Mongolian Mining Conference V1
- 2. The MAP to Success: • Money • Assets • People • All three are fundamental to success • Quality leadership is a differentiator, enabling companies to be the best they can • Corporate Governance is the structure within which quality leadership operates
- 3. About Opus Executive Partners • Global Advisory and Executive Search firm specialising exclusively in the Oil & Gas and Mining sectors • Appointment of Chairmen, Non-Executive Directors, Executive Directors and key Senior Executives • Not just “headhunting” but also governance consultancy and restructuring of company Boards • Consultancy services and bespoke market surveys
- 4. Corporate Governance • Corporate Governance is described as being what the Board of a company does and how it sets the values of the company • London’s excellent reputation encourages companies from around the globe to list here. London’s Corporate Governance regime is central to the standing of this reputation • The June 2010 UK Corporate Governance Code is applicable to all Main Market listed companies. The Quoted Companies Alliance has produced its own guide for AIM listed companies • The Code is not a legal requirement - it encourages companies to apply the recommendations of The Code or explain to stakeholders the reasons why they haven’t
- 5. Key Recommendations of the Code • Chairmen and CEO posts should be held by different people in order to separate the job of running the Board from the job of running the company • There should be a minimum number and proportion of independent NEDs • One Independent Non-Executive Director to be nominated as the Senior Independent Director • Audit, Remuneration and Nomination committees to be established and run by Independent Non-Executive Directors • Shareholders should be informed how Directors have been appointed, for example if Executive Search or open advertising has been used
- 6. What Opus Have Done “How’s Mine Doing? A review of Boards, Performance and Risk in the Mining sector 2011 • The share price performance of LSE Mining companies was analysed over a five year period: June 2006 to June 2011 • The Board structures of the sector were compared with the key recommendations of the June 2010 UK Corporate Governance Code • In light of some recent high profile events our report (How’s Mine Doing?) seeks to provide a fuller understanding of how good practical Governance and a balanced Board can help mitigate risk
- 7. Share Price Performance • Share price performances were analysed for all Main Market & AIM listed Mining companies that operated throughout June 2006 – June 2011 • If an equal sum of money had been invested in every company in June 2006 the overall sector return after five years would have been 57% • The top ten performing companies had a disproportionate performance. When they were removed the sector’s overall return drops to -3%
- 8. Percentage Performance of UK Indices June 2006 – June 2011
- 9. Share Price Performance of Top 10 Mining Companies June 2006 – June 2011
- 10. Share Price Performance of Bottom 10 Mining Companies June 2006 – June 2011
- 11. The Opus “Leadership Corporate Governance Ranking” • Opus have developed a Corporate Governance scoring system to determine how Board structures relate to the Code’s recommendations • It is based on the key objective recommendations of the Code regarding Board structure and is ranked out of a possible maximum of 8 points • The overall score for the sector was only 38% • One of the key reasons for the low Corporate Governance scores was due to the NEDs not being evident as independent
- 12. The Link Between Corporate Governance and Performance • We have found that better Corporate Governance scoring generally correlated with better shareholder value • AIM companies had an average Opus Corporate Governance score of only 29% and the return to shareholders over the period was 50% • Main-Market companies had an average Opus Corporate Governance score of 65% and delivered a return to shareholders of 83% • FTSE 350 companies had an average Opus Corporate Governance score of 77% and delivered a return to shareholders of 92% • The top ten companies by Corporate Governance had an average score of 96% and their share-prices went up by 92% • The bottom ten companies by Corporate Governance had an average score of only 13% and their share-prices decreased by 80%
- 13. Conclusions • Poor Corporate Governance standards make it more difficult to attract high quality people to Boards • WeakBoards pose a high risk to investors and in turn make it more difficult to secure funding • It is clear that companies which recognise good Corporate Governance have a competitive advantage over others who do not Corporate Governance is simply good business
- 14. Thank you for your attention 36 Dover Street Mayfair London W1S 4NH +44 (0)20 7958 1700 www.opusexecutive.com