A guide to good disclosure - Corporate governance

1 Corporate governanceA guide to good disclosureUse this guide to help you give investors meaningfulinformationabout your Corporate is good disclosure ?2 How to respond to the 14 guidelinesGuideline 13-5 Guideline 26 Guideline 37 Guideline 48 Guideline 59 Guideline 610 Guideline 711 Guideline 812 Guideline 913 Guideline 1014 Guideline 1115 Guideline 1216 Guideline 1317 Guideline 1418An explanation of some terms used in this guide19 How to communicate effectively20 Corporate governance A guide to good disclosureIntroduction1 About this guideDuring the past two years, Toronto Stock Exchange (TSX)

2 Hasreviewed the Corporate governance disclosure of over 700 ofits issuers. Almost all describe, in some form, their system ofcorporate governance . While these issuers clearly try to giveinvestors insight into their Corporate governance practices, disclosure can be disclosure about your Corporate governance practicesgives investors a solid understanding of how decisions aremade that may affect their investment. TSX believes thatyour shareholders are entitled to this information. Inaddition, investors who are confident about your corporategovernance practices are more likely to remain or becomeshareholders.

3 This guide helps issuers prepare meaningful disclosure thatcomplies with TSX requirements. It also suggests otherinformation you can include to improve the quality of yourcommunication with responsibilitiesTSX requires all listed companies to disclose their corporategovernance practices each year in their annual report or theirmanagement information and proxy circular. To comply withthis TSX requirement, you must fully and completelydescribe your system of Corporate governance and compareyour practices against each of the 14 guidelines set out inSection 474 of the TSX Company Manual.

4 When comparingyour practice to a guideline, you need to explain: how your practice complies with the guideline, or how your practice differs from the guideline and why, or why the guideline doesn t apply to only requires you to explain your practices, not to adoptthe practices in the guidelines. Some of the guidelines may not apply to your company oryour practices may differ from those set out in theguidelines. If you haven t complied with a guideline, you canstill provide a thorough description of your actual fact, disclosure may be more important in thesesituations.

5 For investors to be confident about yourpractices, you need to explain what you are doing and whyyou believe that your practices are this guide can help youTo help you prepare your Corporate governance disclosure , we: explain what you must discuss for each TSX guideline inorder to comply with the disclosure requirement suggest ideas to enhance your disclosure about eachguideline to give investors the most complete descriptionof your practices provide examples of good disclosure . In these examples,we ve used fictitious names of companies and individuals provide tips on how to communicate is good disclosure ?

6 Corporate governance A guide to good disclosureGood disclosure effectively communicates detailedinformation about your system of governance . By addressingeach of the 14 guidelines, you will describe: the duties, expectations and objectives of your boardof directors and committies the composition of your board of directors how you ensure that you take the interests of minorityshareholders into account the structures and processes in place to make sure theboard functions independently of management how the board tries to enhance its performance.

7 Forexample, by assessing the performance of the board, itscommittees and individual directors how you deal with shareholders concerns and encourage you to go beyond the guidelines and includeother useful information about your Corporate demonstrate what TSX considers good and bad disclosure ,consider the following two examples. Both examplestechnically meet the TSX disclosure requirement for Guideline 8,however only one is an example of good disclosure . Guideline 8 states:The board of directors should review the adequacy andform of the compensation of directors and ensure thecompensation realistically reflects the responsibilities andrisk involved in being an effective 1 Poor disclosureThe board of directors reviews the adequacy and formof the compensation of directors and ensures that thecompensation realistically reflects the responsibilitiesand risk involved in being an effective Example 1 addresses the guideline, the disclosure justrepeats the guideline wording.

8 Readers receive no insightinto how the board arrived at the decision about the leveland suitability of the directors compensation. Example 2 good disclosureThe Corporate governance Committee reviews theamount and the form of director to the board for changes take intoconsideration the time commitment, risks andresponsibilities of directors. The Committee alsoreviews the board compensation at peer disclosed in the section Directors Compensationonpage 7 of this circular, the board decided, based on theCommittee s recommendation, to.

9 Require each director to own $50,000 of commonshares within 5 years of appointment to the board allow directors to take their annual board retainer of$15,000 in common shares, cash or a combination ofboth common shares and cash, and stop granting options to directors under theCompany s Stock Option Committee believes these changes will further alignthe directors interests with the interests of 2 meets TSX expectations by discussing theadequacy and form of compensation and what thecommittee considered in making its information provided goes beyond the guidelinerequirements.

10 It gives specific details about requirementsfor director share ownership, the form of compensationand recent changes to director compensation. To ensureinvestors have all available information about directorcompensation without repeating it, the company refersreaders to another section in its circular. If your approach differs from the practice set out in aguideline, you still need to describe it fully, and explain howyour system differs from the practice. If the practice set outin a guideline doesn t apply to your company, you mustexplain the example below, the practice set out in guideline 4doesn t apply to the company.