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The PBCE provides employees with specific direction in the areas of Human rights; Community relations; Employee practices; Personal conduct; Ethical business conduct; and Health, safety and environment.
Talisman has formal policies and procedures that support the Company’s commitment to corporate responsibility. Our Policy on Business Conduct and Ethics (PBCE or Policy) is the foundation of our corporate responsibility framework and is the basis of organization for this year’s Report. (Bold copy included in this report has been taken directly from our Policy.) Established more than 12 years ago, our Policy is a living document. It has been revised and updated through several multi-departmental reviews including in 1999 and 2003, reflecting the Company’s growth and ensuring alignment with international best practices. The Policy is supported by the Company’s internal control system.
Talisman’s values and beliefs regarding appropriate corporate behaviour are reflected in the commitment statements at the beginning of each policy section and provide context and reasoning around our principles. More detailed explanations of the key ethical issues in each of the main subjects of the Policy are also included to further guide behaviour. In many instances, examples, or a list of “do’s and don’ts”, are included to clarify Talisman’s position on certain activities.
The Policy also reinforces Talisman’s commitment to operate in a safe, environmentally responsible and ethical manner by encouraging strong and transparent relationships with stakeholders. This is accomplished by, among other things, treating employees ethically and fairly, effectively managing occupational health, safety and environmental risks, showing respect for human dignity and the rights of the individual and developing mutually beneficial relationships with communities based on a foundation of trust and respect. Employees are encouraged to embrace the spirit and values embodied in the Policy on Business Conduct and Ethics as a roadmap for Talisman’s approach to responsibly doing business worldwide.
The PBCE is a statement of the ethical principles to which Talisman is committed. Every employee must read the Policy and understand how it relates to all business dealings as a condition of employment. The Policy is the first source of information and clarification regarding ethical issues employees may face in their business activities. To ensure the PBCE is understood and followed worldwide, the Policy is available in hard copy to all employees and contractors in English, Spanish and Indonesian as well as on Talisman’s internal website.
Talisman annually checks our business activities to test conformance with the PBCE. Employees, officers and directors are required to annually complete a Compliance Certificate certifying observance of the PBCE while noting any exceptions and Talisman also requests that its key strategic alliance partners and contractors also undertake this exercise. Compliance certificates are returned directly to the President and Chief Executive Officer (CEO). The President and CEO and each member of the Board of Directors also complete a Certificate of Compliance and provide it to the Chairman of the Board of Directors.
The Company requires that all employees promptly report any observed breaches of the PBCE. The Company values employee good faith actions and will not tolerate retaliation of any kind for reporting information. All reported contraventions are promptly investigated and are treated confidentially to the greatest extent possible. The Governance and Nominating Committee of the Company’s Board of Directors must approve any waiver of any of the provisions of the PBCE for a director or an executive officer in advance. Any material waiver will be promptly disclosed in accordance with applicable securities legislation.
Breaches of the PBCE are dealt with in accordance with the Company’s Progressive Discipline Procedure, which is available to all employees through Talisman’s internal website.
In 2004, Talisman’s President and CEO received 3,134 Compliance Certificates from employees and contractors in North America (2,154), the North Sea (654) and the rest of world (326). Submissions included 14 potential exceptions, which were all assessed or investigated and found to be immaterial.
“I am very concerned that Jim Buckee and his fellow executives actually are dedicated to this Report and its objectives.” B.W. Carter, 2003 Report feedback card.
Talisman’s corporate governance practices satisfy all the existing guidelines for effective corporate governance established by the Toronto Stock Exchange (TSX), all of the New York Stock Exchange (NYSE) corporate governance listing standards applicable to non-US companies and substantially all of the NYSE corporate governance listing standards applicable to US companies. When Multilateral Policy 58-201 and Multilateral Instrument 58-101 (collectively, the “CSA Rules”) are implemented by the Canadian Securities Administrators, Talisman will either satisfy the requirements of the proposed CSA Rules as published on October 29, 2004, or has implemented procedures designed to meet the same governance objectives. For more information, see Talisman’s Annual Report.
In 2004, the Board of Directors approved a new compensation structure for non-executive directors. The Board of Directors also approved a directors share ownership policy which: (1) increases over time the number of common shares and/or deferred share units which must be owned by non-executive directors of Talisman; and (2) mandates that at least 40% of a nonexecutive director’s annual retainer must be received in the form of deferred share units. The Board of Directors has no current intention to issue additional stock options to directors.
The Management Succession and Compensation Committee of the Board of Directors approved an executive share ownership policy in 2004. Senior executive officers are now required to own over a period of time a specified value of shares based on a percentage of base salary.
Talisman continued to refine its organizational structure to reflect good governance practices. In 2004, the Board of Directors revised the reporting structure of Talisman’s internal audit function to ensure that it is independent of financial reporting departments.
Talisman believes that issuers should take an active approach in the development of securities legislation. Accordingly, in 2004 Talisman reviewed and provided comments to the Canadian Securities Administrators on various initiatives, including the proposed Uniform Securities Legislation and the proposed Corporate Governance Rules.
For more information on our governance structures, see the Company’s corporate governance statement, which appears as Schedule “A” of Talisman’s management proxy circular, dated March 14, 2005.
“Talisman appears to have effective governance, with a small board that has strong industry experience; a non-executive chairman with substantial, clearly delineated responsibilities; and what we believe is a good board structure that includes a separate reserves committee with engineering qualifications. The board has followed some good governance practices for many years, including frequent private sessions of outside directors, without management present, and board and director evaluation procedures appear to be vigorous. The company’s global functional management structure, with considerable checks and balances across functional areas, facilitates careful decision-making and controls.” Excerpt from Moody’s Investors Service, December 2004 Corporate Governance Assessment of Talisman