An In-Depth Report on Corporate Governance at OSH Oil Search Limited

This report provides a comprehensive analysis of the corporate governance practices of OSH Oil Search Limited, a company involved in the exploration, development, and production of oil and gas in Papua New Guinea. The report examines the composition of the board, including the audit and fin...Read More

EThics and governance

Ethics and Governance 1
Executive summary
The corporate governance in the companies has concerned with holding the equilibrium
between economic and social goals. This framework inspires to the efficient usage of
resources along with necessitating responsibility for the stewardship of the resources. The
purpose of corporate governance in organizations is to bring into line the interests of the
members, organization, and community. It is an internal means through which organizations
are operated and regulated. This report comprises the corporate governance of OSH OIL
Search Limited 10 Toea which is intricate in the exploration, expansion, and production of oil
and gas. OSH is united in Papua New Guinea (PNG).
OSH is dedicated to assuming and executing severe corporate governance practices. This
commitment of the company is assisted by amenably reporting its governance practices to
support investors in making well-informed investment choices. The company follows
corporate governance recommendations on a regular basis. The shareholders of the company
make an informed decision to or not to vote in the favor of director standing. This report
comprises corporate governance of OSH in the terms of the configuration of the board,
reports from chairperson and CEO and remuneration report. The board orientation has been
also deliberated. Further, the interpretation of company communication by utlising legitimacy
theory has been discussed.
In the end, it can be concluded that OSH is having more independent directors who make use
of the agency theory and shareholders assume the directors to act and make verdicts in the
best interests of the shareholders.

Ethics and Governance 2
Contents
Executive summary...............................................................................................................................1
Introduction and summarization of the company...................................................................................3
Corporate governance at the company...................................................................................................4
Composition of the board..................................................................................................................4
Reports from the Chairperson and CEO............................................................................................5
The remuneration report....................................................................................................................5
Board orientation...................................................................................................................................6
Interpretation of company communication using legitimacy theory......................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11

Ethics and Governance 3
Introduction and summarization of the company
OSH, OIL Search Limited 10 Toea is engaged in the investigation, advancement, and
production of oil and gas. OSH is incorporated in Papua New Guinea (PNG). The major
producing operations of the company are Kutubu, Moran, S E Mananda, Gobe, and Hides.
OSH was established in 1929 and at present is one of the largest companies of Papua New
Guinea. The company was accountable for 13% gross domestic product (GDP) of Papua New
Guinea in 2017. OSH is listed on both Port Moresby and Australian Stock Exchanges and is
comprised of S & P/ ASX 50. 17.6% interest of OSH is detained by the government of Papua
New Guinea. OSH also functions in nations like Egypt, Yemen, Libya, and Iraq.
OSH is having ninety years of experience and conducts operations in a socially responsible
manner. The company is having respectful and open associations with the local landowners
and government which leads its accomplishment (Aguilera & Haxhi, 2019). The company is
committed to guiding significant social matters and seek to custom the norm for private
sector influence to sustainable development. OSH is having a transparent strategy for future
growth by employing carefully with the joint venture partners, government, controllers,
property-owners, and correspondents to make sure long-term and mutually positive results
(Richard, 2019). OSH belongs to the petroleum industry. Petrol and gas are considered vital
to several industries and are a must for the maintenance of industrial civilization.
The vision of OSH is to produce maximum quartile returns for shareholders by distinction in
socially accountable oil and gas exploration and production. OSH is able to attain its vision
by chasing important plans such as optimizing the value of prevailing oil search oil and gas
assets by safe, consistent and sustainable operations. The company is practicing strategies of
commercializing extra LNG trains with gas obtained from NW highlands and Gulf hubs and
by making sure optimum commercial incorporation between the projects (Bandara, 2016).
OSH pursues monetization prospects for the prevalent stranded gas fields in PNG. In 2011,
the company formed an oil search foundation to assist deliver sustainable development results
for the people of PNG whereas, in 2016, OSH committed the US $ 56 million to the source.
The company was thoroughly moved by the devasting 2018 highlands earthquake. It even
verified pledge to PNG with the fast on the ground response and the recovery efforts are still
continued (Oil Search, 2020). OSH has also undertaken various activities to assist additional
LNG development in PNG. The joint venture partners of OSH are the sturdiest and efficient
oil and gas operators globally. The incorporation of in-nation proficiency and partner’s

Ethics and Governance 4
technical and project management assistances helps the company in attaining a superior
position to remain advancing LNG trains and advance PNG’s existence in the international
LNG market. OSH has newly attained top quartile oil interests in North Slope, Alaska (US)
which is an established oil province. The portfolio of Alaska comprises stirring exploration
and assessment prospects with the material advantage (Muliyanto & Marciano, 2018).
Corporate governance at the company
Composition of the board
The board is liable to the shareholders for the performance of OSH. The board supervises and
directs business strategy and offers autonomous oversight for the way it executes and
delivers. It is the prime accountability of the board to offer strategic guidance to the company
(Oil Search, 2020). The board is also liable for efficiently monitoring the management team
along with protecting the rights and benefits of the shareholders and other stakeholders. The
composition of the board of OSH includes:
Audit and financial risk committee:
Chair: F E Harris (Independent chair who was not the chair of the board)
Independent directors: Four
Non-independent directors: One
People and nominations committee
Chair: A J Kantsler
Independent directors: Five
Non-independent directors: None
Health, safety and sustainability committee
Chair: E J Doyle
Independent directors: Three

Ethics and Governance 5
Non-independent directors: One
Corporate actions committee
Chair: R J Lee
Independent directors: Three
Non-independent directors: One
Reports from the Chairperson and CEO
2018 was considered a unique year for OSH. In February, the PNG highlands were distressed
by the severe earthquake. It caused in the provisional closing of all the products along with
the loss of many lives in the communities. OSH ensured the safety of the people along with
the safeguard of the environment and veracity of facilities. The company was able to resume
and conduct operations within the month and it was made possible with the efforts of many
people (McCahery, Sautner & Starks, 2016).
Even after the foremost disruption in the operations, OSH generated healthy cash flow. The
activities of the company are sustained to be guided by the vision to create a top quartile
return for the shareholders by the superiority in the communally liable oil and gas
investigation and production. During 2018, the company augmented the number of
independent members on the board committees from 3 PNG citizens to 6. The company will
keep its shareholders informed as the succession process grows. OSH has sustained its
concentration on operational brilliance, wellbeing and sustainability along with increasing its
growth drives in PNG and Alaska (Al-Bassam, et al. 2018).
The remuneration report
OSH has willingly submitted with section 300 A of the Australian Corporations Act 2001 in
order to make sure that it encounters the current finest practice remuneration broadcasting for
ASX listed organizations. The objective of the remuneration policy of OSH are:
 Obey all the pertinent legal and controlling provisions.
 An appeal, retain and empower talent required to generate value for the shareholders.
 Recompense executives and other workers honestly and accountably with esteem to
the performance of oil search, modest atmosphere and discrete performance of each
worker

Ethics and Governance 6
The remuneration of OSH is based on the ‘Reward for Performance’. The remuneration is
distinguished on the basis of several procedures of the corporate, business unit and discrete
performance. On the other side, remuneration for the non-executive directors is formed by
making use of data from the outside independent consultants (Oil Search, 2020). It is updated
on a regular basis and undertakes:
 The global scale of oil search practices.
 Level of fees remunerated to the non-executive directors of other ASX listed
companies of the same size and intricacy to oil exploration.
 Accountabilities of non-executive directors.
 Work necessities of board members.
Board orientation
The board orientation is a procedure to considerately offer specific and accurate information
to the board members. The information is required by the board members to conduct their
role in the company. It is the purpose of board orientation to offer substantial information
concerning the company and about the roles and accountabilities of the board. It serves a link
in constructing a working association among the board members (Kaymak & Bektas, 2017).
The board of OSH plays a significant role in the board’s focus on robust corporate
governance and effective risk management. The board addresses key elements the way it
delivers strategic objectives and the way it engages with the stakeholders along with
protecting the organization, people and reputation. OSH is having five board committees such
as people and nominations, audit and financial risk, health, safety and sustainability,
corporate actions committee and project and technology committee. The charters regulate to
the board committees and are permitted by the board (Idowu, Capaldi & Schmidpeter, 2017).
There are different theories of corporate governance with the concern of board orientation.
These theories address the challenges of governance of the company on a regular basis.
Corporate governance is the procedure of decision making and the procedure through which
verdicts are executed in the organization (Odo, et al. 2016). Several theories define the
association between several stakeholders of the business while conducting activities of the
organization. The theories of corporate governance are:

Ethics and Governance 7
Agency theory: The agency theory states the association amid shareholders and directors of
the organization. As per the agency theory, the principals or shareholders of the organizations
recruit the directors to do work. The shareholder's envoy work of functioning a business to
the directors who are deliberated to be agents of the shareholders. The shareholders anticipate
the directors to perform and make decisions in their best interests. But it is not essential that
directors make decisions only in the finest interest of the shareholders, they can make
surrendered to self-interest and cannot accomplish the anticipations of the shareholders
(Bosse & Phillips, 2016).
Stewardship theory: The steward theory defines that a steward safeguards and make the most
of shareholder’s wealth by the stable performance. Stewards tend to be directors and
managers of the company employing for the shareholders. Stewards safeguard and make a
profit for the shareholders. The accomplishment of organizational success makes stewards
satisfied and inspired. It focuses on the situation of the employees in order to act freely and
the shareholder's returns can also be maximized. The employees in the form of stewardship
also take possession of their jobs and exert conscientiously (Joslin, 2019).
Resource dependency theory: This theory concentrates on the part of the board of directors in
offering accessibility to the resources required by the company. It reflects that the directors
have a significant part to play in offering and safeguarding vital resources of the company by
its associations to the external environment. The organizational functioning, performance,
and survival are enhanced by the provision of the resources. The directors of the company
have a role in bringing resources to the company like skills, information, access to major
constituents like buyers, suppliers, public policymakers, social groups and legitimacy (Lyons,
Bartlett & McDonald, 2016). The directors of the company have been classified into insiders,
support specialists, business experts and community significant.
Stakeholder theory: The stakeholder theory integrates the liability of the management
towards a wide choice of stakeholders. The theory statuses that managers have a system of
associations to serve in the organization. It comprises workers, suppliers and business
associates (Hussain, Rigoni & Orij, 2018). This theory focusses on the administrative
decision making and interest of all the stakeholders which have intrinsic value. No set of
interest is presumed to control others.
Transaction cost theory: This mentions that an organization has various contracts within the
organization itself or with the market by which it generates value. The contracts are having a

Ethics and Governance 8
linked contract with the outside party, such costs are identified as a transaction cost. The
transaction cost of consuming the market is greater, therefore the organization is likely to
undertake this cost by themselves. As per this theory, a company comprises of the people
with diverse views and objects and the structure of the business is liable to determine the
price and production (Salvioni, Franzoni & Gennari, 2018).
Political theory: This theory states the approach of advancing elective assistance from the
shareholders or by acquiring voting power. The political theory highpoints the provision of
corporate power whereas proceeds and rights are resolute through the government’s favor.
The political influence in organizations is likely to direct corporate governance within the
company (Sabine & Thorson, 2018). The public interest is likely to be much restricted as the
government contributes to the corporate decision making to a great extent.
OSH practices agency theory as the shareholders of OSH anticipates the directors (agents) to
act and make a decision in their interest. The directors are hired by the shareholders to
perform work. The shareholders are deliberated to be owners of the company. The agency
theory reduces the concern of two members of managers and shareholders (Chithambo &
Tauringana, 2017). The working of the directors is assessed from time to time so that their
self-interest does not influence their working. They have to always work in the interests of
the principals (shareholders). The directors have to make sure that they optimize the worth of
prevailing oil exploration and gas assets by safe, consistent and sustainable operations. They
are liable to oil maintain oil search as a foremost corporate inhabitant in PNG along with
endorsing a stable working environment. The directors have to optimize wealth and liquidity
management to assist venture and reward shareholders. They are liable to enhance
organizational capabilities to offer the strategic commitments of the organization (Qudrat-I
Elahi & Michael, 2017).
Interpretation of company communication using legitimacy theory
The legitimacy theory is a apparatus assists OSH in executing and advancing intended social
and environmental revelations to accomplish the social contract. It enables identification of
the objectives and existence in the turbulent environment. OSH justifies its existence in PNG
by legitimate economical and social actions which do not endanger the survival of the
society. For instance, an earthquake struck in the PNG highlands on 26 February 2018 which

Ethics and Governance 9
caused the loss of lives and injured within the local societies. The earthquake resulted in the
shutting down of the operations of the company.
OSH concentrated on the separated workstreams such as offering relief to the obstructed
groups, reinstating functioned production and making sure corporate activities as general.
The business activities of the company comprised of new LNG developments. OSH has been
able to offer rapid and on-the-ground support by almost 80% of all initial responder
assistance to the local societies. Even after the sever challenges, OSH brings back production
onstream within the 4 weeks of the earthquake. The PNG LNG project worker and
ExxonMobil made use of the prospect when operations were shut down to commence the
upkeep activities (Van Zijl, Wöstmann, & Maroun, 2017).
OSH with the key joint venture partners constructed three 2.7 MTPA LNG trains at the PNG
LNG site. Papua LNG plan contributors contracted a memorandum of understanding (MOU)
with the PNG government to create the base for Gas agreement. This agreement justifiably
and properly allots assistances and yields from Papua LNG advancement among the
stakeholders. Along with this, OSH is committed to good governance by assuming and
executing severe corporate governance practices across all the activities. This pledge of OSH
is assisted by transparently and openly reporting governance practices. It assists investors to
make well-versed investment decisions (Oil Search, 2020). The company offers security
holders with all material info in the ownership pertinent to the choice to elect or re-elect a
director. OSH has also intended and executed an investor relations program to enable
effective 2-way communication with stockholders. OSH reflects its commitment through the
diversity and inclusion policy comprising the need for fixing and broadcasting on quantifiable
objects for enhancing diversity (Nair, Janenova & Serikbayeva, 2020). The diversity
comprises a depiction of PNG citizens and women in the leadership parts more. The company
has identified that an operative board enables effectual release of the responsibilities which is
levied by law on directors and subsidizes to the conveyance of the business’s strategic
purposes (Hummel & Schlick, 2016).
Conclusion
OSH enthusiastically endorses ethical and responsible decision-making. The code of conduct
of the company is grounded on the company’s values and behaviors. The company meets the
pertinent legal and regulatory requirements. OSH assists social responsibility, health, safety,
environment and security, climate, corruption stoppage, diversity and inclusion, minimum

Ethics and Governance 10
shareholding and more. The social responsibility of OSH is evident from the efforts made
after the occurrence of earthquake in 2018 in PNG highlands. The board of the OSH sets the
company’s expectations for all directors and employees on the key areas. The agency theory
has been implied in the company in which directors are expected to make verdicts in the best
interest of the shareholders.
The committee structure of OSH has also concentration on robust corporate governance and
effective risk management. The committees engage the stakeholders and eventually protect
the organization, people and reputation. OSH is dedicated to assuming and executing severe
corporate governance observes. Such commitment is reported by the governance practices so
that investors can make well-informed investment decisions.

Ethics and Governance 11
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