2009 GRI governance indicators and commitments to external initiatives
|4.1 Governance structure, including committees. Include description of mandate and composition (including number of independent members and/or non-executive members) of the committees and indicate any direct responsibility for economic, social and environmental performance||The Board of Directors is made up of 11 members, 10 of which are independent. Stephen Snyder, President and CEO of TransAlta, is the only executive officer of the Board. On behalf of TransAlta’s shareholders, the Board of Directors is responsible for the stewardship of TransAlta Corporation, by establishing the key policies and standards, including policies for the assessment and management of its risks, and for reviewing and approving its strategic plans. The Board monitors and assesses performance and progress in meeting the company’s long and short-term goals.
There are three committees of the Board, all the members of which are independent. The three committees and a brief description of their mandates are:
Audit and Risk Committee: provides assistance to the Board in fulfilling its oversight responsibility to the shareholders, the investment community and others, relating to the integrity of the company’s financial statements, the financial reporting process, the systems of internal accounting and financial controls, the risk identification assessment conducted by management and the programs established by management and the Board in response to such assessment, the internal audit function and the external auditors’ qualifications, independence, performance and reports.
Human Resources Committee: responsible for reviewing and approving key compensation and human resource policies for the company. Its mandate includes reviewing key human resources strategies and equity-based and other compensation programs, and for recommending to the Board the compensation of executives. The committee also reviews and approves the succession management and development plan for key employees.
Governance and Environment Committee: responsible for identifying and recommending individuals for nomination as members of the Board and its committees and for developing and recommending corporate governance principles and monitoring compliance. The committee also provides assistance to the Board in fulfilling its oversight responsibilities with respect to environmental, health and safety practices, procedures and policies in relation to required legal/regulatory and industry standards or best practices.
|4.2 Indicate whether the Chair is also an executive officer||The Chair, Donna Soble Kaufman, is not an executive officer, and is independent.|
|4.3 For organizations with a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members. State how the organization defines independent and non-executive||Ten of the 11 Board members are independent, non-executive members.
An independent director is a director who has no direct or indirect material relationship or any other relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of independent judgment. In making this determination, the Board adheres to the requirements of Canadian and U.S. securities and stock exchange rules and regulations. The independent directors are not members of management.
|4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body||Through attendance at the Annual General Meeting (AGM) or through the use of proxies for voting, each shareholder is given the opportunity to vote on matters to be addressed at the AGM. In addition, subject to statutory provisions, shareholders may submit their own proposal for consideration at any AGM.
Employees, contractors, shareholders and other stakeholders are also invited to express any concerns they may have regarding financial, accounting or any other matters, on an anonymous and/or confidential basis, to the Chair of the Audit and Risk Committee through the Ethics Help-Line. Shareholders also have the opportunity to raise questions from the floor during the AGM or write to the Board directly.
|4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance)||Every employee of the corporation has safety performance as a compensation target within their Performance Management Process, a document that sets and allows tracking of goals for each year. In addition, Directors responsible for environmental or Environment, Health and Safety governance functions, such as auditing, will have related compensation targets within their performance management process.|
|4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided||On an annual basis, every employee is required to sign-off on the Corporate Code of Conduct, and each Director must sign-off on the Directors’ Code of Conduct. The Codes of Conduct are approved by the Governance and Environment Committee of the Board. Any exceptions arising from the annual sign-off are reported to the Audit and Risk Committee. The following are the Conflict of Interest clauses within each of the Codes of Conduct:
Conflict of Interest and Fair Dealings Clause from the Corporate Code of Conduct:
TransAlta employees must ensure that no conflict exists between their personal interests and those of TransAlta. TransAlta employees are committed to conducting their business affairs in TransAlta’s best interests by dealing with customers, suppliers, contractors, competitors, existing and potential business partners and other TransAlta employees in a manner that avoids real, perceived or potential conflicts of interest.
Conflict of Interest Clause from the Directors’ Code of Conduct:
Directors shall conduct their business and affairs in a manner that ensures their private or personal interests do not interfere or appear to interfere, with the interest of the Corporation, including conflicts relative to personal, financial or other gain.
A Director who is a party to a material contract or proposed material contract or has a material interest in any person who is a party to a material contract or proposed material contract with the Corporation shall inform the Chair of the Board of any such conflict of interest. The disclosing Director shall not thereafter vote on any decision or action in which there is a conflict of interest.
|4.7 Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organization’s strategy on economic, environmental, and social topics||Each year the Governance and Environment Committee (GEC) reviews the composition of the Board in order to ensure it has the best mix of skills and experience to guide the long-term strategy and ongoing business operation of the company. This review examines diversity of background, skill and experience of each Director currently on the Board and takes into account upcoming retirements, succession, specialized committee membership requirements, industry, market and potential future developments of the company’s business. This information is compiled through the use of a competency matrix that outlines each director’s areas of expertise and experience. The GEC maintains a list of potential nominees generated by both individual director referrals and an executive search firm. This list is reviewed annually to ensure that the candidates possess the required skills and experience to meet the needs of the company. Nominees must also have the ability to devote the time required and a willingness to serve.
The GEC recommends to the Board all nominees for appointment and election to the Board. The Board has also adopted a “majority voting” policy with respect to the election of its directors which provides for the votes cast or withheld to be cast for each director individually. This policy also provides that in an uncontested election of directors, at an annual meeting of shareholders, the votes cast in favour of the election of a director nominee must represent a majority of the shares voted and withheld for the election of the director. If that is not the case, that director must tender his or her resignation for consideration by the balance of the Board. The company files with securities regulators the results of votes cast for each individual director as a percentage of total votes cast.
|4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental and social performance and the status of their implementation||Our Corporate Code of Conduct and Directors’ Code of Conduct can be found on our website.
There is an annual mandatory sign-off process for all employees and directors across all geographic regions of the corporation for the above noted Codes of Conduct. In 2009, 2,315 of 2,319 employees signed off on the Code of Conduct.
The Corporate Code of Conduct and associated policies includes the following topics to which employees are expected to comply: respect in the workplace, conflicts of Interest and fair dealings, competition, insider trading, ethical business conduct, compliance with laws, accounting or auditing issues, protecting TransAlta’s assets, health and safety, environment and sustainable development and social responsibility.
|4.9 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internally agreed standards, codes of conduct, and principles||The Board is responsible for the stewardship of TransAlta, establishing the key policies and standards for the corporation, including policies for the assessment and management of its risks. To meet its corporate governance responsibilities, the Board has adopted Corporate Governance Guidelines which provide a framework for how the business and affairs of the company will be carried out. The Board believes that these practices benefit all stakeholders and form the building blocks for long-term success. The Board reviews these guidelines annually to ensure that they reflect the most current and appropriate governance standards.
To assist in its oversight responsibilities, the Board has three standing committees: the Human Resources Committee, the Audit and Risk Committee and the Governance and Environment Committee. For more information, see “Reports of Committees of the Board.” All of these committees have adopted charters which outline their specific oversight responsibilities.
The Board has delegated to the CEO and senior management the responsibility for the day-to-day management of the business of the company. In addition to those matters which must, pursuant to applicable laws and the company’s by-laws, be approved by the Board, the Board has specified limits to management’s authority and retains responsibility for significant matters such as major changes to organizational structure, material acquisitions and divestitures, major capital expenditures, debt and equity financing transactions and approval of environmental policies.
The Board also has ultimate oversight for adoption of the company’s strategic planning process, the resultant plan, monitoring performance in executing the strategies and meeting the objectives of the plan. The Board meets on an annual basis for a comprehensive strategic planning session at which time it reviews and approves the strategic plans of the Company. The directors receive updates on the strategic plan at regular Board meetings and from regular CEO communications.
Detailed mandates and procedures for the committees are documented within the charters for each committee. A high level summary of roles of each committee relating to sustainability elements is described below.
Governance and Environment Committee: ensures the company’s governance principles are adhered to; reviews environment, health and safety (EHS) practices, policies, procedures and performance in relation to regulatory requirements, industry standards, best practices and prevention/mitigation of losses; reviews TransAlta standards and performance against peer organizations; reviews emerging EHS public policy and regulations to determine potential impact to the organization; and reviews environmental matters that may have a material effect on the company’s business or financial results.
The committee also receives regular updates on environmental regulatory developments in Canada, the United States and Australia, taking into consideration the potential impact these developments may have on the company and the industry.
Human Resources Committee: reviews human resources policies, compensation and pension programs, organizational changes, management development and succession planning.
Audit and Risk Committee: review and oversight of all key audit and financial matters; oversight and approval of principal risks, potential impacts and the systems in place to mitigate and manage the risks. The committee receives quarterly updates on management’s risk assessment based on a comprehensive enterprise risk management process and reports to the Board annually on the assessment and findings.
|4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance||The Chair meets annually with each director to obtain their views on the effectiveness of the Board, Board committees, the Board-management relationship, individual director performance, contributions of individual directors, management contributions and overall workings of the Board. To facilitate these one-on-one meetings, questionnaires relating to Board and individual committee assessments are provided to each Director for their review and for use in the preparation of these meetings. The questionnaires address specific topics and questions for discussion, including (among others) an overall assessment of the Board’s performance in the discharge of its duties and responsibilities, whether the Board is satisfied with the strategic initiatives of the company (including its oversight of sustainability performance), the company’s risk management processes, the company’s disclosure processes, the management succession plan, the Board’s relationship with management, the quality and timeliness of information provided to the Board in preparation for meetings, the operation of the Board and its committees and the contributions of each director.|
|Commitments to external initiatives|
|4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization||TransAlta supports the precautionary principle and this is reflected in our long range forecast planning tool. We use this tool to assess the environmental, social and economic impacts of projects from the initial conception stage through to the operations, maintenance and reclamation stages of our operations.
TransAlta has also developed and implemented an extensive Enterprise Risk Management process that involves management from all regions of the company in identifying, assessing and ranking risk. Individual risk assessments from across the organization are rolled up into an Enterprise Risk Scorecard segmented by immediate, near and long-term implications. The ERM process is to be used as a tool to evaluate the overall risks of the Corporation, mitigants and resulting residual risks, and assists both Management and the Board in making decisions with respect to the company’s risk profile.
|4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses||Canadian Electricity Association (CEA)
CEA’s Sustainable Electricity program