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Latest Updates 1 May 2006
17 January 2006 29 April 2005 1 October 2004 15 September 2004 11 August 2004 18 May 2004 1 December 2003 19 August 2003 15 August 2003 23 May 2003 22 May 2003 From the Corporate Governance section of Keppel Corporation's Annual Report 2007: Introduction | Board's conduct
of affairs | Board composition and guidance The board and management of Keppel Corporation Limited (“KCL” or the “Company”) firmly believe that a genuine commitment to good corporate governance is essential to the sustainability of the Company’s businesses and performance, and are pleased to confirm that the Company has adhered to the principles and guidelines of the Code of Corporate Governance 20051 (the “2005 Code”), save for Guideline 3.1 (Chairman and CEO should be separate persons) the reason for which deviation is explained in this report. The following describes the Company’s corporate governance practices with specific reference to the 2005 Code. Note:
Board’s
conduct of affairs The principal functions of the board are to:
All KCL directors are expected to exercise independent judgment in the best interests of the Company. This is one of the performance criteria for the peer and self assessment on the effectiveness of the individual directors. Based on the results of the peer and self assessment carried out by the KCL directors, all KCL directors have discharged this duty consistently well. To assist the board in the discharge of its oversight function, various board committees, namely the Executive Committee, Audit Committee, Board Risk Committee, Nominating Committee, and Remuneration Committee, have been constituted with clear written terms of reference. All the Committees are actively engaged and play an important role in ensuring good corporate governance in the Company and within the Group. In addition, a Board Safety Committee was formed in January 2006. The terms of reference of the respective board committees are disclosed in the Appendix to this report. The board meets six times a year and as warranted by particular circumstances. Telephonic attendance and conference via audio-visual communication at board meetings are allowed under the Company’s Articles of Association. The number of board and board committee meetings held in FY 2007, as well as the attendance of each board member at these meetings, are disclosed in Table 1. The Company has adopted internal guidelines setting forth matters that require board approval. Under these guidelines, new investments or increase in investments and divestments exceeding $100 million by any Group company, and all commitments to term loans and lines of credit from banks and financial institutions by the Company, require the approval of the Board. Further, any investment of $100 million and below but which does not have strategic fit with any of the Company’s core businesses, is not EVA positive, or does not generate Return on Equity of at least 12% on a standalone basis, would require specific board approval. Each board member has equal responsibility to oversee the business and affairs of the Company. Management on the other hand is responsible for the day-to-day operation and administration of the Company in accordance with the policies and strategy set by the board.
A formal letter is sent to newly-appointed directors upon their appointment explaining their duties and obligations as director. All newly-appointed directors undergo a comprehensive orientation programme which includes management presentations on the Group’s businesses and strategic plans and objectives, and site visits. The directors are provided with continuing education in areas such as directors’ duties and responsibilities, corporate governance, changes in financial reporting standards, insider trading, changes in the Companies Act and industry-related matters, so as to update and refresh them on matters that affect or may enhance their performance as board or board committee members.
Board composition
and guidance To carry out its oversight function well, the board must be an effective board which can lead and control the business of the Group. The KCL directors believe that, in view of the many complex businesses that the Company is involved in, the KCL board should comprise executive directors, who have intimate knowledge of the business, and independent directors, who can take a broader view of the Group’s activities and bring independent judgment to bear on issues for the board’s consideration. The Nominating Committee determines on an annual basis whether or not a director is independent, bearing in mind the 2005 Code’s definition of an “independent director” and guidance as to relationships the existence of which would deem a director not to be independent. The Nominating Committee also deems a director who is directly associated with a substantial shareholder as non-independent, although such a relationship has not been expressly adopted in the 2005 Code as one that would deem a director not to be independent. Mr Tow Heng Tan, who is Chief Investment Officer, Temasek Holdings, is therefore deemed non-independent by the Nominating Committee. The Nominating Committee is of the view that, taking into account the nature and scope of the Company’s businesses, the board should consist of 9 to 11 members. The board currently has majority independent directors with a total of 10 directors of whom 6 are independent. The nature of the directors’ appointments on the board and details of their membership on board committees are set out in the Appendix hereto. The Nominating Committee is satisfied that the board comprises directors who as a group provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge, required for the board to be effective. The KCL board and management fully appreciate that fundamental to good corporate governance is an effective and robust board whose members engage in open and constructive debate and challenge management on its assumptions and proposals, and that for this to happen, the board, in particular, the non-executive directors, must be kept well informed of the Company’s businesses and affairs and be knowledgeable about the industry in which the businesses operate. The Company has therefore adopted initiatives to put in place processes to ensure that the non-executive directors are well supported by accurate, complete and timely information, have unrestricted access to management, and have sufficient time and resources to discharge their oversight function effectively. These initiatives include regular informal meetings for management to brief the directors on prospective deals and potential developments at an early stage before formal board approval is sought, and the circulation of relevant information on business initiatives, industry developments and analyst and press commentaries on matters in relation to the Company or the industries in which it operates. A two-day off-site board strategy meeting was also organised for in-depth discussions on strategic issues, to give the non-executive directors a better understanding of the Group and its businesses, and to provide an opportunity for the non-executive directors to familiarise themselves with the management team to facilitate the board’s review of the Company’s succession planning and leadership development programme. The Company has also made available on the Company’s premises an office for the non-executive directors’ use at any time to facilitate direct access to management. Further, a Directors’ Portal was established in 2004 as a secured web-based resource centre for the depositing and retrieval of board materials, information on industry developments, and analysts’ and other reports on matters relating to the Group, and to provide an alternative medium for the continuous exchange of information and views among board members via secured Internet access. The KCL non-executive directors meet regularly without the presence of management to discuss matters such as the changes which they would like to see in board processes, corporate governance initiatives, matters which they wish to discuss during the board off-site strategy meeting, succession planning and leadership development, and the remuneration of the Executive Chairman and those of the other two Executive Directors.
Chairman and
Chief Executive Officer Mr Lim Chee Onn is both the Chairman and Chief Executive Officer of the Company. The board confirms that this has not concentrated power in the hands of one individual or compromised accountability and independent decisionmaking for the following reasons:
In the case of KCL which is in three large core businesses, the board is of the firm and unanimous view that it is in the best interests of the Company to continue to have an Executive Chairman so that the board, and in particular the non-executive directors, can have the benefit of a Chairman who is knowledgeable about the businesses of the Company and is thereby better able to guide discussions and ensure that the board is properly briefed in a timely manner on pertinent issues and developments, and at the same time have the benefit of objective and independent views from the independent directors. It is evident from the results of the assessment on the effectiveness of the board, and the assessment on the performance of the Chairman, that the Executive Chairman has enhanced the effectiveness of the individual non-executive directors, and the board as a whole, by providing the board with a thorough understanding of the businesses and ensuring open and robust dialogue between the board and management. It is the KCL board’s belief that it is the person who fills the role that matters, rather than whether the roles are separate or combined per se. The board retains the right to review the current status as facts and circumstances change. The Executive Chairman, with the assistance of the Company Secretary, schedules meetings and prepares meeting agenda to enable the board to perform its duties responsibly having regard to the flow of the Company’s operations. The Executive Chairman sets guidelines on and monitors the fl ow of information from management to the board to ensure that all material information are provided timeously to the board for the board to make good decisions. He also encourages constructive relations between the board and management, and between the Executive Directors and non-executive directors. In this regard, the Executive Chairman has initiated informal meetings on a regular basis for management to brief the directors on prospective deals and potential developments at an early stage before formal board approval is sought. He also ensures that relevant information on business initiatives, industry developments and analyst and press commentaries on matters in relation to the Company or the industries in which it operates are continuously circulated to board members so as to enable them to be updated and thereby enhance the effectiveness of the non-executive directors and the board as a whole. He has also made available on the Company’s premises an office for the non-executive directors’ use at any time to facilitate direct access to management. The Executive Chairman also ensures effective communication with shareholders. The Executive Chairman takes a leading role in the Company’s drive to achieve and maintain a high standard of corporate governance with the full support of the directors, Company Secretary and management.
Board membership Nominating Committee The terms of reference of the Nominating Committee are disclosed in the Appendix hereto. Process for appointment of new directors
Criteria for appointment of new directors
The Nominating Committee is also charged with the responsibility of re-nomination having regard to the director’s contribution and performance (such as attendance, preparedness, participation and candour), with reference to the results of the assessment of the performance of the individual director by his peers for the previous financial year. The directors submit themselves for re-nomination and re-election at regular intervals of at least once every three years. Pursuant to the Company’s Articles of Association, one-third of the directors retire from office at the Company’s annual general meeting, and a newly appointed director must submit himself for re-election at the annual general meeting immediately following his appointment. As a matter of policy, a non-executive director would serve a maximum of two three-year terms of appointment. However, the board recognises the contribution of directors who over time have developed deep insight into the Group’s businesses and operations and who are therefore able to provide invaluable contribution to the board as a whole. In such cases, the board would exercise its discretion to extend the term and retain the services of the director rather than lose the benefit of his contribution. The NC is also charged with determining the “independence” status of the directors annually. Please refer to page 37 on the basis of the NC’s determination as to whether a director should or should not be deemed independent. The NC also determines annually whether a director with multiple board representations is able to and has been adequately carrying out his duties as a director of the Company. The NC took into account the results of the assessment of the effectiveness of the individual director, and the respective directors’ actual conduct on the board, in making this determination, and is satisfied that all the directors have been able to and have adequately carried out their duties as director notwithstanding their multiple board representations. The NC has adopted internal guidelines addressing competing time commitments that are faced when directors serve on multiple boards. As a guide, directors should not serve on more than six principal boards. The following key information regarding directors are set out in the following pages of this Annual Report: Pages 213 to 216 and 219: Academic and professional qualifications, board committees served on (as a member or Chairman), date of first appointment as director, date of last re-election as director, directorships or chairmanships both present and past held over the preceding five years in other listed companies and other major appointments, whether appointment is executive or non-executive, whether considered by the Nominating Committee to be independent; and Pages 147 to 148: Shareholding in the Company and its subsidiaries.
Board performance The board has implemented formal processes for assessing the effectiveness of the board as a whole, the contribution by each individual director to the effectiveness of the board, as well as the effectiveness of the Chairman of the board. To ensure that the assessments are done promptly and fairly, the board has appointed an independent third party (the “Independent Co-ordinator”) to assist in collating and analysing the returns of the board members. Mrs Fang Ai Lian, Chairman, Ernst & Young, was appointed for this role. The evaluation processes and performance criteria are disclosed in the Appendix to this report. In her consolidated report to the board, the Independent Co-ordinator made the following comments in relation to the Company’s board processes: “there continues to be improvement in KCL’s board processes, and feedback had been taken on board and addressed by the relevant parties.” The board assessment exercise provided an opportunity to obtain constructive feedback from each director on whether the board’s procedures and processes allowed him to discharge his duties effectively and the changes which should be made to enhance the effectiveness of the board as a whole. The assessment exercise also helped the directors to focus on their key responsibilities. The individual director assessment exercise allowed for peer review with a view to raising the quality of board members. It also assisted the Nominating Committee in determining whether to re-nominate directors who are due for retirement at the next annual general meeting, and in determining whether directors with multiple board representations are nevertheless able to and have adequately discharged their duties as directors of the Company.
Access to information As a general rule, board papers are required to be sent to directors at least seven days before the board meeting so that the members may better understand the matters prior to the board meeting and discussion may be focused on questions that the directors may have. However, sensitive matters may be tabled at the meeting itself or discussed without any papers being distributed. Managers who can provide additional insight into the matters at hand would be present at the relevant time during the board meeting. The directors are also provided with the names and contact details of the Company’s senior management and the Company Secretary to facilitate direct access to senior management and the Company Secretary. The Company fully recognises that the flow of relevant information on an accurate and timely basis is critical for the board to be effective in the discharge of its duties. Management is therefore expected to provide the board with accurate information in a timely manner concerning the Company’s progress or shortcomings in meeting its strategic business objectives or financial targets and other information relevant to the strategic issues facing the Company. Management also provides the board members with management accounts on a monthly basis. Such reports keep the board informed, on a balanced and understandable basis, of the Group’s performance, financial position and prospects and consist of the consolidated profit and loss accounts, analysis of sales, operating profit, pre-tax and attributable profit by major divisions compared against the budgets, together with explanation given for significant variances for the month and year-to-date. The Company Secretary administers, attends and prepares minutes of board proceedings. She assists the Chairman to ensure that board procedures (including but not limited to assisting the Chairman to ensure the timely and good information fl ow to the board and board committees, and between senior management and the non-executive directors, and facilitating orientation and assisting in the professional development of the directors) are followed and regularly reviewed to ensure effective functioning of the board, and that the Company’s memorandum and articles of association and relevant rules and regulations, including requirements of the Companies Act, Securities & Futures Act and Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”), are complied with. She also assists the Chairman and the board to implement and strengthen corporate governance practices and processes with a view to enhancing long-term shareholder value. She is also the primary channel of communication between the Company and the SGX. The appointment and removal of the Company Secretary are subject to the approval of the board. Subject to the approval of the Chairman, the directors, whether as a group or individually, may seek and obtain independent professional advice to assist them in their duties, at the expense of the Company.
Remuneration
matters Remuneration Committee The Remuneration Committee is responsible for ensuring a formal and transparent procedure for developing policy on executive remuneration and for determining the remuneration packages of individual directors and senior management. The Remuneration Committee assists the board to ensure that remuneration policies and practices are sound in that they are able to attract, retain and motivate without being excessive, and thereby maximise shareholder value. The Remuneration Committee recommends to the board for endorsement a framework of remuneration (which covers all aspects of remuneration including directors’ fees, salaries, allowances, bonuses, options and benefits in kind) and the specific remuneration packages for each director and the Executive Chairman. The Remuneration Committee also reviews the remuneration of senior management and administers the KCL Share Option Scheme. The Committee has access to expert advice in the field of executive compensation outside the Company where required. Note:
Annual remuneration
report The remuneration of the non-executive directors is paid by way of directors’ fees in cash and/or in a fixed number of KCL shares as follows: i. Cash Component: The amount of directors’ fees payable in cash is dependent on the respective nonexecutive directors’ level of responsibility. Each non-executive director is paid a basic fee. In addition, non-executive directors who perform additional services in Board Committees are paid an additional fee for such services. The members of the Audit, Board Risk, and Executive Committees are paid a higher fee than the members of the other Board Committees because of the heavier responsibilities and more frequent meetings required of them. The Chairman of each Board Committee is also paid a higher fee compared with the members of the respective Committees in view of the greater responsibility carried by that office. Executive directors are not paid directors’ fees. The framework for determining the amount of director’s fees payable in cash is set out in Table 2.
ii. Share Component: At an extraordinary general meeting of the Company held in 2007, the shareholders approved the board’s recommendation to amend Article 82 of the Company’s Articles of Association relating to the remuneration of directors to permit the Company to award a fixed number of KCL shares in the capital of the Company, as shall from time to time be determined by an Ordinary Resolution of the Company, to the non-executive directors as part of their remuneration. The Company is therefore able to remunerate its nonexecutive directors in the form of KCL shares by the purchase of KCL shares from the market for delivery to the nonexecutive directors. The incorporation of an equity component in the total remuneration of the non-executive directors is intended to achieve the objective of aligning the interests of the non-executive directors with those of the shareholders and the long-term interests of the Company. The remuneration payable to nonexecutive directors is subject to shareholders’ approval at the Company’s annual general meetings. Remuneration policy in respect of executive directors and other key executives The compensation structure is designed to enable the Company to stay competitive and relevant. The Company benchmarks its annual fixed salary at the market median with the variable compensation being performance-driven. More emphasis is placed on the ‘pay-at-risk’ compensation as an employee moves up the corporate ladder. This allows the Company to better align executive compensation towards shareholders’ value creation. The Executive Directors participate in a long-term incentive scheme in the form of the KCL Share Option Scheme, details of which are set out on pages 148, 149, 167, 168 and 169. Level and mix of remuneration of Directors and Key Executives (who are not also Directors) for the year ended 31 December 2007
Notes:
Remuneration of employees who are immediate family members of a director or the Executive Chairman Details of the KCL Share Option Scheme
Accountability
and audit The board is responsible for providing a balanced and understandable assessment of the Company’s performance, position and prospects, including interim and other price sensitive public reports, and reports to regulators (if required). Management provides all members of the board with management accounts which present a balanced and understandable assessment of the company’s performance, position and prospects on a monthly basis. The board has embraced openness and transparency in the conduct of the Company’s affairs, whilst preserving the commercial interests of the Company. Financial reports and other price sensitive information are disseminated to shareholders through announcements via SGXnet to the SGX, press releases, the Company’s website, and public webcast and media and analyst briefings. The Company’s Summary Financial Report is sent to all shareholders and its Annual Report is available on request and accessible on the Company’s website. Management provides all board members with management accounts on a monthly basis. Such reports keep the board members informed of the Group’s performance, position and prospects and consist of the consolidated profit and loss accounts, analysis of sales, operating profit, pre-tax and attributable profit by major divisions compared against the respective budgets, together with explanations for significant variances for the month and year-to-date. Audit Committee Mr Lim Hock San and Mrs Oon Kum Loon have accounting and related financial management expertise and experience. The board considers Mr Tony Chew as having sufficient financial management knowledge and experience to discharge his responsibilities as a member of the Committee. The Audit Committee’s main role is to assist the board to ensure integrity of financial reporting and that there is in place sound internal control systems. The Committee’s terms of reference are set out on page 52 herein. The Audit Committee has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly. The Company has an internal audit team and together with the external auditors, report independently their findings and recommendations to the Audit Committee. The Audit Committee met with the external auditors 3 times and with the internal auditors 5 times during the year, and once in January 2008 without the presence of management. During the year, the Audit Committee performed independent review of the financial statements of the Company before the announcement of the Company’s quarterly and full-year results. In the process, the Committee reviewed the key areas of management judgment applied for adequate provisioning and disclosure, critical accounting policies and any significant changes made that would have a great impact on the financials. The Audit Committee also reviewed and approved both the Group internal auditor’s and external auditor’s plans to ensure that the plans covered sufficiently in terms of audit scope in reviewing the significant internal controls of the Company. Such significant controls comprise financial, and operational and compliance controls. All audit findings and recommendations put up by the internal and the external auditors were forwarded to the Audit Committee. Significant issues were discussed at these meetings. In addition, the Audit Committee undertook a review of the independence and objectivity of the external auditors through discussions with the external auditors as well as reviewing the nonaudit fees awarded to them, and has confi rmed that the non-audit services performed by the external auditors would not affect their independence. The Committee also reviewed the adequacy of the internal audit function and is satisfi ed that the team is adequately resourced and has appropriate standing within the Company. The Committee has reviewed the “Keppel: Whistle-Blower Protection Policy” (the “Policy”) which provides for the mechanisms by which employees and other persons may, in confi dence, raise concerns about possible improprieties in financial reporting or other matters, and was satisfi ed that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action. Following the launch of the Policy, a set of guidelines which was reviewed by the Audit Committee and approved by the board, was issued to assist the Audit Committee in managing allegations of fraud or other misconduct which may be made pursuant to the Policy, so that:
On a quarterly basis, management reported to the Audit Committee the interested person transactions (“IPTs”) in accordance with the Company’s Shareholders’ Mandate for IPT. The IPTs were reviewed by the internal auditors. All findings were reported during Audit Committee meetings.
Internal controls
and risk management The Company’s approach to risk management and internal control is set out in the “Operating and Financial Review” section on pages 123 to 125 of this Annual Report. The Company’s internal and external auditors conduct an annual review of the effectiveness of the Company’s material internal controls, including financial, operational and compliance controls, and risk management. Any material non-compliance or failures in internal controls and recommendations for improvements are reported to the Audit Committee. The Audit Committee also reviews the effectiveness of the actions taken by management on the recommendations made by the internal and external auditors in this respect. During the year, the Audit Committee reviewed the effectiveness of the Company’s internal control and risk management procedures and was satisfied that the Company’s risk management processes and internal controls are adequate to meet the needs of the Company in its current business environment. Board Risk Committee The Board Risk Committee is made up of 3 independent directors (including the Chairman) and a non-executive director who is independent of management. Mrs Oon Kum Loon was appointed Chairman of the Committee because of her wealth of experience in the area of risk management. Prior to serving as Chief Financial Officer in the Development Bank of Singapore (DBS), she was the Managing Director & Head of Group Risk Management, responsible for the development and implementation of a group-wide integrated risk management framework for the DBS Group. Mr Lim Hock San, who is the Chairman of the Audit Committee, has in-depth knowledge and experience in finance accountancy, business and management and is the second member of the Board Risk Committee. The third member is Mr Tow Heng Tan who has deep management experience from his extensive business career spanning the management consultancy, investment banking and stock-broking industries. Mr Tow is currently the Chief Investment Officer of Temasek Holdings. The fourth member is Mr Yeo Wee Kiong who is a director in Drew & Napier LLC, a leading law corporation in Singapore, practicing in the areas of corporate law, corporate finance, mergers and acquisitions, listings on stock exchange, venture capital, banking and securities. Mr Yeo sits on the boards of several companies (listed and non-listed) and has vast experience in the corporate world and wide knowledge ranging from engineering, finance and law.
Internal audit The role of the internal auditors is to assist the Audit Committee to ensure that the Company maintains a sound system of internal controls by regular monitoring of key controls and procedures and ensuring their effectiveness, undertaking investigations as directed by the Audit Committee, and conducting regular in-depth audits of high risk areas. The Company’s internal audit functions are serviced in-house (“Group Internal Audit”). Staffed by suitably qualified executives, Group Internal Audit has unrestricted direct access to the Audit Committee. The Head of Group Internal Audit’s primary line of reporting is to the Chairman of the Audit Committee, although she reports administratively to the Executive Chairman of the Company. As a corporate member of the Singapore branch of the Institute of Internal Auditors Incorporated, USA (“IIA”), Group Internal Audit is guided by the Standards for the Professional Practice of Internal Auditing set by the IIA. These standards consist of attribute standards, performance standards and implementation standards. During the year, Group Internal Audit adopted a risk-based auditing approach that focuses on material internal controls, including financial, operational and compliance controls. Audits were carried out on all significant business units in the Company, inclusive of limited review performed on dormant and inactive companies. All Group Internal Audit’s reports are submitted to the Audit Committee for deliberation with copies of these reports extended to the Executive Chairman and the relevant senior management officers. In addition, internal audit’s summary of findings and recommendations are discussed at the Audit Committee meetings.
Communication
with shareholders In addition to the matters mentioned above in relation to “Access to Information/Accountability”, the Company’s Group Corporate Communications Department (with assistance from the Group Control & Accounts and Group Legal Departments, when required) regularly communicates with shareholders and receives and attends to their queries and concerns. Material information are disclosed in a comprehensive, accurate and timely manner via SGXnet and the press. To ensure a level playing field and provide confidence to shareholders, unpublished price sensitive information are not selectively disclosed, and on the rare occasion when such information are inadvertently disclosed, they are immediately released to the public via SGXnet and the press. Shareholders are informed of shareholders’ meetings through notices published in the newspapers and reports or circulars sent to all shareholders. Shareholders are invited at such meetings to put forth any questions they may have on the motions to be debated and decided upon. If any shareholder is unable to attend, he is allowed to appoint up to two proxies to vote on his behalf at the meeting through proxy forms sent in advance. At shareholders’ meetings, each distinct issue is proposed as a separate resolution. The Chairmen of each Board Committee are required to be present to address questions at the Annual General Meeting. External auditors are also present at such Meeting to assist the directors to address shareholders’ queries, if necessary. The Company is not implementing absentia voting methods such as voting via mail, e-mail or fax until security, integrity and other pertinent issues are satisfactorily resolved. The Company Secretary prepares minutes of shareholders’ meetings, which incorporates substantial comments or queries from shareholders and responses from the board and management. These minutes are available to shareholders upon their requests.
Securities
transactions
APPENDIX A. Executive Committee
Matters arising at meetings of the Executive Committee shall be decided by a simple majority of votes including the affi rmative vote of at least one member who is an independent director. B. Audit Committee
C. Board Risk Committee
D. Nominating Committee
E. Remuneration Committee
Save that a member of this Committee shall not be involved in the deliberations in respect of any remuneration, compensation, options or any form of benefits to be granted to him. F. Board Safety Committee
NATURE OF CURRENT DIRECTORS’ APPOINTMENTS AND MEMBERSHIP ON BOARD COMMITTEES
PROCESS FOR SELECTING NEW DIRECTORS Each Board member is required to complete a Board Evaluation Questionnaire and send the Questionnaire direct to the Independent Co-ordinator (“IC”) within five working days. An “Explanatory Note’” is attached to the Questionnaire to clarify the background, rationale and objectives of the various performance criteria used in the Board Evaluation Questionnaire with the aim of achieving consistency in the understanding and interpretation of the questions. Based on the returns from each of the directors, the Independent Co-ordinator prepares a consolidated report and briefs the Chairman of the Nominating Committee (“NC”) on the report. Thereafter, the IC presents the report for discussion at a meeting of the non-executive directors (“NEDs”), chaired by the Lead Independent Director. Following the NED meeting, the IC will, together with the Chairman of the NC, brief the Chairman of the Board on the report and the recommendations of the NEDs. The IC will thereafter present the report to the Board together with the recommendations of the NEDs for discussion on the changes which should be made to help the Board discharge its duties more effectively. Individual Directors In the case of the assessment of the individual Executive Director, each NED is required to complete the Executive Director’s assessment form and send the form directly to the IC within five working days. It is emphasised that the purpose of the assessment is to assess each of the Executive Directors on their respective performance on the Board (as opposed to their respective executive performance). The Executive Directors are not required to perform a self, nor a peer, assessment. Based on the returns from each of the NEDs, the IC prepares a consolidated report and briefs the Chairman of the Nominating Committee (“NC”) on the report. Thereafter, the IC presents the report for discussion at a meeting of the nonexecutive directors (“NEDs”), chaired by the Lead Independent Director. Following the NED meeting, the IC will, together with the Chairman of the NC, brief the Chairman of the Board on the report and the recommendations of the NEDs. The IC will thereafter present the report to the Board together with the recommendations of the NEDs. The Chairman of the NC will thereafter meet with the Executive Directors individually to provide the necessary feedback on their respective Board performance with a view to improving their Board performance and shareholder value. As for the assessment of the performance of the NEDs, each director (both NEDs and Executive Directors) is required to complete the NED’s assessment form and send the form directly to the IC within five working days. Each NED is also required to perform a self-assessment in addition to a peer assessment. Based on the returns, the IC prepares a consolidated report and briefs the Chairman of the NC on the report. Thereafter, the IC presents the report for discussion at a meeting of the NEDs, chaired by the Lead Independent Director. Following the NED meeting, the IC will, together with the Chairman of the NC, brief the Chairman of the Board on the report and the recommendations of the NEDs. The IC will thereafter present the report to the Board together with the recommendations of the NEDs. The Chairman of the NC will thereafter meet with the NEDs individually to provide the necessary feedback on their respective board performance with a view to improving their Board performance and shareholder value. Chairman PERFORMANCE CRITERIA The individual director’s performance criteria are categorised into 5 segments; namely, (1) interactive skills (under which factors as to whether the director works well with other directors, and participates actively are taken into account); (2) knowledge (under which factors as to the director’s industry and business knowledge, functional expertise, whether he provides valuable inputs, his ability to analyse, communicate and contribute to the productivity of meetings, and his understanding of finance and accounts are taken into consideration; (3) director’s duties (under which factors as to the director’s board committee work contribution, whether the director takes his role of director seriously and works to further improve his own performance, whether he listens and discusses objectively and exercises independent judgment, and meeting preparation are taken into consideration); (4) availability (under which the director’s attendance at Board and Board committee meetings, whether he is available when needed, and his informal contribution via e-mail, telephone, written notes etc are considered, and (5) overall contribution, bearing in mind that each director was appointed for his/her strength in certain areas which taken together provides the Board with the required mix of skills and competencies. The assessment of the Chairman of the Board is based on his ability to lead, whether he established proper procedures to ensure the effective functioning of the Board, whether he ensured that the time devoted to Board meetings were appropriate (in terms of number of meetings held a year and duration of each Board meeting) for effective discussion and decision-making by the Board, whether he ensured that information provided to the Board was adequate (in terms of adequacy and timeliness) for the Board to make informed and considered decisions, whether he guides discussions effectively so that there is timely resolution of issues, whether he ensured that meetings are conducted in a manner that facilitates open communication and meaningful participation, and whether he ensured that Board committees are formed where appropriate, with clear terms of reference, to assist the Board in the discharge of its duties and responsibilities.
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