Corporate Governance


Toronto Stock Exchange Guidelines for Corporate Governance


The Toronto Stock Exchange (TSX) has adopted guidelines to help its listed companies achieve and maintain good corporate governance. Each of the guidelines is listed below, followed by a description of CSI Wireless' related activities.

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Guideline 1 Stewardship of the Company

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The Board of Directors of every corporation should explicitly assume responsibility for the stewardship of the corporation. d of Directors of every corporation should explicitly assume respnsibility for the stewardship of the corporation.

The Board of Directors has adopted a Board Mandate (the "Mandate"), and terms of reference for each of its committees. The Mandate explicitly makes it responsible for the stewardship of CSI Wireless. In discharging this responsibility, Directors exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, and act honestly and in good faith with a view to the best interests of the Corporation. In general terms, the Board:

•  defines, in consultation with the CEO, CSI Wireless' principal objectives;

•  supervises the management of CSI Wireless' business and affairs to achieve the principal objectives;

•  discharges duties imposed on the Board by applicable laws;

•  takes all action that the Board deems necessary to carry out its foregoing responsibilities.

 

As part of its Mandate, CSI Wireless' Board is responsible to perform a variety of specific duties. Many are described below, in relation to other TSX guidelines.

 

Guideline 1 (a) Strategic Planning Process

As part of the overall stewardship responsibility, the Board of Directors of every corporation should assume responsibility for adoption of a strategic planning process.

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The Board's Mandate requires the CEO each year to present to the Board strategic plans, which take into account the risks and opportunities of the business. At least one Board meeting each year is devoted to discussing and considering the plans. Management must seek the Board's approval for any transaction and/or contract that would have a significant impact on the strategic plans, and that would be material to the Corporation.

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Guideline 1 (b) Principal Risks

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As part of the overall stewardship responsibility, the Board of Directors of every corporation should assume responsibility for identification of the principal risks of the corporation's business and ensuring the implementation of appropriate systems to manage these risks.

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The Board has identified the principal risks of the Corporation's business and works with management on an on-going basis to assess and review the management of such risks. The Mandate of the Board provides that the Board will work with management to review the principal risks of the Corporation's business and the steps the Corporation is taking to manage these risks.

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Guideline 1 (c) Succession Planning

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As part of the overall stewardship responsibility, the board of directors of every corporation should assume responsibility for succession planning, including appointing, training and monitoring senior management.

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The CSI Wireless Board is responsible, by its Mandate, for choosing the President and CEO, for appointing senior management, and for monitoring their performance. In addition, the Mandate provides that the Board is charged with a duty to, in consultation with the Chief Executive Officer, appoint all officers of the Corporation and approve the terms of each officer's employment with the Corporation. The Mandate also provides that the Board shall (i) receive from the Chief Executive Officer his evaluation of the performance of each senior officer who reports to the Chief Executive Officer (ii) develop a system under which succession to senior management positions will occur in a timely manner and (iii) to approve any proposed significant change in the management organization structure of the Corporation.

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Guideline 1 (d) Communications Policy

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As part of the overall stewardship responsibility, the board of directors of every corporation should assume responsibility for a communications policy for the corporation.

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The Mandate provides that the Board, in consultation with the Chief Executive Officer, is responsible for establishing and maintaining a communications policy for the Corporation. The Corporation has adopted a formal Disclosure, Confidentiality and Trading Policy that establishes procedures which: (i) permit the disclosure of information about the Corporation to the public in a timely manner; (ii) ensure that non-publicly disclosed information remains confidential; and (iii) ensure that trading of the Corporation's securities by directors, officers and employees remain in compliance with applicable securities laws. The Corporation currently communicates with its shareholders and other stakeholders through various channels that include annual and quarterly reports, news releases, statutory filings, the internet and an investor relations firm. The Board and the Chief Executive Officer have delegated shareholder relations responsibilities to E-Vestor Communications Inc. of Toronto, Ontario to provide investor relations services. Shareholder communications are generally handled by E-Vestor Communications Inc. as well as by the Chief Executive Officer and the Chief Financial Officer of the Corporation.

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Guideline 1 (e) Integrity of Internal Control

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As part of the overall stewardship responsibility, the board of directors of every corporation should assume responsibility for the integrity of the corporation's internal control and management information systems.

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The Audit Committee, by its terms of reference, is responsible to monitor and consider the integrity of CSI Wireless' financial reporting and internal control processes. In order to carry out this responsibility, the Audit Committee consults with management representatives and with the Corporation's external auditor.

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Guideline 2 Board Independence

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The board of directors of every corporation should be constituted with a majority of individuals who qualify as unrelated directors.

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Four of CSI Wireless' seven directors, including the Chairman, are considered by the Corporation to be unrelated. These directors are not a part of CSI Wireless' management and are free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act with a view to the best interest of the Corporation, other than interests and relationships arising from shareholding. These directors do not receive any financial compensation from the Corporation other than fees and share options related to services provided in their capacity as directors. The three related directors are Stephen A. Verhoeff, CSI Wireless' President and CEO; and Michael W. Brower and Hamid Najafi , both of whom do occasional consulting work for CSI Wireless and receive fees accordingly.

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Guideline 3 Individual Unrelated Directors

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The application of the definition of "unrelated" director to the circumstances of each individual director should be the responsibility of the Board which will be required to disclose on an annual basis whether the Board has a majority of unrelated directors.

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The Corporate Governance Committee is responsible to analyze the relationships of each director, through his or her involvement with CSI Wireless and with other enterprises, and to make recommendations to the Board as to whether directors should be classified as "related" or "unrelated".

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Guideline 4 Nominating Committee

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The board of directors of every corporation should appoint a committee of directors composed exclusively of outside (non-management) directors, a majority of whom are unrelated directors, with the responsibility for proposing to the full board new nominees to the board.

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The Board's Corporate Governance Committee, which consists entirely of unrelated outside directors, is responsible to develop and maintain a list of potential candidates for Board membership, and when necessary, to review, interview, and recommend nominees to the full Board. Nominees must possess general business management experience, together with specific experience in areas of strategic interest to CSI Wireless. Nominees must also be willing and able to devote the required time and energy to Board responsibilities, and to support the Corporation's mission and strategic objectives.

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Guideline 5 Assessing the Board's Effectiveness

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Every board of directors should implement a process to be carried out by the nominating committee or other appropriate committee for assessing the effectiveness of the Board as a whole, the committees of the Board, and the contribution of individual directors.

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The Corporate Governance Committee is responsible by its terms of reference to evaluate the effectiveness of the Board, committees and individual directors. The Committee surveys directors using a standardized evaluation form to provide feedback on the effectiveness of the Board. The Committee, with the participation of the Chairman, recommends changes to enhance Board performance based on survey feedback.

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Guideline 6 Orientation and Education of Directors

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Every corporation, as an integral element of the process for appointing new directors, should provide an orientation and education program for new recruits to the board.

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The Corporate Governance Committee is responsible by its terms of reference to develop and maintain orientation and education programs for new directors. As there have been no new directors added to the Board since the creation of the Corporate Governance Committee, these programs have not yet been formalized.

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Guideline 7 Effective Board Size

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Every board of directors should examine its size and, with a view to determining the impact of the number upon effectiveness, undertake where appropriate, a program to reduce the number of directors to a number which facilitates more effective decision-making.

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The Board of Directors has determined that six to nine members is an appropriate number of directors having regard to the size of the Corporation and the nature of its business and operations. At the current time, the Board's size, at seven directors, is viewed as being effective.

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Guideline 8 Compensation of Directors

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The board of directors should review the adequacy and form of the compensation of directors, and ensure the compensation realistically reflects the responsibilities and risk involved in being an effective director.

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The Compensation Committee, which is comprised entirely of unrelated outside directors, is responsible to review directors' compensation, and where appropriate to make recommendations to change directors' compensation. To make its recommendations, the Committee takes into account the nature and amount of compensation paid to directors of comparable publicly traded Canadian companies and the circumstances of the Corporation.

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Guideline 9 Committees and Outside Directors

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Committees of the board of directors should generally be composed of outside (non-management) directors, a majority of whom are unrelated directors.

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The Compensation Committee, the Audit Committee, and the Corporate Governance Committee are all composed entirely of outside, unrelated directors.

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Guideline 10 Approach to Corporate Governance

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Every board of directors should expressly assume responsibility for, or assign to a committee of directors the general responsibility for, developing the corporation's approach to governance issues. This committee would, amongst other things, be responsible for the corporation's response to these governance guidelines.

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The Corporate Governance Committee, by its terms of reference, is responsible for reviewing CSI Wireless' overall governance principles, recommending any changes to them, and recommending to the Board for approval the Corporation's disclosures in response to the TSX governance guidelines. The Committee monitors best practices among major Canadian companies to ensure CSI Wireless continues to carry out high standards of corporate governance.

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Guideline 11 Position Descriptions

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The board of directors, together with the CEO, should develop position descriptions for the board and for the CEO, involving the definition of the limits to management's responsibilities. In addition, the board should approve or develop the corporate objectives the CEO is responsible for meeting.

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Under its Mandate, the Board, in consultation with the CEO, is responsible to develop a position description for the CEO. The Board is also responsible to review and approve the corporate objectives that the CEO is responsible for meeting, and to assess the CEO's performance against these objectives.

The Board is also responsible to establish the limits of management's authority and responsibility in conducting the Corporation's business. In this regard, the Board has identified that management is responsible, among other responsibilities, to:

•  propose and, in response to Board approval, execute CSI Wireless' corporate strategies, long-term plans, goals and targets;

•  carry out a comprehensive budgeting process and monitor the Corporation's financial performance against the budget;

•  be accountable for CSI Wireless' financial and competitive performance;

•  provide timely, complete and accurate information about CSI Wireless' business operations;

•  identify opportunities and risks affecting the Corporation's business, and to respond appropriately to them;

•  ensure the development of senior executives and plan for their succession; and

•  manage CSI Wireless' resources in a manner consistent with enhancing the Corporation's value while maintaining appropriate ethical, legal, environmental, corporate and social standards.

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Guideline 12 Board Independence

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Every board of directors should have in place appropriate structures and procedures to ensure that the board can function independently of management.

The primary structure that ensures that CSI Wireless' Board functions independently of management is that six of CSI Wireless' seven directors, including the Chairman, are outside directors, in that they are not members of CSI Wireless' management.

Other factors in place to help ensure the CSI Wireless Board's autonomy from Management:

•  the Board, its Audit Committee, Compensation Committee, and Corporate Governance Committee are all composed entirely of outside unrelated directors;

•  any director can call a meeting of the Board or of a committee of which he is a member; and

•  all directors and committees have the right to recommend the engagement of professional or other advisors.

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Guideline 13 Audit Committee

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The audit committee of every board of directors should be composed only of outside (non-management) directors. The roles and responsibilities of the audit committee should be specifically defined so as to provide appropriate guidance to audit committee members as to their duties. The audit committee should have direct communication lines with the internal and external auditors to discuss and review specific issues as appropriate. The audit committee's duties should include oversight responsibility for management reporting on internal control.

CSI Wireless' Audit Committee is composed entirely of outside (non-management) and unrelated directors. All of its members are financially literate, meaning they are able to read and understand a balance sheet, an income statement, a cash flow statement and the notes attached thereto. Mr. Hamilton is a Chartered Accountant and Certified Financial Analyst, and Mr. Lang holds a Masters Degree in Business Administration.

The Audit Committee is responsible by its terms of reference to review CSI Wireless' annual and quarterly financial statements, accounting practices, business and financial controls, and the results of all external audits. It is also responsible to recommend to the Board the external auditors to be appointed by shareholders at each annual meeting, review their audit work plan, approve their fees and approve all non-audit services to be provided by their firm. The Audit Committee has direct communication lines with the external auditors. The external auditors attend and participate in all quarterly Audit Committee meetings, at which time they present a review of the financial statements and meet with the Audit Committee separately from management.

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Guideline 14 Outside Advisors

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The board of directors should implement a system that enables an individual director to engage an outside advisor at the expense of the corporation in appropriate circumstances. The engagement of the outside advisor should be subject to the approval of an appropriate committee of the board.

Directors, and each committee, may hire outside advisors at the Corporation's expense, subject to the review of the Corporate Governance Committee. No advisors were hired in 2003.

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