Ethics and Governance of Santos Ltd

This report provides an overview of the ethics and governance practices of Santos Ltd, a leading oil and gas producer in Australia. It covers topics such as board orientation, interpretation of company communications, and the summary of corporate governance. The report also highlights the importance of ethics and corporate social responsibility in achieving success.

Running head: MANAGEMENT
Ethics and governance of Santos Ltd
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Executive summary
Management from the Board panel is assistance for Santos Ltd in terms of enhancing the
efficiency in the supply of the oil and natural gas in the Australian market and overseas. This
reports enhances the awareness of the readers about the skills, competencies and capabilities,
which are the main criteria for appointing the Directors. Apart from this, legitimacy in the
approach is one of the other aspects, which the reports looks for setting the ground for
corporate social responsibility. This parameter is the main element for achieving success.
Incapability in aligning the performance with the expectations of the stakeholders and
shareholders adds an interrogative parameter to the organizational culture. However,
conscious approach towards the development of Aboriginal people exempts Santos Ltd from
this aspect.

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Table of contents
Introduction................................................................................................................................3
Summary of corporate governance............................................................................................4
Board orientation........................................................................................................................6
Interpretation of company communications...............................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12
Bibliography.............................................................................................................................13
Appendix 1...............................................................................................................................14
Appendix 2...............................................................................................................................15

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Introduction
Santos Ltd achieves accolades and glory by emerging as the second largest
independent oil and gas producers in the threshold of Australia. The dynamics of the
company expands through the presence of shareholders from overseas countries. The
operations are centrally performed under Electrical energy as a public company. As a matter
of specification, the company deals in the gas and petroleum exploration (Santos.com, 2019).
Along with this, the company deals with the services of producing, treating and marketing of
coal seam gas, liquefied natural gas, crude oil, condensate, naptha and liquefied petroleum
gas. Export of crude oil and gas by pipeline is accounted as one of the other functions of the
company. According to the annual report of 2018, the annual revenue was US$3.660 million.
The net income was US$0.727 billion. The major drive behind this is the hard efforts of 2190
employees.
Santos takes pride in being one of the reputed gas producers, supplying sales gas in
the markets of mainland states and territories in Australia. The supply chain also expands to
Sydney for the supply of ethane gas. Overseas expansion relates to the supply of oil and
liquids. The core business of the company is based on the gas and oil discoveries in the
Copper basin, covering the areas of north-east Australia and south west Queensland
(Santos.com, 2019). Primary venture partner and operator of natural gas processing facilities
is assistance in terms of influencing the purchasing power of the clients and the customers.
Mention can be made of on and off-shore oil and gas exploration throughout
Kyrgyzstan, IndonesiaAustralia, Papua New Guinea, Bangladesh, India, Egypt and Vietnam
and. In the financial year of 2008, the sales production valued up to 54.4 million barrels of oil
and equivalent. The era of 2014witnesses the highest oil production in six years. In the first
financial year, the sales revenue was $1.8 billion, which was a hike of 20% as per the
earnings of the previous year. Sales volume encountered as increase of 5% to 28.9 million

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oilbarrels, which assisted in making productive investment in coal seam gas project in
Indonesia (Santos.com, 2019). However, the first half of 2014 encountered collapsed the
profit by 24% at $206 million. Indulging Adelaide based consultancy Bespoke Approach,
Australian State government standardizes the business operations.
In the era of 2001, a pump explosion case was noticed in the liquid pumping station,
compelling the process operator, Collin Jeremy Sutton to encounter tragic death. Another
worker also faced injuries and burns in neck and hand. South Australian State Industrial
Relations Court, the company was pleaded guilty in terms of failing to execute the
responsibilities of an employer regarding ensuring safety from the risks. Special monitoring
techniques are used for measuring the consumption of water resources. Annual Sustainability
Report is prepared for enhancing the awareness about the extraction of the water resources
(Santos.com, 2019). Reference can be cited of the Sponsorships, which expand the scope and
arena of the judicial and commercial operations. Huge investments are made towards the
development of the community groups, events and other institutional occurrences.
This report attempts to shed light on the corporate governance of Santos Ltd, with
special emphasis on board orientation and communication through legitimacy theory.
Summary of corporate governance
The Board and Management are committed towards adhering to the standards and
protocols of the corporate governance. In order to accomplish the vision, the staffs of Santos
Ltd are expected to ensure that they meet the standards of personnel safety, environmental
performance, governance and code of conduct. The Commitees of Board are expected to
perform the duties according to the plans. The committees, established by the Board are:
Audit and Risk Committee, Nomination Committee, People and Remuneration Committee
and Environment, Health, Safety and Sustainability Committee(Santos.com, 2019). All

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these committees are dependent on each other for undertaking fair decisions regarding the
betterment of the company.
The Board of Directors comprises of the Chairman, Managing Director and Chief
Executive Officer. Along with this, Chairman of Base Resource Limited, Non-executive
director of Independence is accounted as an important member of the Board panel. Mention
can be made of the directors and their shareholdings in the company, which indicates
Gallagher and Kevin Thomas with the highest shareholding (refer to appendix 1).
Reports of Chairperson and CEO
In the statements of the CEO, it was found that in 2018, a new program was
introduced for converting more than 200 oil well pumps in the Cooper Basin, which was to
operate in the solar power and batteries. The Director is hopeful that using solar power would
deliver productive results in terms of reducing oil consumption, long distance fuel haulage
and emissions from crude oil. Announcement of appraisal programs in the Cooper Basin is
estimated to cause the development of Australia’s first commercial scale use of the carbon
capture, utilization and storage. Along with this, enhanced oil recovery and contribution
towards reduction in the carbon dioxide emissions would act as an initiative towards
preserving the ecological biodiversity (Santos.com, 2019).
Remuneration report
Remuneration of the directors and CEO is based on the standards and protocols of the
Corporations Act (2001). Remuneration is disclosed in US dollars, which are converted from
A$ to US$ with an average rate of $40.7475. This was according to the events of 2018.
However, in the era of 2017, the remuneration value was $0.7667. Every year, the
remuneration value changes according to exchange rate variations, which is not necessarily a

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change in the pricing policies (Santos.com, 2019). Apart from this, the following are the
supportive elements regarding the remuneration of CEO and the Senior Executives:
 Cash payments on account of Total fixed remuneration (TFR)
 Cash STI awards earned in respect of the performance in 2018
 Deferred STI awards as compared to the investments in the previous years’
performance
 SAR granted as a part of the LTI program, valued on the basis of the closing prices, as
on the date of vesting (refer to Appendix 2).
Board orientation
The board panel members are committed towards maintaining and enhancing the
corporate governance framework, which aims at accomplishing the vision of emerging as
Australia’s leading natural gas producers by 2025. The board members regularly reviewthe
policies and corporate governance practices, which accompanies the standards and protocols
of the Corporation Act (2001). The rules of the listing exchange are an added advantage in
terms of generating best practices. Santos Board Charter is an authentic document, enhancing
the awareness towards the rules and regulations, which the board members are to follow for
reaching to the benchmark level of performance (Santos.com, 2019). Structured orientation of
the board members adds value to the practices.
As a matter of specification, the Board is responsible for monitoring and controlling
the performance. In this, approval of the core values enhances the workplace culture,
upgrading the values of the ethical code of conduct. The Board Committee is comprised of
the Audit and Risk, People and Remuneration, Environment, Health and Safety along with
Nomination. Allocation of the duties to these Committees is one of the essential duties of the
Board panel members. According to the revelations of ASX, (2014), in case of Nomination,
the board controls the appointments and succession. Developing strategic direction through

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the development of the financial objectives is the most crucial responsibility of the board of
Santos Limited. The Secretary is to directly report to the Board. Along with this, the Board
delegates management of the operations and resources, under the guidance of the executive
management team and leadership of CEO (Santos.com, 2019).
The conduct and operations of Santos in the ordinary course is shaped on the basis of
the corporate strategies implemented under the conditions of budgets, which are approved
and align with the written delegations of the authority. Discharge of the responsibilities is
measured in terms of the performance objectives.
According to the Constitution of Santos Ltd, the Board is to have minimum five
Directors, excluding the Managing Director and maximum 10 other directors, seeking
election at the first annual general meeting. The Board Charter undergoes renewal of the
guidelines regarding the tenacity of the non-executive Director. The time frame in this case is
six to nine years. Apart from this, the board panel is to assess the independence of each
Director, according to the ASX principles. The personal interest of the staffs is considered by
the Board and Director in relation to the matters of Corporation Act (Santos.com, 2019)
Effective communication is the key element, which enhances the mutual
understanding between the board members. Approval by the board helps the CEO of Santos
Ltd to strive towards operational excellence through strategic approach. Along with,
monitoring the capital and budget is accounted as important duties of the Board. Signed
approval needs to be produced by the Board for the acquisitions and disposal of the assets
along with the decisions to be undertaken on the basis of the developed budget and
miscellaneous, is one of the vital duties possessed by the Board. Mention can also be made of
the approval for Company’s values, ethical standards and codes of conduct, for which
Board’s approval is a prime necessity.

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The Board also possesses responsibility for selecting, evaluating and succession
planning for the hierarchy, which needs to be followed for enhancing the efficiency. In this,
the CEO and the Directors are to report directly to the Board (Santos.com, 2019). Setting
remuneration and its policies is also accounted as the major responsibilities of the Board
panel of Santos Ltd. Direct reporting is followed for averting the communication gaps, which
can lead to misunderstanding. Risk management is an integral part in the Board orientation of
Santos, which relates to the well being of the stakeholders and shareholders. Taking
feedbacks is an initiative towards enhancing the corporate social responsibility.
For understanding the Board composition, knowledge horizons need to be expanded
towards the diversity prevailing in the corporate governance of Santos Ltd. The variability in
the diversified needs alters according to the needs and requirements of the company.
According to the revision of the Board competencies in 2018, Directors were appointed
according to their capability to lead the company to success. As per the guidelines of the
Board Charter, members experienced in handling upstream activities in oil and gas are
preferred (Santos.com, 2019). For ensuring that the duties are allocated according to the
skills, the Board considers current strategic plan, industry background, which helps in
undertaking the decisions for securing the future.
Board Strategy Day is observed in July, when Board collaborates with the Directors
for assessing the performance and the capabilities through audits and reviews. Sites are
visited for enhancing the Board effectiveness. Mention can be made of visit to Arcadia and
Roma fields in Queensland. Skill Matrix Assessment is used for deciding on the ways to
further improvise on the standards and quality of the operations (refer to Appendix 2). Santos
Limited adheres to Agency Theory for practicing the corporate governance. Complying with
the propositions of the theory, the agents and the principals gain clarity in their roles. Self-
interest attains a backseat in this context in terms of enhancing the organizational

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effectiveness. Differentiation of opinion might lead to conflicts, degrading the unity and
coordination in the workplace. Incompatibility in the interest of the stakeholders disrupts the
inefficiency, leading to severe losses in the form of turnover. Board panel of Santos needs to
be praised for possessing skilled and influential personnel, indicative of productive approach
towards enhancing the organizational effectiveness (Santos.com 2019).
Interpretation of company communications
According to the ethical parameter of stakeholder theory, corporation and the board
panel are the key contributors in catering to the needs, demands and requirements of the
stakeholders. Aligning with this, Santos Ltd practices open and transparent communication
for gaining trust, loyalty and dependence from the clients and the customers. Deegan, (2002)
states that active listening to the queries of the community groups and incorporating them in
the business practices develops positive linkages between the social and economic parameter.
This positivity enhances the stability in the relationship between the business and the society.
Open channels of communications, that is, feedbacks, help the Company to gain a better
understanding about the needs, demands and requirements of the stakeholders. Here,
legitimate approach is reflected from exposing liberal approach to the needs of the clients and
the customers. Typical evidence of this lies in the implementation of Data Protection Act
(1998) while collecting feedbacks.
In all of the projects, Santos Ltd aims at social benefits, which is assistance for
developing the strategies based on the investments made by the communities. Reference can
be cited of local employment, training, involvement of the local suppliers, health and safety
services, infrastructure, sponsoring community events and others. In all these, the aim is on
the development of the Aboriginals, who are involved while planning for ways to mitigate the
potential risks, which can stall the productivity (Santos.com, 2019). Volunteers are hired for
handling the operations directed towards the community development.

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One of the crucial documents in this context is that of Market Communication and
Continuous Disclosure Policy, which is committed towards preserving the right to
information for providing the investors with all the exact information related to the supply of
oil and natural gas. According to this policy, the disclosure of information is done with due
consideration to the compliance with continuous disclosure agreements enlisted under ASX
rules and Corporation Act. Monitoring is done for ensuring that the information disclosed is
according to the facts and balance in the operations. Promptness is the key element for
practicing follow-ups regarding the disclosed information. This helps in averting conflicts,
discriminations and harassments (Santos.com, 2019).
Personal visits to the management team are assistance for communicating on the
effectiveness of the company operations. The main issues of this communication are:
 Financial statements and repositions
 Quarterly active reports
 Annual reports
 Minutes of the annual general meetings
 Announcements under ASX listing rules
The announcements and information exchange is done on the website for disseminating
the information to the clients and the customers at the same time. Registration is mandatory
for receiving notifications regarding the announcements. Webcasts are aired live for the
personnel to view and enhance their awareness about the latest information. Interactive
sessions are conducted where the stakeholders and shareholders can directly post their
questions to Company Investor Relations Department in the Annual General Meetings
(Santos.com, 2019). Along with this, they are also provided with the option of contacting the
company website via Share Registry links.

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Milne and Patten, (2002) opines that feedbacks are an important means for the company
in terms of deciding whether the legitimacy is “what it should be doing in the society”. In
case of Santos Ltd, uploading the information on the websites is the means for legitimizing
the business for adding value to the investments made by the stakeholders and shareholders.
Tricker & Tricker, (2015) are of the view that alignment with the standards of corporate
governance is crucial. However, McCahery, Sautner and Starks,(2016) opines that corporate
attains value when it is based on the mutual interest of the stakeholders, shareholders and
community people.
Conclusion
According to social contract theory, legitimacy is the key element for gaining trust,
loyalty and dependence from the common people. Transparency in the actions enhances the
brand loyalty. These aspects prove true for Santos Ltd, one of the second largest oil
producing companies in the threshold of Australia. Uploading the information on the website
is a means for preserving the right to information in case of the stakeholders and
shareholders. Registration in this case is assistance for the staffs in mapping the scope and
arena to which the business dynamics has to be expanded. Management and control from the
board members authenticates the operations, a strive for achieving operational excellence.

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References
ASX. (2014). Corporate Governance Principles and Recommendations (3rd ed.). Sydney,
NSW: Australian Stock Exchange Corporate Governance Council. Retrieved from
https://www.asx.com.au/regulation/corporate-governance-council.htm
Deegan, C. (2002). Introduction: The legitimising effect of social and environmental
disclosures - a theoretical foundation. Accounting, Auditing & Accountability
Journal, 15(3), 282-311.
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6),
2905-2932.
Milne, M. J., & Patten, D. M. (2002). Securing organizational legitimacy: An experimental
decision case examining the impact of environmental disclosures. Accounting,
Auditing & Accountability, 15(3), 372-405.
Santos.com (2019). About us. Retrieved 3rd June 2019 from https://www.santos.com/
Santos.com (2019). Shareholder Communication & Market Disclosure – Guidelines.
Retrieved 3rd June 2019 from https://www.santos.com/media/3039/shareholder-
communication-and-market-disclosure-overall-guidelines.pdf
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.

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Bibliography
Crowther, D., & Seifi, S. (Eds.). (2018). Redefining Corporate Social Responsibility.
Emerald Group Publishing.
Cuomo, F., Mallin, C., & Zattoni, A. (2016). Corporate governance codes: A review and
research agenda. Corporate governance: an international review, 24(3), 222-241.
Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of contemporary corporate
governance. Cambridge University Press.

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Appendix 1
Fig: Directors of Santos Limited and their shareholdings
(Source: Santos.com, 2019)

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Appendix 2
Fig: Skill, Description and Evaluation of Board, Santos Ltd
(Source: Santos.com, 2019)