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Corporate Governance on Cement Industry document sample
Corporate Governance on Cement Industry document sample
PRESENTATION THE COMPANY CEMENTOS ARGOS S.A. (ARGOS), a member of the Argos Business Groups, was established on August 14, 1944 under Colombian law and has its main place of business in the city of Barranquilla. Through a series of mergers in 2005, it absorbed Compañia Colombiana de Clinker S.A. (COLCLINKER S.A.), Cales y Cementos de Tolúviejo S.A. (TOLCEMENTO), Cementos El Cairo S. A., Cementos del Nare S.A., Cementos Rioclaro S.A., Cementos Paz del Rio S.A. and Cementos del Valle S.A.. As a result, it became the largest cement producer in Colombia and a major player within the region. Today, ARGOS is a leader in the Colombian cement industry, with 51% of the market. It is the fifth largest cement producer in Latin America, with investments in Panama, Venezuela, Haiti and the Dominican Republic, and the sixth major producer of concrete in the United States. In addition, it exports cement and clinker to 27 countries. ARGOS has a broad network of logistic facilities to develop its business and uses them to move raw materials and finished products at competitive costs. It has four ports in the United States and another four in Colombia, in addition to port facilities in Panama, the Dominican Republic and Haiti. In Colombia, ARGOS moves more freight by land than any other company. As part of its effort to expand and to guarantee the resources it needs, ARGOS has electrical power plants to supply its production processes. These facilities give the company an installed capacity of more than 250 MW, enabling it to control the availability and cost of this important input. The welfare of the community and respect for the environment are extremely important to the company. It currently employs more than 11,000 persons and constantly develops a variety of programs to promote the well-being of its employees, their families and the communities where it does business. In this respect, ARGOS contributes more than USD $3 million to the community every year, benefitting more than 600,000 persons. In the interest of environmental protection, it has reforested more than 8,600 hectares. CORPORATE GOVERNANCE CODE The present code is a letter of introduction to shareholders, the market and the community at large on the way ARGOS does business. It is intended to familiarize investors with the code of conduct that guides the actions of the company, its management and all its employees. Therefore, the objective of this corporate governance code is the adoption of measures or guidelines with respect how the company is run, its management practices and the conduct of ARGOS employees, the way it handles information and the public’s knowledge of its practices, all in the interest of ensuring respect for the rights of those who invest in ARGOS stock or in any other security issued by the company. This code also contains the corporate governance practices recommended by the Country Code, which is outlined in External Circular 28 issued by the National Superintendent of Financial Institutions in 2007. CHAPTER I: RELATIONS WITH STOCKHOLDERS AND OTHER INVESTORS The rights of shareholders and all other investors are protected by Colombian law, the bylaws of the company and the Corporate Governance Code. All shareholders are entitled to exercise their rights, to submit observations or comments to management, and to request changes or to submit relevant legal proposals on how to improve the company’s performance. . Out of respect for its shareholders and investors, ARGOS: a. Recognizes and defends their rights; b. Provides them with relevant information on which to base their decisions; c. Organizes and conducts meetings in a way that enables every shareholder to take part; d. Affords equal and equitable treatment to all shareholders. 1. General Rights of Stockholders and Investors In addition to the rights stipulated by law and in the company’s by-laws, ARGOS shareholders and investors are entitled to: a. Access to public information of the company, provided promptly and in full, as well as information to help them reach a decision on their investment in ARGOS. b. Request authorization from management to commission special audits, at the expense and responsibility of the shareholder or investor, bearing in mind the following: - Special audits are to be conducted during the 15 days prior to the Regular Meeting of Shareholders, within the period established for exercise of the right to inspect the company’s books and documents, as provided for in the Commercial Code and with respect to those documents authorized by law. - Under no circumstance shall the company allow its rights, information, agreements that constitute a competitive advantage or, in general, any documents regarded as privileged or confidential or those of third parties to be violated under the pretext of special audits. - In no case shall special audits imply any infringement on the autonomy of the company’s managers, pursuant to legal authority and the powers stipulated in the by-laws. - Requests for a special audit shall be made in writing, indicating in detail the reasons and events on which the request is founded, the specific items to be audited and the duration of the audit. The persons engaged to conduct the audit are to be competent professionals, recognized as such in accordance with the law, and are to be qualified to serve as statutory auditors of the company during the respective period. Paragraph: Investors may request special audits consistent with the nature of their investment and pursuant to the aforementioned rules, provided they represent, individually or jointly, 15% or more of the respective issue of shares or securities. 2. Specific Rights of Stockholders Shareholders are entitled to: a. Transfer their shares, as provided for by law, the company’s by-laws and any existing stockholders agreements, to be familiar with the methods for stock registration, and to know the identity of the company’s major shareholders, in accordance with the law. b. Participate in meetings of shareholders and to vote on the decisions to be taken therein, as well as the designation of bodies and persons to be elected at meetings of shareholders, as provided by law and the by-laws. c. Make recommendations on corporate governance. d. Share in the company’s profits, in proportion to their interest. e. When differences arise among shareholders, or between shareholders and management, the shareholders may resort to the Arbitral Tribunal provided for in the ARGOS by-laws. 3. Equitable Treatment for Stockholders and Investors The company shall abide by the following rules, which are intended to guarantee equitable treatment to all shareholders and investors. a. The Board of Directors shall ensure fair and equal treatment to all shareholders and investors, regardless of the number of shares or securities they possess. Consequently, it shall ensure that each and every shareholder and investor obtains a full response, in due course, to any questions or concerns about matters the company is required to disclose, or are not banned by any restriction as to legal or contractual confidentiality, the issue and cancellation of respective certificates of their securities, if such be the case; and full and prompt payment of company dividends and profits, among others, as agreed or ordered by the pertinent corporate body. b. ARGOS employees and executives are prohibited from the following, so as to ensure all shareholders are afforded equitable treatment. Accordingly, they shall abstain from: - Encouraging, promoting or suggesting that shareholders grant powers in cases where the name of the representative to the meeting of shareholders is not clearly defined. - Receiving special powers granted by the shareholders before such meetings are called. - Accepting, as valid, powers conferred by the shareholders if all legal requirements have not been fulfilled; in other words, powers are to be granted in writing, indicating the name of the representative, the person being represented, if such be the case, and the date or time of the meeting. In addition, legal entities granting power of representation are required to submit a recent certificate of their existence and representation, as provided for by law. - Suggesting or deciding on the name of those who will act as representatives at meetings of shareholders. - Recommending that shareholders vote for a particular list of candidate for the Board of Directors. - Suggesting, coordinating or reaching an agreement with any shareholder or shareholder’s representative on the presentation of proposals for consideration at a meeting of shareholders. - Suggesting, coordinating or reaching an agreement with any shareholder or with any shareholder’s representative on voting for or against any proposal presented at a meeting of shareholders. . The conduct described above also shall be prohibited when performed through a third party. Pursuant to the by-laws of the company, ARGOS employees and executives may not exercise powers to represent stock other than their own at general meetings of shareholders, nor may they substitute the powers conferred to them. They also are prohibited from voting, even by virtue of their own shares, on decisions intended to approve balance sheets or accounts at the end of the business year, or those for liquidation. In any case, ARGOS executives and employees may exercise the political rights inherent in their own shares and in those they are entitled to speak for when acting as legal representatives. The employee who is also an ARGOS shareholder and who may decide to represent his/her shares at a meeting of shareholders or to have them represented at a meeting of shareholders by granting power of representation to a third party, shall give expressed indication of said condition when requesting his/her voting document or card or in the respective power of attorney, so his/her vote is not taken into account for approval of the financial statements. c. The rights and obligations inherent in the position of shareholder or investor shall be made public through the company’s web site. d. The types of shares and securities issued, in addition to the amount of shares and securities issued and in reserve for each type issued shall be made public through the company’s web site. CHAPTER II: RULES FOR THE GENERAL MEETING OF SHAREHOLDERS The General Meeting of Shareholders is the maximum governing body of the company and is comprised of the shareholders of the company. A regular meeting of shareholders is to be held once a year, along with as many special meetings as might be required to adequately perform the duties of the General Meeting of Shareholders, as stipulated in the by-laws. The meeting shall be called and conducted as provided for by law, the corporate by-laws and this code. 1. Information for the General Meeting of Shareholders The shareholders shall have adequate information to participate in and to reach decisions at the General Meeting of Shareholders. Said information shall have the following characteristics, among others a. The shareholders shall be informed of the date, time and place of the meetings and the order of business, when appropriate, in addition to any changes, as provided for in the by-laws. b. During the notification period, all documents relative to the respective meeting shall be available to the shareholders for consultation at the offices of the Secretary General of the Company. c. When the election of Board members is scheduled for a particular meeting, the information placed at the disposal of the shareholders shall contain the respective list of candidates, if available. To that end, the shareholders shall submit their proposals to the company within the notification period. d. Financial information on subordinate companies and the home office concerning matters to be decided at the respective meeting shall be placed at the disposal of the shareholders during the notification period. e. When the technological resources are available to do so allow, the company shall place at the shareholder’s disposal the electronic means required to convey the meeting as it occurs, so shareholders who are unable to attend can follow the proceedings. 2. Meeting Notices Notices of regular and special meetings shall be given pursuant to the means and as far in advance as specified in the by-laws and in the following rules: a. The notice, as well as information that is relevant to decision-making and can be made available to the general public, shall be posted on the company’s web site. b. Without detriment to the shareholder’s right to submit proposals during the course of a meeting, the order of business for each meeting shall list the various matters to be discussed, so as to prevent them from being confused with others. The items included the order of business shall be arranged in logical order, with the exception of those to be discussed jointly by virtue of the fact that they are related, in which case the shareholders shall be advised accordingly. c. In the event a change in corporate purpose, waiver of preemptive right to subscription, a 1 change of the main place of business, dissolution in advance or segregation of the 1 For the purpose of this code, segregation shall be understood as the operation whereby a company known as the “segregant” allocates one or more portions of its equity to form one or more companies or to increase the capital of existing companies, which are known as “beneficiaries”. In return, the segregant company receives shares, quotas or interest in the beneficiary company. A contribution in kind is regarded as segregation only when at least one line of business or commercial establishment is turned over, or there is a significant change in development of the corporate purpose of the segregate company. A significant change in development of the corporate purpose of the segregate company is assumed to have taken place when the net value of the property is equal to or more than 25% of its total equity or when the contributed assets generate 30% or more of its operating income, based on the financial statements for the preceding business year. company are to be considered at a meeting of shareholders, expressed mention of all such matters is to be included in the notice of the meeting. 3. Voting As a general rule, the decisions taken at a meeting of shareholders are to be approved by a majority of the votes pertaining to the shares represented at the meeting, bearing in mind that each share shall be entitled to one vote. The exceptions provided for by law and the ARGOS by- laws apply. 4. Representation The shareholders may appoint a proxy to represent them in dealing with the company, specifically to deliberate and vote at the General Meeting of Shareholders, to collect dividends and for any other purpose. This may be done by granting a power of attorney, in writing, pursuant to the law and within the terms and conditions stipulated in the company’s by-laws. 5. Relevant Decisions In addition to what are defined in the corporate by-laws as decisions to be taken at the Meeting of Shareholders, the following matters also are to be decided by that body: a. Segregation, regardless of whether the company is the segregant or the beneficiary. 2 b. Relevant operations conducted with economic associates, except in the case of transactions conducted within the normal flow of company business or conducted under market conditions. CHAPTER III: RULES FOR THE BOARD OF DIRECTORS The primary responsibility of the ARGOS Board of Directors is to decide on strategic corporate objectives and to monitor all action taken in pursuit of those objectives, being mindful always of what is in the best interests of the shareholders. The Board of Directors shall encourage proper attention and treatment for customers, employees, suppliers and the community, all of whom are essential to comply successfully with the responsibilities entrusted to it. The organization, functions, frequency of the meetings and the type of notice given to the Board are governed by law, the by-laws of the company and this code. 2 For the purpose of this Code, a “relevant operation” is only one that might result in Cementos Argos S.A. having to report “relevant information” to the securities market, as required by law. 1. Guiding Principles for Members of the Board of Directors The members of the Board shall bear in mind the following principles when performing their duties, in order to be as objective, independent and knowledgeable as possible in their decision- making. To do so, each director, individually, and as a collegiate body shall: a. Act in good faith, with due diligence and care, endeavoring always to decide in the best interests of the company and its shareholders. b. Treat all groups of shareholders and investors equitably and fairly in its decisions. c. Encourage, as concerns its functions, compliance with applicable legislation, the company’s by-laws, the Corporate Governance Code, and all other rules and standards endorsed by the institution. d. Apply its criteria independently and objectively. e. Be familiar with the company’s plans, strategies and objectives, its financial and operational standing, and the important sectors of its business. f. Participate actively in meetings of the Board and in the committees to which they belong, and become familiar with and review in advance the material management shall provided appropriately and in due course for study and analysis. g. Avoid conflicts of interest with the company at all times. Manage any such incidents with care and attention, describing the situation at a formal meeting of the Board of Directors, documenting the conflict and abstaining from voting on the matter. To that end, the members shall inform the Board of any direct or indirect relations among themselves, with the company, with suppliers, with clients or with any other interest group that might result in a conflict of interest or influence the direction of their opinion or vote. 2. Principal Responsibilities of the Board of Directors In addition to those associated with the functions assigned to it in the by-laws, the following are principal responsibilities of the Board of the Directors. a. The Board of Directors shall ensure its own performance, in strict compliance with the Corporate Governance Code, and shall supervise communications and the transparency of its actions. . b. With respect to the President and the Vice Presidents of the company, the Board is responsible for selecting persons to fill those posts, evaluating their performance, determining their compensation and replacing them, as well as assigning their primary responsibilities and supervising the succession plan. c. With respect to operation of the business, the Board shall direct and review the company’s strategy, principal projects, risk policy, budgets and business plan. d. The Board of Directors shall encourage veracity in accounting, management information, financial and auditing systems and shall ensure the proper operation of systems for control, risk monitoring and legal compliance. e. Finally, it is up to the Board of Directors to identify and address conflicts of interest involving management, the Board and the shareholders, the undue use of company assets and abuses in transactions with related parties. It also shall encourage strict adherence to the Code of Ethics. 3. Criteria for Selecting the Board of Directors The process used to select the Board of Directors shall ensure the profile of its members is consistent with the needs of the company. The following are the basic principles, general and particular aptitudes and limitations required of candidates for the Board of Directors, in order to fit that profile. The General Meeting of Shareholders shall take the following aspects into account, among others, when proceeding to elect the members of the Board of Directors. a. The Directors shall be elected on the basis of the same criteria. To the extent possible, each Director shall contribute a particular professional expertise. Each shall have sufficient time available to comply with their obligations as a member of the Board. b. All Directors shall have the basic skills required to perform their duties adequately, such as analytical and management capabilities, a strategic view of the business, objectivity, the capacity to present their points of view, and the ability to assess upper management. They also must be able to understand and question financial information and business proposals and to work in an international environment. c. In addition to basic skills, each Board member shall have other specific aptitudes that enable his/her to contribute in one or more areas, by virtue of their special knowledge of the industry, financial aspects and risk, legal matters, commercial issues and crisis management. d. The members of the Board shall refrain from taking part, on their own or through a third party, in activities that imply competition with the company or in acts where there is a conflict of interest, unless expressly authorized to do so by the Board of Directors or the Meeting of Shareholders, as the case may be. e. At least 25% of the Board members elected for a specific period shall be independent. Independent members of the Board of Directors are understood as those who: • Are neither employees nor executives of the company, its home office or subordinate companies, nor were the year before, except in the case of the reelection of an independent member. • Are not shareholders who directly, or by virtue of an agreement, orient, guide or control the majority of the voting rights of the company or determine the majority make-up of the company’s management, executive or supervisory bodies. • Are neither members nor employees of associations or companies that provide consulting services or advice to the company or to companies that are part of the same economic group, when the revenue from that item accounts for 20% or more of their operating income. • Are neither employees nor executives of a foundation, association or company 3 that receives significant donations from the company. • Are not managers of an entity with a Board of Directors that includes a legal representative of the company. • Are not persons who receive compensation from the company, other than their fees as members of the Board of Directors, the Audit Committee or any other committee created by the Board of Directors. 4. Election and Composition of the Board of Directors The ARGOS Board of Directors is elected by the General Meeting of Shareholders and shall be comprised invariably of an odd number of members that is sufficient to perform its duties adequately. There shall be no alternate Board members. There shall be no decision-making majority on the Board comprised of a number of persons who are occupationally associated with the company. When Board members are to be elected and a list of candidates that might allow a majority of that type is presented, management shall advise the General Meeting of Shareholders accordingly. The electoral quotient system and all other provisions stipulated by law and in the company’s by- laws shall apply when members are to be elected to the Board of Directors or to any collegiate body. 3 Significant donations are those that account for 20% or more of the total donations received by the entity in question. 5. Functions of the Board of Directors The Board of Directors has sufficient authority to order the company to enter into or execute any act or agreement consistent with its corporate purpose and to take the decisions necessary for the company to fulfill its objectives, in accordance with the law and the by-laws of the company. 6. Conflicts of Interest There shall be no majority of any type on the Board of Directors comprised of persons who are related by marriage or by blood to the third degree of consanguinity or the second of affinity or through a civil relationship in the first degree. If a Board is elected contrary to this provision, it may not act and the previous Board shall continue to exercise its functions, convoking immediately a meeting of shareholders for a new election. 7. Term of the Directors The Directors who are elected to the Board shall serve for a period of two (2) years and may be reelected indefinitely. The Directors may be reelected and may be removed freely by the General Assembly of Shareholders, even before their term has ended. 8. Attendance by Officers of the Company The meetings of the Board shall be attended by the President and the Secretary General of ARGOS. Other officers of the company may attend if required to do so by the Board. However, no special remuneration shall be paid to any of them for their attendance. 9. Operating Rules for the Board of Directors Functions of the President Apart from the functions stipulated by law, the by-laws, the Board and other Company regulations and codes, the functions of the President in relation to the Board are the following and shall be performed directly or through a delegate. a. Implement the decisions of the Board of Directors. b. Adopt decisions associated with the company’s financial statements, in accordance with the law, established accounting rules and the provisions of the Board of Directors. c. Call special meetings of the Board of Directors. d. Present, in conjunction with the Board of Directors, a written report to the General Meeting of Shareholders on the President’s management, including the measures he/she recommends for adoption by the General Assembly, in addition to a general balance sheet, a full and detailed income statement, and any other attachments and documents required by law. The financial statements are to be certified as required by law. The report in question shall contain, among other information, a description of the risks inherent in the activities related to the company and all other material aspects relative to its operations, in accordance with prevailing rules and regulations. e. Provide relevant information to the Board of Directors in a clear, precise and timely manner. f. Make the necessary recommendations to the Board of Directors on matters related to good corporate governance. g. Disclose to the Board of Directors, immediately and in detail, any conflicts of interest that might arise. h. Present information to the Board of Directors concerning the performance of the company, particularly with respect to corporate strategies, material risks and financial and management reports. i. Perform whatever functions the Board of Directors might delegate to the President. Functions of the Secretary General Apart from the functions stipulated by law, the by-laws, the Board, the President and in any company regulations and codes, the functions of the Secretary General are the following and shall be performed directly or through a delegate. a. Coordinate organization of the Board of Directors, convey notices of its meetings and attend such meetings. b. Coordinate, in conjunction with the President of ARGOS, the collection and transmittal of information to be analyzed by the Board of Directors. c. Maintain the records and minutes books of the Board of Directors, as required by law, and authorize, with his/her signature, any copies of those documents that might be issued. d. Participate, as designated, in the committees created to support the Board of Directors. e. Encourage and inform the Board of Directors on progress and tendencies concerning matters of corporate governance. f. Deal with conflict of interests that might arise within the company and are to be brought to the attention of the Board of Directors. g. Inform the Board of Directors of the stock registration system and situations for control within the company. h. Render legal advice and assistance to the Board of Directors and submit reports on legal matters of material importance to company activities and the actions of management. i. Communicate the decisions of the Board of Directors to the different areas and officers within the company. j. Perform whatever functions the Board of Directors might delegate to the Secretary General. Meetings of the Board of Directors Pursuant to the ARGOS by-laws and in view of the fact that the meetings of the Board of Directors of the parent company are monthly, the Board of Directors shall meet at least once every three months. However, special meetings may be held when warranted by special circumstances, provided they are convoked in accordance with the by-laws of the company. The Board of Directors shall meet at least once a year, in a thoroughly prepared special session, to analyze, assess and decide on company planning and strategies. Transmittal and Quality of Information To enhance the performance of the members of the Board of Directors, an effort shall be made to ensure the information they receive is relevant, concise, well organized and designed to bring them up to date on material aspects related to corporate affairs. The information required for decision-making at each meeting shall be sent to the Directors by the Secretary General, in a sealed envelope stamped confidential, no later than two days prior to the scheduled date of the meeting. Definition of the Order of Business. Permanent Matters The members of the Board of Directors shall have an opportunity to suggest topics for consideration by the Board. The Board shall determine what matters are to be considered on a permanent basis or require special attention or follow-up, in addition to all matters that need to be re-examined or updated. The President of the company and the Chairman of the Board shall define, sufficiently in advance, the matters to be addressed by the Board of Directors and shall inform the other Board members accordingly. Meetings without the Presence of Management The Board of Directors, as a collegiate body, may hold whatever meetings might be necessary without the presence of officers who are part of ARGOS management. Such meetings shall be held when decided by the Board of Directors and the decisions taken therein shall be entirely valid, provided they comply with all legal requirements and those set forth in the by-laws of the company. Minutes The studies, facts and sources of information that served as a basis for decision-making, as well as the reasons taken into account in favor of or against decisions shall be noted in the minutes of the meetings of the Board of Directors. 10. Budget Each year, the Board of Directors shall draw up a budget of the expenditures required to perform its duties. In that budget, special consideration shall be given to aspects concerning whatever fees might be required to hire outside advisers or consultants other than those engaged by management, when needed, national and international travel, representation or entertainment allowances, participation in seminars and events, and any other expenses that might be required to ensure the Board is able to do its job properly. 11. Outside Advisers As a collegiate body, the Board of Directors may engage outside advisers, apart from those hired by management, when it considers such advisors are necessary to improve the performance of its duties. 12. Intranet or Any Other Information and Communication Medium for Analysis, Discussion and Documents The management of the company shall endeavor to establish an electronic information and communication system. The object of that system shall be to place information at the disposal of the Directors and to facilitate discussion and analysis between management and the Board of Directors, and among the members of the Board of Directors. The management of the company shall guarantee the security, reliability and confidentiality of all matters addressed therein. 13. Filling Vacancies When a position on the Board of Directors is permanently left vacant, the Board shall call a General Meeting of Shareholders to fill the vacancy, either through a partial vote or through a new election of the entire Board, using the quotient electoral system as stipulated in these by- laws. 14. Criteria on Defining Compensation for the Board of Directors The Meeting of Shareholders shall consider the structure, obligations and responsibilities of the Board of Directors when determining how its members are to be compensated, as well as their personal and professional merits, the time to be spent on their activities as Board members, and their experience. 15. Availability Each member of the Board of Directors is expected to dedicate time and attention to their responsibilities and to attend, prepare for and participate actively in the meetings of the Board of Directors and in the committees to which they might be assigned. 16. Assessment of the Performance of the Board of Directors The Board of Directors shall decide how its performance and that of the President of the company are to be assessed. The Regular General Meeting of Shareholders shall be informed by management of the workings and the main activities carried out by the Board of Directors, the Board’s committees and the President of the company during the preceding period. 17. Instruction, Training and Induction for Board Members Those who might serve as members of the Board of Directors must be persons who are duly informed, familiar with the business, and understand the business environment and the competition. The company shall make every effort to ensure that each member of the Board of Directors is sufficiently familiar with the company, its business and its environment. To that end, ARGOS shall design an induction, refresher, instruction and training program for those persons who might serve as members of the Board of Directors, both principals and alternates. 18. Access to Company Officers and Facilities The Board of Directors and each of its members shall have direct access to the chief executives and to any other officers, when they believe such access is necessary to perform their duties. In addition, the members of the Board of Directors shall have access to any of the company’s facilities in or outside the country, so as to become familiar with the company’s activities, its operations, the personnel assigned to the different areas and, in general, to have firsthand and direct knowledge of how the company operates. 19. Committees to Support the Work of the Board of Director In view of the fact that the parent company has provided for an Appointments and Retribution Committee and a Corporate Governance Committee that sets guidelines for the entire Argos Business Group, Cementos Argos does not anticipate establishing committees of this type. Audit and Finance Committee An Audit and Finance Committee shall be created to support the work of the Board of Directors. It shall be comprised of three (3) members of the Board of Directors, including all members of an independent nature. The Chairmen of the Audit and Finance Committee shall be one of the independent members, and the secretary shall be the Secretary General of the company or his/her delegate. The President of the company, the Financial Vice President and the Internal Auditor shall serve on the committee as well. The Statutory Auditor of the company shall attend meetings of the committee, having the right to take part in its deliberations, but not the right to vote. The Audit and Finance Committee is created to help the Board of Directors oversee the effectiveness of the internal control system, make decisions on control, and improve the activities of the company, its managers and directors. The Committee orders and ensures that internal control procedures are consistent with the needs, objectives, goals and strategies determined by ARGOS and are in keeping with the objectives of internal control, such as efficient and effective operations and sufficient and reliable financial information. The Committee does not take over the functions of the Board of Directors or Management concerning supervision and implementation of the ARGOS internal control system. Any officer of the company may be called to attend meetings of the Audit and Finance Committee. The following are the primary functions of the ARGOS Audit and Finance Committee: a. Help the Board of Directors to arrive at decisions on control and how it can be improved. b. Supervise the company’s arrangements for internal control to determine if the procedures that have been designed reasonably protect the company’s assets and if there are controls in place to verify whether or not transactions are properly authorized and registered. c. Supervise the functions and activities of the internal auditor to determine his/her independence from the activities being audited and to ensure the scope of their efforts satisfies the needs of the company. d. Ensure the financial information prepared by the company is transparent and appropriately disclosed. Doing so implies guaranteeing that the necessary controls are in place and adequate instruments are available to confirm whether or not the financial statements reflect the situation of the company and the value of its assets. e. Assess the internal control reports submitted by the Internal Auditor and the Statutory Auditor, making sure that management has taken their suggestions and recommendations into account. f. Request whatever reports it considers necessary to perform its duties adequately. g. Continually evaluate the procedures that have been established, so as to determine whether or not internal control is sufficient. h. The reports and observations made by the Committee and placed on record shall be presented to the Board of Directors on at least one (1) occasion every year, or more often, if requested by the Board of Directors. i. When situations of significant importance are detected, the Committee shall submit a special report to the President of ARGOS. j. To do its job, the Audit Committee shall be familiar with and/or evaluate the following documents, at the very least: • The draft of the company’s financial statements • The report containing the Statutory Auditor’s opinion on the financial statements • The internal control reports issued by the Statutory Auditor and/or letters sent by the Statutory Auditor and/or the Internal Auditor with recommendations or observations, as the case may be. • The annual plan for internal and statutory audits • Official notices sent to the company by the authorities, with observations on shortcomings that have been detected. k. Issue an opinion, in a written report, concerning possible relevant operations scheduled with economic associates that are not part of the normal flow of business and might be conducted eventually in conditions other than those of the market and might alter equal treatment among shareholders. l. Establish the policies, criteria and practices the company will use to construct, disclose and circulate financial information. m. Define ways and means to consolidate information from the company’s control bodies for presentation to the Board of Directors. CHAPTER IV: TRANSPARENCY, SMOOTH FLOW AND INTEGRITY OF INFORMATION The ARGOS Corporate Governance Code ensures that information on all material issues relevant to the company is presented regularly and in a precise way, including information on earnings, the company’s financial situation, internal control, the distribution of shares and corporate governance. Apart from those required by law, the company shall make additional channels of information available to shareholders, investors and all other persons with an interest in its activities. 1. Information on Company Performance Information on the company’s performance shall be prepared and presented as required by law and pursuant to established accounting standards. Without detriment to compliance with the rules and standards on Relevant Information, among other matters, ARGOS shall inform its shareholders and the market in general on: a. The business objectives management has set for the business year b. Any foreseeable material risks and measures to prevent them from materializing c. The financial statements, together with the year-end reports, which are to be audited by the Statutory Auditor, who shall be an independent person of recognized prestige d. Relevant reports by the Internal Auditor and the findings of the Statutory Auditor e. Opportunities and problems pertaining to development of the company’s activity, including information on ARGOS and its development, the competitive environment, business projects or those consistent with its nature f. General policies on pay and any economic benefit afforded to members of the Board of Directors, legal representatives, the Statutory Auditor, outside advisers and special auditors g. Relevant contracts among its directors, managers, chief executives and legal representatives, including their relatives, partners and other associates. h. Mechanisms and procedures established within the company for conflict management. i. Criteria applicable to any transactions or trade conducted by its directors, managers and officers with stocks and other securities issued by the company. j. The résumés of the members of the Board of Directors and the members of other internal control bodies, as well as those of the legal representatives 2. ARGOS Framework for Internal Control ARGOS shall promote the existence of the following framework for internal control. Audit and Finance Committee The Audit and Finance Committee was created to help the Board of Directors supervise the effectiveness of the internal control system, the sufficiency and reliability of financial information for decisions on control, and improvement in the performance of the company, its managers and directors. Internal Auditing Department ARGOS has an Internal Auditing Department that conducts an independent and objective evaluation of the quality and effectiveness of the internal control system and offers advice and consulting to give the company’s operations added value. In addition, it helps ARGOS to meet its objectives through a systematic and disciplined approach designed to evaluate and improve the system for risk management, control and governance. The Auditing Department also helps to prevent risk and constantly identifies and conveys information on opportunities for improvement, through the use of know-how, data and technology. As part of its function, the Internal Auditing Department shall evaluate compliance with the Corporate Governance Code and shall convey the results of that assessment to the Audit and Finance Committee. Risk Map ARGOS shall have a risk map based on the company’s business cycle. The map shall provide an overview of the different systems that represent the company’s operations as a whole and are formed by the relationship between the groups and processes involved in its various activities. Statutory Auditor ARGOS has a Statutory Auditor whose duties are stipulated in the Commercial Code and subject to its provisions. This does not preclude what is prescribed in other rules and by the Meeting of Shareholders, when compatible with the Statutory Auditor’s legal obligations. The General Meeting of Shareholders shall include, at the session during which the Statutory Auditor is appointed, information on the appropriations planned to provide human and technical resources for the performance of his/her duties. The Statutory Auditor and his/her alternate shall be appointed at the General Meeting of Shareholders for a term of two (2) years, but may be re-elected indefinitely and removed by the Meeting at any time. The alternate shall replace the Statutory Auditor in the event of his/her permanent or temporary absence. The election of the Statutory Auditor shall be based on an objective and entirely transparent assessment. Within fifteen (15) working days prior to the date of the Regular Meeting of Shareholders at which the Statutory Auditor is to be elected, any shareholder may request the Meeting of Shareholders to consider appointing a particular legal entity as the Statutory Auditor of the company. A request to that effect shall be accompanied by a presentation on the firm proposed for said position, indicating its auditing experience and providing certification of that experience. The request also shall contain a proposal on the fees that would be paid to the Statutory Auditor whose name is being placed in consideration. Apart from the information required by law, the report submitted by the Statutory Auditor to the Meeting of Shareholders shall include his/her relevant findings, so the shareholders and other investors will have the information they need to reach a decision on the securities in question. The Statutory Auditor may not perform or render services other than those particular to his/her position, neither for ARGOS nor for any of its associate companies. The agreement entered into between the company and the Statutory Auditor shall stipulate that, in the event of successive re-elections, the persons appointed as the principal and alternate shall be changed at least every five (5) years and must wait at least two (2) years after retiring from that position to be eligible once again to serve ARGOS as statutory auditors. 3. Information for Shareholders, Investors and the Market in General ARGOS shall encourage the establishment of various channels to convey information on its activities to shareholders, investors and the market in general. Investor Relations Office The primary objective of the Investor Relations Office is to help foster a preference for investing in ARGOS, based on an understanding of the company, the quality of its information, adequate details on its activities and permanent contact with the community of shareholders, investors and local and international analysts. The function and process of serving the investor helps to establish a links between shareholders/investors and the governing bodies of the company. In general, the Investor Relations Office will make an effort to be aware of their needs, requirements and suggestions. Shareholders and investors may submit requests or complaints to the company when they believe it is not in compliance with this Corporate Governance Code. In such cases, company management shall provide a clear and sufficient response to the complaint or suggestion, through the Investor Relations Committee, doing so with utmost diligence and as quickly as possible. Relevant Information. Internal Procedures for Circulating Information Relevant information is that which a prudent and diligent expert would have taken into account when acquiring, selling or holding on to securities. It also is the information shareholders would consider when exercising their political rights at the respective assembly of shareholders or competent body. ARGOS shall define the procedures, responsible parties, terms and, in general, the structure that is needed to circulate relevant information that might be of interest to the market. ARGOS shall be in strict compliance with the regulations governing the public securities market, submitting information to the market pursuant to those regulations. Identification of the Main Real Beneficiaries of Company Shares The main real beneficiaries of ARGOS shares who account for a controlling interest in the company shall be identified in accordance with the disclosure policies stipulated by law and, specifically, pursuant to what is required by the National Office of the Superintendent of Financial Institutions, considering the nature of the company as a corporation and honoring the guarantee of privacy to which all investors are entitled, regardless of whether they are principal or minority shareholders. CHAPTER V: RULES OF CONDUCT FOR COMPANY EMPLOYEES AND MANAGEMENT – THE ARGOS CODE OF ETHICS Introduction Employees and the members of the Board of Directors of ARGOS shall conduct themselves, at all times, in a serious and transparent manner pursuant to the principles of integrity and honesty, promoting and exalting the standards and the values that pay tribute to the person. This Code of Ethics also applies to the employees and directors of the companies that are part 4 of the ARGOS Business Group. 1. General Aspects ARGOS rules of conduct, codes and manuals do not substitute the sound judgment, responsibility, common sense and prudence that employees and directors must exhibit to do a good job. All employees and directors shall abide by the law and the regulations in force in the country where they work, as well as the provisions and regulations issued by authorities, and the policies set by company management. All business and activities conducted on behalf of the company shall be governed by the ethical principles set forth in this code, among others. Failure to abide by the Code of Ethics contained in this chapter shall be considered a serious breach of the obligations derived from the work contract. ARGOS shall inform its employees and directors of the rules of conduct set forth in its Code of Ethics, and shall provide for due compliance with those rules. 2. Pledge The employees of the organization pledge to do the following at all times: a. Act with utmost good faith, due diligence, loyalty and care, endeavoring always to ensure their decisions are in the best interests of the company and its shareholders. 4 For the purpose of this chapter, reference to ARGOS, the company or the organization is understood as reference to all the companies in the ARGOS Group. b. Promote and convey an understanding of applicable legislation, regulations and provisions, as well as the standards outlined in the Corporate Governance Code and the Code of Ethics. c. Refrain from suggesting or intervening in situations that might permit, protect or facilitate incorrect or punishable acts or that might be used to confuse or betray the good faith of third parties or used in a way that is contrary to the interests of the public and those of the organization, such as slanted or biased publicity, industrial espionage, and the non-fulfillment of labor, commercial, social and other obligations. d. Refrain from actions intended to oblige, manipulate, distort or fraudulently influence officers or employees who are responsible for internal audits or control. e. Promptly inform their immediate supervisors of any event or irregularity committed by a co-worker or a third party that might affect or jeopardize the interests of the organization. f. Be absolutely objective, independent and knowledgeable in their decision-making. The interests of the organization shall be best served when decisions are based on objective criteria and not influenced by factors such as gifts, donations or payments intended to obtain results or advantages for managers, employees or their family members. As a general policy, the bestowal or receipt of gifts is not a practice to be encouraged, particularly with clients, suppliers, contractors and public agencies. ARGOS employees may not, under any circumstance, receive money, fees or gifts that might persuade them to make a biased decision. Nor shall they take advantage of their position, in any company, to obtain benefits for themselves or their families, or arrive at a decision based on feelings of friendship or dislike. 3. Conflicts of Interest Any situation in which a person places his or her personal interests at odds with those of the company is considered a conflict of interest. This applies to personal activities or dealings with third parties, be they suppliers, contractors, clients or others, that might affect free and independent decision-making due to differences in the motives of those involved in the relationship. For these reasons, ARGOS employees and directors shall: a. Abstain from participating personally, or through a third party, in pursuit of their own interests or those of a third party, in activities that might imply competition with the company or in acts where there is a conflict of interest, unless expressly authorized to do so by the competent body. b. Exercise care in dealing with any such incidents, describing the situation fully and in detail, documenting the incident and providing supervisors with any and all information that might be relevant to a decision on the matter. The provisions in this paragraph and the following rules shall apply to the disclosure of conflicts of interest or potential conflicts of interest: • The directors shall report any conflict of interest or potential conflict of interest in which they might incur to the Board of Directors, which shall ask the President to proceed to convoke a meeting of the Board as soon as possible. • The President shall report any conflict of interest or potential conflict of interest in which he/she might be incur to the Board of Directors and, for that purpose, shall call a meeting as soon as he becomes aware of the conflict. • The Vice Presidents of the organization shall report any conflict of interest or potential conflict of interest in which they might incur to the President of the company, who shall determine how the conflict is to be handled or, if they consider the matter to be pertinent, shall inform the Board of Directors accordingly. • All other officers or employees of the organization shall report any conflict of interest or potential conflict of interest in which they might incur to the Vice President who is their superior officer, who shall determine how the conflict is to be managed or, if he considers the matter to be pertinent, shall inform the President accordingly. c. Avoid taking part in activities or managing businesses that might be contrary to the interests of the company or might jeopardize the fulfillment of their duties and responsibilities. d. Refrain from taking advantage of their position to obtain benefits for themselves or for third parties with respect to the products or services provided by the company, or to obtain personal benefits from suppliers, contractors or clients. e. Conflicts of interested shall be resolved in strict compliance with the following principles: • When the interests of ARGOS conflict with those of its shareholders, managers or the interests of a third party associated with the company, the interests of ARGOS shall invariably take precedence. • When the interests of shareholders conflict with the interests of the company’s management or those of a third party related to it, the interests of the shareholders shall invariably take precedence. 4. Privileged Information Privileged information is understood as information of a specific nature that has not been made public and, if it had, would have been taken into account by a reasonably diligent or prudent investor to make an investment decision. Employees and Directors of the company shall abstain, at all times, from: a. Conducting any operation for their benefit, or the benefit of a third party, using privileged information. b. Providing a third party with information to which they are not entitled. c. Suggesting an operation based on privileged information known to them by virtue of their position, particularly the purchase or sale of shares or other securities issued by ARGOS, regardless of whether or not they are listed on the public securities market. 5. Confidentiality and Information Management ARGOS employees and directors shall keep in confidence and protect, at all times, the working documents and confidential information entrusted to their care. In this respect, they shall: a. Sign the confidentiality agreements that might be required for specific projects and, in such cases, shall refrain from discussing such projects or related information, even with other employees who are not associated with the project. b. Refrain from discussing matters related to company business with persons outside the organization, including friends and relatives. c. Exercise utmost discretion and not discuss the company’s projects, particularly those involving confidential information, in places or situations were third parties might be present. d. Refrain from copying, distributing or transferring electronically, or by any other means, programs, files, software or manuals owned or licensed by the organization, without prior authorization. e. Refrain from utilizing e-mail access supplied by the organization for purposes other than those for which it is provided, or in violation of the policies or instructions issued with respect to its use. 6. Expressed Prohibitions Employees at levels 0, 1 and 2 within the organization may not trade or negotiate, on their own or through a third party, stocks or securities issued by companies registered on a stock exchange, except those turned over to them in the form of variable compensation. The directors may trade such securities only under the conditions and with the authorization stipulated in applicable legislation. 7. Final Provisions The foregoing are general guidelines for evaluating most of situations an ARGOS employee or director might encounter. However, they do not necessarily cover all the problems that can arise on a day-to-day basis. Eventually, there will be doubts about what conduct or behavior is most appropriate. In such cases, the employee should inform their immediate superior of the situation. In the absence of expressed rules on a particular matter or issue, the action taken shall not result in decisions that jeopardize the interests of the organization. Sound judgment, experience, knowledge and good faith are the elements on which employees and directors should base their actions and determinations. CHAPTER VI: CORPORATE SOCIAL RESPONSIBILITY – INTEREST GROUPS The success of ARGOS will depend on whether relations among shareholders, relations between shareholders and the Board of Directors, the President and other directors, and relations between the company and its employees, suppliers, clients, the authorities and the community, among others, are managed satisfactorily. At ARGOS, each relationship with groups of persons or institutions that are associated with the company is backed by a philosophy and by general guidelines for management and coordination that are designed to provide every guarantee and to protect their rights effectively. The objectives in dealing with interest groups are to: • Acknowledge and guarantee their rights. • Encourage active participation and cooperation aimed at creating value. • Develop performance improvement mechanisms that involve them. • Share information that is relevant to the issues that concern them, in accordance with the law and prevailing regulations. • Seek mutual benefit for the parties and ensure they are addressed with the proper transparency and formality they deserve. 1. General Principals Governing the Actions of ARGOS Employees and Directors with Respect to Interest Groups ARGOS employees and directors shall base all their actions with respect to interest groups on the following principles. a. Customer Relations The commitment to customer satisfaction is to be reflected in respect for the customer’s rights and the search for solutions to serve the customer’s interests. Employees shall explain all operating conditions clearly, so customers are entirely familiar with the company’s products and services, as well as the reciprocal obligations generated by any commercial activity. Every aspect of the company’s relationship with a customer is absolutely confidential. Any disclosure or release of information shall be consistent with the best interests of the customer and the company. Conversation or information on business is to be expressed in clear and specific terms, so as to reduce the possibility of misunderstandings to the extent possible. The company’s affairs and those of its customers are never to be discussed in public. Requests, claims and requirements are to be addressed promptly and precisely, in accordance with the law and all respective agreements. b. Relations with Authorities The company’s relations with the government and with government agencies and all public officials shall be managed within the scope of the law and in accordance with strict ethical standards, pursuant to the principles set forth in the Code of Ethics. Direct or indirect intervention in relations that do not adhere to the law is to be avoided, regardless of whether such relations are with public institutions or organizations, in another entity or among private parties. c. Relations on the Job Relations on the job shall be courteous and respectful. Employees shall endeavor to ensure that a spirit of collaboration, teamwork and loyalty predominates, along with each and every corporate value, complying strictly with the standards and provisions set forth in the Company Work Rules. Employees also are obliged to respect their co-workers and their families, and are not allowed to promote religious groups or political involvement while on the job. d. Relations with Suppliers In every instance, the selection and contracting of suppliers shall be based on technical, professional and ethical criteria, as well as the needs of the company. Specific processes are to be followed, such as knowledge and evaluation of the supplier and price quotes, among others, to ensure the best cost/benefit ratio. An effort shall be made to establish mutually beneficial relations with suppliers, based on quality, effectiveness, respect, a constant search for the common good, and the best terms and conditions for both parties. e. Community Relations ARGOS contributes to the community at large, through business practices founded on ethical principles and strict adherence to the law. As part of that philosophy, the country’s economic, social and cultural progress is one of the company’s objectives. In this sense, support for civic campaigns with broad coverage that foster and promote a better quality of life within the community is analyzed and defined year after year. The results of those campaigns reflect our institutional commitment. The company also is committed to participating in professional, sectoral and regional affairs, to ensuring a better quality of life in the communities where it does business, to protecting the environment, and to being involved in works and activities of common benefit. 2. Environmental Policy. Statement of Principles ARGOS bases its mission on working in harmony with the environment and the community. Being conscious of this principal and the global challenge of protecting our habitat through rational resource use and development, ARGOS shall incorporate the following environmental commitments into its standards for doing business: a. Be responsible with the environment, through clean and efficient production. b. Prevent and mitigate the environmental impact of mining, manufacturing, marketing and distribution processes, taking into account: • Gas and particle emission control. • Efficient water consumption, proper waste water management, and the tendency to eliminate discharges • Optimization in the use of electrical and thermal energy • Adequate waste collection, classification, temporary storage, treatment and disposal • Readaptation of areas disturbed by mining activity • Mining and manufacturing processes operated under safe conditions • Efforts to undertake reforestation programs c. Observe the principles and requirements set forth in environmental rules and regulations, taking international standards into account. d. Constantly improve the performance, efficiency and effectiveness of the environmental management system and process eco-efficiency. e. Encourage awareness among employees and their families, contractors and the communities where the company operates, by • Promoting creative talent for identifying and defining improvement options. • Consolidating community relations by developing the social components of environmental management plans. • Developing strategies for communication and education that encourage respect for and defense of the environment. • Conducting commercial relations with suppliers of goods and services, based on observance of the environmental requirements in the contracts.
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