Corporate Governance

Board Mandate

1. Purpose

The Board of Directors (the “Board”) of Turquoise Hill Resources Ltd. (the “Corporation”) shall have the oversight responsibility, authority and specific duties as described below.

From time to time, the Board may delegate certain tasks to its committees. However, such delegation does not relieve the Board of its overall responsibilities.

This Mandate will be reviewed periodically by the Board of Directors of the Corporation and modified as required from time to time.

2. Organization of the Board of Directors

  1. Size

    The Board is constituted of a minimum of three (3) and a maximum of fourteen (14) directors, as provided for in the articles of the Corporation

  2. Independence

    The Board is constituted with a majority of individuals who qualify as independent directors and satisfy the independence requirements under applicable securities laws, stock exchanges and any other regulatory requirements.

  3. Director Compensation

    The Board shall establish guidelines for determining the form and amount of director compensation, upon recommendation of the Compensation and Benefits Committee.

  4. Assessment

    The Nominating, Corporate Governance and Sustainability Committee annually supervises the performance assessment of individual directors, the Board as a whole, the Board committees, and the Board and committee chairs.

3. Meetings of the Board of Directors

The quorum at any meeting of the Board is a majority of directors in office. The Board holds regular annual and quarterly meetings. The Board also meets on an ad hoc basis as required, generally by means of telephone conferencing facilities. Meetings of the Board shall be called by the chair of the Board or the corporate secretary upon the request of any director.

The Board chair develops the agenda for each meeting of the full Board in consultation with the CEO. The agenda and the appropriate material are provided to directors of the Corporation on a timely basis prior to any meeting of the Board. Each director shall review all Board meeting materials in advance of each meeting, shall make all reasonable efforts to attend all Board and Board committee meetings, and is expected to take an active part in Board decisions.

The agenda for each regularly scheduled and ad hoc Board meeting will include as standing items at the end of each meeting: i) an in camera session of the full Board separate from management and ii) an in camera session of the independent directors separate from management. Additional meetings of independent directors may be held from time to time in order to discuss any related party transaction or matters which pertain to the controlling shareholder.

4. The Role of the Board of Directors

Specific responsibilities of the Board include, but are not limited to, the following:

  1. With respect to strategic planning

    • Establishing with management significant corporate plans and strategic initiatives.
    • Reviewing and approving, on at least an annual basis, the Corporation’s strategic plans, which take into account, among other things, the opportunities and risks of the business, and adopting a strategic planning process and monitoring the Corporation’s performance. 
    • Taking all reasonable measures to ensure that policies and processes are in place for identifying principal business risks and opportunities for the Corporation, addressing the extent to which such risks are acceptable to the Corporation, and ensuring that appropriate systems are in place to manage risks.
  2. With respect to financial matters and internal control

    • Reviewing and approving the annual and quarterly capital and operating plans and budgets.
    • Reviewing and approving significant deviations from the capital and operating plans and budgets.
    • Overseeing the integrity and quality of the Corporation’s financial statements and approval of their disclosure.
    • Reviewing the general content of, and the Audit Committee’s report on the financial aspects of, the Corporation’s Management Discussion & Analysis, information circulars, annual information forms, annual reports, offering memorandums and prospectuses, and other documents required to be disclosed or filed by the Corporation and approving same for public disclosure and filing with regulatory authorities.
    • Approving material investments, dispositions and joint ventures, and approving any other major initiatives outside the scope of approved operating plans and budgets.
    • Approving the issuance of any securities of the Corporation.
    • Approving the incurrence of any debt by the Corporation outside the ordinary course of business.
    • Determining dividend policies and procedures, if applicable.
    • Taking all reasonable measures to ensure that policies and processes are in place to ensure the integrity of the Corporation’s internal control, financial reporting and management information systems.
    • Instructing the Corporation’s representatives on the Oyu Tolgoi Operating Committee and the Oyu Tolgoi Technical Committee on their votes on non-administrative matters to be decided during those committee meetings.
    • Reviewing periodically the Corporation’s communications policy and monitoring the Corporation’s communications with analysts, investors and the public.
  3. With respect to human resources and performance assessment

    • Reviewing and approving the Corporation’s incentive compensation plans and policies based on the recommendations of the Compensation and Benefits Committee.
    • Appointing the CEO and approving the terms and conditions applicable to the appointment termination or retirement of the CEO. 
    • Monitoring, assessing and approving the performance and compensation of the CEO as well as the succession plans for the CEO on the recommendations of the Compensation and Benefits Committee.
    • Monitoring and approving the performance and compensation of senior management as well as their succession plans on the recommendations of the CEO and Compensation and Benefits Committee.
  4. With respect to director nominations and corporate governance matters

    • Nominating the candidates for the Board to the shareholders and filling vacancies as required, based on recommendations from the Nominating, Corporate Governance and Sustainability Committee.
    • Taking all reasonable measures to satisfy itself as to the integrity of management and that management creates a culture of integrity throughout the Corporation.
    • Reviewing, on a regular basis, appropriate corporate governance processes and procedures, including the identification of decisions requiring approval of the Board and, where appropriate, measures for receiving stakeholder feedback, and the adequate public disclosure thereof.
    • On the recommendation of the Nominating, Corporate Governance and Sustainability Committee, determining the composition, structure, processes, and characteristics of the Board and the terms of reference of committees of the Board, and establishing a process for monitoring and evaluating the performance of the Board, its committees and its directors on an ongoing basis.
    • Enhancing succession planning at the Board level by requiring directors to offer their resignation to the chair of the Nominating, Corporate Governance and Sustainability Committee upon reaching twelve (12) years of service on the Board, for consideration by the Board in its absolute discretion. In exercising this discretion, the Board takes into consideration the skills, background and diversification requirements of the Corporation’s future strategic initiatives.
    • Taking reasonable steps to ensure the ability of each candidate to make the commitment of time necessary to be a director of the Corporation, including the application of the following guidelines when considering candidates to become directors of the Corporation or continued membership on the Board: (a) for candidates that are chief executive officers or other senior executives of public corporations, individuals should hold no more than two (2) public corporation directorships (including the Corporation’s Board), and (b) for other candidates, individuals should hold not more than five (5) public corporation directorships (including the Corporation’s Board).
    • Reviewing and approving, at its discretion, any outside directorships proposed to be held by any executive officer of the Corporation.
    • Appointing Board committees and delegating to any such committee powers of the Board as appropriate and legally permissible.
    • Ensuring an appropriate orientation and education program for directors is provided.
    • Monitoring the ethical conduct of the Corporation and ensuring that it complies with applicable legal and regulatory requirements as well as adopting and reviewing, on a regular basis, the Corporation’s Code of Business Conduct, applicable to the Corporation’s directors, its CEO, its financial officers and its other officers and employees and monitoring compliance with such code.
    • Reviewing this Mandate and other Board policies and charters for Board committees in place from time to time and proposing modifications as applicable based on the recommendation of the Nominating, Corporate Governance and Sustainability Committee.
    • Taking all reasonable measures to ensure that appropriate policies and processes are in place to ensure the Corporation’s compliance with applicable laws and regulations, including timely disclosure of relevant corporate information and regulatory reporting.
    • Ensuring that the directors have direct access to management and, as necessary and appropriate, independent advisors.
    • Ensuring evaluations of the Board, Board committees and Directors are carried out at least annually.
    • Approving the Corporation’s Management Information Circular and Annual Information Form based on the recommendations of the Nominating, Corporate Governance and Sustainability Committee, the Audit Committee and the Compensation and Benefits Committee.
  5. With respect to health, environment, safety and communities

    • Overseeing the adoption and review of health, safety, environmental and communities’ policies and procedures adopted for the Corporation and for its subsidiaries.
    • Taking all reasonable measures to oversee the implementation of safety and security throughout the operations of the Corporation based on the recommendation of the Health, Safety, Environment, Communities and Operations Committee.
    • Taking all reasonable measures to ensure that appropriate management reporting and control systems are in place to monitor the status of compliance with the Corporation’s health, safety, environmental and communities policies, as well as applicable laws and regulations in the areas of health, safety, environment and communities based on the recommendation of the Health, Safety, Environment, Communities and Operations Committee.
    • Assessing the adequacy of the Corporation’s remedial actions following the identification of areas of concern with respect to health, safety, environmental and/or communities’ matters.
    • Reviewing the systems and controls in place to ensure appropriate scoping, estimating and accounting for environmental costs.

5. Retention of Independent Advisors

In performing its responsibilities, the Board may, as required and subject to advising the chair of the Board, engage an outside advisor for advice and assistance at the expense of the Corporation.

6. Additional

Note that the Corporation is subject to the requirements set forth in the following agreements which may affect the above: 

  • The Private Placement Agreement dated October 18, 2006 among the Corporation and Rio Tinto International Holdings Limited;
  • The Heads of Agreement dated December 8, 2010 among the Corporation and Rio Tinto International Holdings Limited; 
  • The Memorandum of Agreement dated April 17, 2012 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated May 22, 2012;
  • The Memorandum of Agreement dated August 23, 2013 among the Corporation, Rio Tinto International Holdings Limited and Rio Tinto South East Asia Limited, as amended pursuant to an Amending Agreement dated November 14, 2013; and
  • The Financing Support Agreement dated December 15, 2015 among the Corporation and Rio Tinto plc.

Nothing contained in this mandate is intended to expand applicable standards of conduct under statutory, regulatory or exchange requirements for the directors of the Corporation or the members of the Board committees.

Policy Regarding Diversity

ARTICLE 1
DEFINITIONS

“Board” means the Company’s board of directors.

“Company” means Turquoise Hill Resources Ltd.

“Designated Groups” means women, Aboriginal peoples, persons with disabilities, and members of visible minorities.

“Named Executive Officer” means each individual in respect of which the statement of executive compensation is provided in the   Company’s Management Information Circular, in accordance with applicable securities regulations in Canada.

“Policy” means this policy regarding diversity on the Board and in Named Executive Officer positions.

ARTICLE 2
PURPOSE

This Policy sets forth the Company’s approach to achieving and maintaining diversity on its Board and in Named Executive Officer positions, with a specific emphasis on gender diversity.

ARTICLE 3
POLICY STATEMENT

  1. 3.1 The Company is of the view that Board members and Named Executive Officer appointment decisions should be based on merit and remains committed to selecting the best person to fulfill these roles. At the same time, the Company recognizes that diversity is important to ensure that the profiles of Board members and Named Executive Officers provide the necessary range of perspectives, experience and expertise required to achieve effective stewardship and management.
  2. 3.2 In an increasingly complex global marketplace, the ability to draw on a wide range of viewpoints, backgrounds, skills, and experience is critical to the Company’s success. By bringing together men and women from diverse backgrounds and giving each person the opportunity to contribute their skills, experience and perspectives in an inclusive workplace, the Company believes that it is better able to develop solutions to challenges and deliver sustainable value for the Company and its stakeholders. The Company considers diversity to be an important attribute of a well-functioning Board and an efficient team of Named Executive Officers, and will assist the Company to achieve its goal of becoming a leading mining company in its sector.
  3. 3.3 Gender diversity is an important component of the Company’s diversity strategy. The Board is committed to ensuring that gender diversity is actively pursued and seeks to ensure that at least one woman is represented on the Board at all times, giving due consideration to all other factors set forth in this Policy.
  4. 3.4 For the purposes of Board composition and composition of the Executive team, diversity includes, but is not limited to, characteristics such as gender, age, disability, as well as the inclusion of Aboriginal peoples and members of visible minorities. In particular, the Company recognizes that gender diversity is a significant aspect of diversity and acknowledges the important role that women play in contributing to the diversity of perspective on the Board and in Executive Officer positions. The Company will seek to achieve a target of not less than 30% of women on the Board by 2024, in line with the Company’s tenure limit and as vacancies may occur from time to time. The Company also commits to appoint at least one (1) Director who also represents a Designated Group other than women as the Company looks to fulfill its other target. Additionally, the Company will strive to maintain a representation of not less than 30% of women in Named Executive Officer positions and commits to consider the appointment of members of Designated Groups within Named Executive Officer positions. 
  5. 3.5 The Company is also committed to inclusiveness within all its positions.

ARTICLE 4
BOARD APPOINTMENTS

  1. 4.1 The Board’s Nominating and Corporate Governance Committee is responsible for recommending qualified persons for Board nominations that possess the competencies, skills, business and financial experience, leadership and level of commitment required of a director to fulfill Board responsibilities. Diversity of directors is considered in assessing the skills matrix of the Board. The Nominating and Corporate Governance Committee recognizes that the evolution of the mix of skills and diversity is a long-term process and weighs the various factors relevant to board balance and diversity when vacancies arise. With respect to Board nominees appointed by Rio Tinto, the Company’s majority shareholder, the Nominating and Corporate Governance Committee coordinates with Rio Tinto to review the qualifications of its nominees prior to a final selection being made.
  2. 4.2 In the process of searching for qualified persons to serve on the Board, the Nominating and Corporate Governance Committee strives for the inclusion of diverse groups, knowledge, and viewpoints. To accomplish this, the Nominating and Corporate Governance Committee may retain an executive search firm to help meet the Board’s diversity objectives.
  3. 4.3 In connection with its efforts to create and maintain a diverse Board, the Nominating and Corporate Governance Committee:
    1. develops recruitment protocols that seek to include diverse candidates in any director search. These protocols take into account that qualified candidates may be found in a broad array of organizations, including academic institutions, privately held businesses, non-profit organizations and trade associations, in addition to the traditional candidate pool of corporate directors and officers;
    2. strives to use, to their fullest potential, the current network of organizations and trade groups that may help identify diverse candidates;
    3. periodically reviews Board recruitment and selection protocols to ensure that diversity remains a component of any director search; and
    4. in order to support the specific objective of gender diversity, considers the level of representation of women on the Board and will seek to include women in the short list of candidates being considered for a Board position.

ARTICLE 5
MECHANISMS OF BOARD RENEWAL

Director term limits have been adopted to ensure Board renewal, as described in the Company’s Board Mandate, as amended, and disclosed in the Company’s Management Information Circular.

ARTICLE 6
EXECUTIVE OFFICER APPOINTMENTS

In fulfilling its role, the person or committee of the Board in charge of the nomination of Named Executive Officers:

  1. considers candidates that are highly qualified based on their experience, education, expertise, personal qualities, and general and sector-specific knowledge;
  2. reviews potential candidates from a variety of backgrounds and perspectives, with the Company’s diversity objectives in mind including, without limiting the generality of the foregoing, the specific objective of gender diversity; and
  3. considers the level of representation of women in Named Executive Officer positions when making Named Executive Officer appointments and will seek to include women as well as persons within the Designated Groups in the short list of candidates being considered for a Named Executive Officer position.

ARTICLE 7
ANNUAL REVIEW

On an annual basis, the Nominating and Corporate Governance Committee:

  1. assesses the effectiveness of the nomination process at achieving the Company’s diversity objectives outlined in this Policy;
  2. measures the annual and cumulative progress in achieving its gender diversity objectives; and
  3. monitors the implementation of this Policy.

ARTICLE 8
DISCLOSURE OF POLICY

The Company discloses in its Management Information Circular, among other things:

  1. a short summary of the Policy’s objectives and key provisions;
  2. the measures taken to ensure that the Policy has been effectively implemented;
  3. annual and cumulative progress in achieving the Policy’s objectives;
  4. whether, and if so how, the Board or its Nominating and Corporate Governance Committee measures the effectiveness of the Policy;
  5. how the Board or its Nominating and Corporate Governance Committee considers the level of representation of women on the Board in identifying and nominating candidates for election or re-election to the Board;
  6. how the person or committee of the Board in charge of nominations considers the level of representation of women in Named Executive Officer positions when making Named Executive Officer appointments;
  7. a description of the Company’s policy on mandatory retirement age, term limits or other mechanisms of Board renewal;
  8. whether the Company has adopted a target regarding women on the Board and, if not, the reasons why it has not done so;
  9. whether the Company has adopted a target regarding women in Named Executive Officer positions and, if not, the reasons why it has not done so;
  10. the number and proportion (in percentage terms) of directors on the Board who are women; and
  11. the number and proportion (in percentage terms) of Named Executive Officers of the Company, including all major subsidiaries of the Company (as such term is defined in Section 1.1 of National Instrument 58‑101 Disclosure of Corporate Governance Practices), who are women.

This Policy will be published on the Company’s website for public information.

Majority Voting Policy

1. On March 22, 2013, the Board of Directors of the Corporation (the “Board”) adopted a “majority voting” policy, pursuant to which if a nominee for election as a director of the Corporation receives a greater number of votes “withheld” or “abstained” than votes “for”, with respect to the election of directors by shareholders, he or she will be expected to offer to tender his or her resignation to the Board promptly following the meeting of shareholders at which the director is elected.

2. Upon receiving such resignation, the Nominating & Corporate Governance Committee will consider such resignation and make a recommendation to the Board whether or not to accept it, provided however, that the resignation will be accepted absent exceptional circumstances.

3. The Board will make its decision as to whether or not to accept the resignation(s) in question based upon the recommendation of the Nominating and Corporate Governance Committee and announce such decision in a press release to be issued within 90 days following the meeting of shareholders. A copy of such press release shall be provided to the Toronto Stock Exchange. If the Board determines not to accept the resignation(s), the press release shall state the reasons for such decision.

4. The director who offered to tender his or her resignation should not participate in any committee or Board deliberations and decisions pertaining to the resignation offer.

5. A resignation tendered pursuant to this policy shall be effective upon its acceptance by the Board.

6. This policy only applies in circumstances involving an uncontested election of directors. An “uncontested election of directors” means that the number of director nominees is the same as the number of directors to be elected to the Board and that no proxy material is circulated in support of one or more nominees who are not part of the candidates proposed by the Corporation’s management and supported by the Board.

7. Subject to any corporate law restrictions, in the case where the Board accepts the offer of resignation of a director and such director resigns, the Board may leave the resultant vacancy unfilled until the next annual meeting of shareholders. It may also choose to fill the vacancy through the appointment of a new director whom the Board considers to merit the confidence of the shareholders. It may further decide to call a special meeting of shareholders at which there will be presented a new candidate to fill the vacant position.

Committee Charters

Chair of the Board

TURQUOISE HILL RESOURCES LTD.
(the “Company”)
POSITION DESCRIPTION FOR
CHAIR OF THE BOARD

The role of the Chair is critical to the effective functioning of the Board. The Chair sets the tone for the relationship between the Board and Management, plays a significant role in the development of the Company’s strategic direction and acts as a spokesperson for the Company in its relationships with shareholders and other stakeholders.

The Chair of the Board is appointed by the directors.

The roles and responsibilities of the Board Chair include:

  1. Leadership of the Board, ensuring its effectiveness in all aspects of its oversight and monitoring role.
  2. Ensuring good governance practices at the Board level and setting the ethical tone of the Board.
  3. Managing conflicts of interests.
  4. Setting the agenda, in consultation with the CEO of the Company, to ensure all relevant matters to the Company are addressed at Board meetings.
  5. Ensuring the provision of accurate, timely, complete, relevant, honest and clear information to the directors.
  6. Upholding rigorous standards of preparation for Board meetings so that all directors have read the materials in advance to ensure effective discussions and decision making.
  7. Chairing meetings of the Board in accordance with the By-laws of the Company and Canadian corporate law.
  8. Ensuring adequate participation of all Board members in discussions and decision making.
  9. Ensuring effective communication with all shareholders.
  10. Chairing meetings of the shareholders of the Company in accordance with the By-Laws of the Company and Canadian corporate law.
  11. Facilitating Board discussions to ensure core issues facing the Company are addressed in the Company’s best interests.
  12. Promoting constructive and respectful relations among Board members and between the Board and Management.
  13. Monitoring how the Board works together and how individual directors perform.
  14. Identifying and participating in the selection of new Board members along with the Nominating and Corporate Governance Committee.
  15. Overseeing a formal succession plan for the Board, the CEO and certain key Management positions.
  16. Fulfilling any other duties as provided for in the By-Laws of the Company.

Shareholder Engagement Policy

Turquoise Hill’s Board of Directors and management believe that regular and constructive engagement with the Company’s shareholders is important in contributing to good corporate governance and transparency. This policy outlines how the Board communicates with shareholders and how shareholders can communicate with the Board and management of Turquoise Hill.

Article 1
Shareholder Communication

  1. To allow shareholders to provide timely and meaningful feedback, Turquoise Hill has developed practices appropriate for its shareholder base to facilitate constructive dialogue. Examples of such practices include meetings with institutional investors, periodic investor site visits at Oyu Tolgoi, attendance at institutional investor conferences and industry forums and maintenance of the investor relations information provided on the Company’s website. Further, management provides updates regarding Turquoise Hill’s financial results, development progress and operational performance periodically throughout the year as part of its continuous public disclosure, at investor presentations, conference calls/webcasts and by news release.
  2. The Company recognizes that feedback from shareholders assists management in understanding what information and disclosure is most meaningful and helpful to shareholders and the broader investment community.  Accordingly, Turquoise Hill has instituted procedures to ensure that the Board and management consider and respond to shareholder concerns in a transparent and disciplined manner that is consistent with the Company’s governance structure and its policies governing corporate disclosure and confidentiality. All shareholder inquiries and comments relating to Turquoise Hill’s business and operations, financial results, strategic direction and similar matters should be directed to Turquoise Hill’s Investor Relations team at Info@turquoisehill.com.

Article 2
Engagement with the Board of Directors of Turquoise Hill

  1. While Turquoise Hill’s governance structure is founded and limited by contractual agreements between Turquoise Hill and its majority shareholder, Turquoise Hill’s directors are committed to understanding shareholder expectations, perspectives and concerns with a view to advancing in good faith the best interests of the Company. To that end, Turquoise Hill directors, and in particular its independent directors, will continue to engage with shareholders as appropriate.
  2. The Board welcomes shareholder inquiries and comments relating to the following matters:
    1. Corporate governance practices and disclosure;
    2. Board performance;
    3. Executive performance and compensation;
    4. Board and Committee composition and qualifications; and
    5. Turquoise Hill’s relationship with its majority shareholder.
  3. Matters not directly related to the foregoing are most appropriately addressed by management through Turquoise Hill’s Investor Relations team.
  4. The Board has designated the Chairman of the Board, Mr. Peter Gillin, as its agent to receive communications addressed to the Board or any director. Shareholders or other stakeholders may communicate with the Board by writing to the Chairman of the Board, as follows: Peter.Gillin@turquoisehill.com.
  5. The Board will consider each request and determine how to proceed. Any subsequent communication or meeting will be limited to the predetermined topics identified in the communication or meeting’s agenda.

Article 3
Disclosure by the Turquoise Hill Board or Management

Shareholders are advised that directors, officers and employees of Turquoise Hill are prohibited by applicable securities laws and Company policy from disclosing or discussing potentially material non-public information about the Company during the course of any engagement with shareholders. Further, disclosure of certain information about the Company is subject to the Company’s policies and practices with respect to the treatment of confidential information. These constraints may impact the timing and substance of communications or meetings with shareholders.

Article 4
Review

The Nominating & Corporate Governance Committee of the Board will periodically review this policy and recommend any changes to the Board for approval.