, in combination with talent assessments and other feedback, to select new partners. Existing partners have the opportunity to review and comment on proposed new partners before the Executive Committee makes a final decision on admissions. During this process, the Executive Committee also reviews the performance of existing partners. Ongoing membership is contingent upon superior performance and leadership, and underperforming partners will be removed.
Within the partnership, the President is by definition the primus inter pares. The responsibilities and activities of the President are subject to the oversight of the Board, including the Executive Chairman, and include general supervision of the business of the Company, providing leadership and vision to the Company and our Executive Committee, developing and recommending significant corporate strategies and objectives for approval by the Board, and developing and recommending to the Board annual operating budgets. The President is responsible for overseeing day-to-day mining operations, building strong relationships among our partners, and nurturing Barrick’s relationships with host governments, local communities, and other external stakeholders.
The Executive Chairman actively oversees the partnership in a weekly meeting he chairs of Barrick’s eight most senior partners, who we refer to as our Executive Committee. In these weekly meetings, each senior partner reports, one by one, on Barrick’s key priorities: talent management with our Executive Vice President, Talent Management; Best-in-Class operations with our Senior Vice President, Operational and Technical Excellence; portfolio optimization with our Senior Executive Vice President, Strategic Matters; financial prudence and strategy with our Executive Vice President and Chief Financial Officer; exploration initiatives with our Executive Vice President, Exploration and Growth; and capital allocation and investment management with our Chief Investment Officer. The discussion then ends with new or outstanding priorities with our President and the Chief of Staff. Throughout these meetings, our Executive Chairman monitors progress, clarifies direction, and emphasizes priorities, which he continues to do one-on-one with senior partners throughout the week.
The Executive Chairman also communicates with shareholders, engages potential investors and, in concert with our President and other senior partners, works with our external partners, including host governments and joint venture partners. In addition, the Executive Chairman provides leadership and direction to the Board, and facilitates the operations and deliberations of the Board to satisfy the Board’s functions and responsibilities under its mandate. More specifically, the Executive Chairman chairs each meeting of the Board and works in consultation with the Lead Director to, among other things, plan and organize the activities of the Board. Together with the Lead Director, the Executive Chairman ensures that the Board has all the information it needs to function effectively, at all times, including, as necessary, communication between Board meetings. The Executive Chairman serves as the principal liaison between the Board and the Executive Committee and meets with representatives of our shareholders and other partners on behalf of the Board. The Executive Chairman is also responsible for conducting an annual performance evaluation of our Executive Committee with input from the Lead Director.
Because the Executive Chairman is not an independent director, the independent directors elect an independent director to serve as Lead Director following each annual meeting. The Lead Director provides leadership to the Board and particularly to the independent directors. The Lead Director facilitates the functioning of the Board independently of management, serves as an independent leadership contact for directors and shareholders, and assists in maintaining and enhancing the quality of the Company’s corporate governance. In early 2016, the Corporate Governance & Nominating Committee conducted its annual review and assessment of our Lead Director position description. Following that process, our Corporate Governance & Nominating Committee recommended, and our Board adopted, an enhanced Lead Director position description, which augments the Lead Director’s already robust role. Among other things, the Lead Director’s authority and responsibilities include the following:
- Consulting with the Executive Chairman regarding the agenda and ultimately approving the agenda (including additions to the agenda) and associated materials for each Board meeting;
- Approving Board meeting schedules to ensure that there is sufficient time for discussion of all agenda items;
- Chairing Board meetings when the Executive Chairman is absent or in circumstances where the Executive Chairman is (or may be perceived to be) conflicted;
- Presiding over in camera sessions of the independent directors following every Board meeting;
- Calling meetings of the independent directors, or the Board, as required;
- Briefing the Executive Chairman on decisions reached or suggestions made at meetings of independent directors, or during in camera sessions;
- Facilitating communication between the independent directors and the Executive Chairman, including by presenting the Executive Chairman’s views, concerns, and issues to such directors and raising with the Executive Chairman, as appropriate, the views, concerns and issues raised by such directors;
- Engaging with the Executive Chairman between Board meetings and assisting with informing or engaging with independent directors;
- Overseeing the annual Board and directors evaluation process;
- Engaging with each director individually regarding the performance and functioning of the Board, its committees, and other evaluation matters, as appropriate, and inquiring as to whether any director has concerns about the nomination of other directors;
- Working with the Executive Chairman to define his objectives for approval by the Board on the joint recommendation of the Corporate Governance & Nominating Committee and Compensation Committee;
- Providing input in respect of the Executive Chairman’s annual performance evaluation of the Executive Committee;
- Consulting with the Corporate Governance & Nominating Committee in its performance evaluation of the Executive Chairman;
- Providing leadership to the Board if circumstances arise in which the Executive Chairman may be (or may be perceived to be) in conflict, in responding to any reported conflicts of interest, or potential conflicts of interest, arising for any director;
- Being available for consultation and direct communication with shareholders and other key constituents, as appropriate; and
- Retaining independent advisors on behalf of the Board as the Board or the independent directors may deem necessary or appropriate.
J. Brett Harvey has served as our Lead Director since December 2013. In 2017, Mr. Harvey played a fundamental role as our Lead Director in a number of key Board initiatives, including consulting with the Executive Chairman regarding the agenda and associated materials for all Board meetings, chairing all meetings of the independent directors that occurred throughout the year, facilitating communication between the independent directors and the Executive Chairman, overseeing the annual Board and individual directors evaluation process, consulting with the Corporate Governance & Nominating Committee in evaluating the Executive Chairman’s 2017 performance and, in consultation with the Executive Chairman, setting the Executive Chairman’s performance objectives for 2018. On November 17, 2017, Mr. Harvey also led our second annual investor luncheon in New York City, which was attended by shareholders representing approximately 19% of Barrick’s outstanding Common Shares. Graham G. Clow (member of the Risk Committee), Dambisa F. Moyo (member of the Audit Committee and Corporate Governance & Nominating Committee), and J. Robert S. Prichard (member of the Compensation Committee and Risk Committee) participated in this luncheon, without management present. The purpose of this luncheon was to engage with investors and directly solicit their views on Barrick’s strategy, performance, governance initiatives, and approach to executive compensation.
The Board has adopted position descriptions for the Executive Chairman, the Lead Director, and the President. A copy of these position descriptions can be found on our website at www.barrick.com/company/governance. Each Board committee mandate also sets out the role and responsibilities of its committee chair.
The Board believes that Barrick’s current governance and leadership structure is vital to completing Barrick’s positive transformation. In particular, we believe that our Executive Chairman plays a critical role in ensuring that our partnership continues to execute on the ambitious goals we have set for ourselves for the benefit of all. The Board believes it is functioning effectively under its current structure, and that the current structure, including a board that is 87% independent and a robust Lead Director position, provides appropriate oversight protections.
The Board will continue to evaluate the efficacy of its governance and leadership structure, and will consider a more traditional structure as the circumstances of the Company or its leadership changes from time to time.