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Corporate Governance Overview Statement
The Board of Directors (the “Board”) of Oriental Holdings Berhad (“OHB” or the “Company”) is committed to implementing and maintaining high standards of corporate governance practices that are premised on the notions of transparency, accountability and integrity with a view to enhance stakeholders’ value. As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form.
This Corporate Governance Overview Statement is made pursuant to paragraph 15.25(1) of the Main Market Listing Requirements (“Main Market Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”). In producing this Corporate Governance Overview Statement, guidance was drawn from Practice Note 9 of Main Market Listing Requirements and the Corporate Governance Guide (3rd Edition) issued by Bursa Malaysia Securities Berhad.
The Corporate Governance Overview Statement is supplemented with a Corporate Governance Report which provides detailed articulation on the application of each Practice as prescribed in the Malaysian Code on Corporate Governance (“MCCG”). The Corporate Governance Report is available on OHB’s website and via an announcement on Bursa Malaysia Securities Berhad’s website.
The Corporate Governance Overview Statement should also be read in conjunction with the other statements in the Annual Report (e.g. Statement on Risk Management and Internal Control, Audit Committee Report and Sustainability Statement) as the depth or relevance of applying certain corporate governance promulgations may be better explained in the context of the respective statements.
CORPORATE GOVERNANCE APPROACH
The Board of OHB remains focused on ensuring the Company and its subsidiaries (collectively referred to as the “Group”) continue to strive forward with the vigour and tenacity that has consistently produced value to its stockholders as well as the wider cross-section of stakeholders. The Board believes that a robust and dynamic corporate governance framework is essential to provide a solid foundation for effective and responsible decision-making in OHB.
OHB’s overall approach to corporate governance is to:
- - have the appropriate people, processes and structures to direct and manage the business and affairs of the Company;
- - promote the long-term sustainability of the Company by identifying business opportunities whilst equally being cognisant of the associated risks; and
- - drive the application of good corporate governance practices through the alignment of the interests of stakeholders and Board as well as Management.
In its effort to promote meaningful and thoughtful application of good governance practices, the Board regularly reviews the Company’s corporate governance policies and procedures to ensure they reflect the latest curation of thoughts, market dynamics and best practices whilst simultaneously addressing the needs of the Group. This was proved to be particularly imperative during the year as the domestic corporate governance ecosystem was introduced to a series of corporate governance reforms, namely the operationalisation of Companies Act 2016, the release of the latest iteration of MCCG, amendments to the Main Market Listing Requirements as well as the issuance of the Corporate Governance Guide (3rd Edition).
SUMMARY OF CORPORATE GOVERNANCE PRACTICES
OHB has applied all of the Practices encapsulated in the MCCG for the financial year ended 31 December 2017, save for:
- Practice 4.1 (having majority Independent Directors on the Board);
- Practice 5.1 (engaging independent experts to conduct annual Board evaluation);
- Practice 11.2 (the adoption of integrated reporting); and
- Practice 12.3 (the use of technology to facilitate remote shareholders’ participation during general meetings).
In relation to the aforementioned departed Practices, the Company has provided forthcoming and clear explanations for their non-application. The explanations are augmented with an articulation of alternative practices that has been adopted by the Board, taking into account the Intended Outcomes envisioned by the said Practices of MCCG. Further details of the application of each individual Practice are available in the Corporate Governance Report.
A summary of OHB’s corporate governance practices with reference to the three Principles of MCCG is outlined below.
PRINCIPAL A: BOARD LEADERSHIP AND EFFECTIVENESS
I: Board responsibilities
As stewards of the Company, the Board is primarily responsible for directing and providing leadership for the overall strategic direction of the Group. The Board is focused on delivering on the long-term stockholder value whilst equally taking into account the interest of the wider stakeholder groups. By maintaining high standards of transparency, accountability and integrity in its conduct, the Board ensures that it meets its obligation to the Company’s stakeholders.
The Board recognises that there should be a harmonious synergy between corporate pursuits and social obligations. Accordingly, the Board has renewed its commitment in driving corporate social responsibility and sustainable development efforts by embedding environmental, economic and social considerations into the formulation of the Company’s long-term strategy.
The respective positions of the Chairman of the Board and Group Managing Directors of OHB are held by different individuals. Datuk Loh Kian Chong leads the Board as its Chairman whilst Dato’ Robert Wong Lum Kong, DSSA, JP and Dato’ Seri Lim Su Tong manage the day-to-day business activities and affairs of the Group as joint Group Managing Directors.
To assist in its oversight function on specific matters, the Board has established and delegated its authority to several Board Committees, namely, the Executive Committee (“EXCO”), Audit Committee (“AC”), Remuneration Committee (“RC”), Nominating Committee (“NC”) and Risk Management Committee (“RMC”). The Committees are guided by their respective Terms of Reference as approved by the Board and report to the Board on the key matters deliberated during the respective Committee meetings. Notwithstanding that, the Board adheres to the principle “delegate, not abdicate” and thus, has exercised collective oversight on the Board Committees at all times and retains the authority and responsibility to make decisions for the Group.
The EXCO, which comprises the five Executive Directors on the Board, oversees the implementation of Board decisions and policies at Management level. During the year under review, the EXCO has approved the Group annual budget as well as the budget for all divisions. The Performance Coordinating Team (“PCT”) of selected divisions report to the EXCO in relation to the performance and Key Performance Indicators on a quarterly basis. The EXCO reports the findings and make subsequent recommendations to the Board.
The RMC is responsible for reviewing and recommending risk management policies and strategies for the Group. It assists the Board to fulfil its oversight responsibility on risk management to manage the overall risk exposure of the Group.
The AC assists and supports the Board to oversee the Group’s processes for preparation of financial information, its internal control system and independence of the Group’s external and internal auditors.
During the financial year under review, the Board has met regularly to deliberate on matters under their purview. All Directors have devoted adequate time to prepare, attend and actively participate during Board and/or Board Committee meetings. Details of Directors’ meeting attendance are outlined below.
 Datuk Loh Kian Chong was appointed as member of RMC w.e.f. 10 April 2017.
 Sharifah Intan binti S. M. Aidid was on medical leave.
The Board has unrestricted access to the services of two competent and suitably qualified Company Secretaries, who fulfil the requirements set out in Section 235(2) of Companies Act 2016. The Company Secretaries regularly apprise the Board on the latest regulatory developments relating to corporate governance and assist the Board in interpreting and applying pertinent corporate governance promulgations.
Meeting materials are circulated to Directors at least seven (7) calendar days prior to Board or Board Committee meetings in order to accord Directors with sufficient time to review the materials and prepare for the meeting. The minutes of meetings reflect the decisions made by the Board, including the key deliberations, rationale of each decision and any significant concerns or dissenting views voiced out by Directors. The minutes additionally indicate whether any Director abstained from deliberating and voting on specific matters. The draft minutes of meeting are targeted to be circulated within fourteen (14) calendar days of each Board or Board Committee meeting and re-circulated for signing at the subsequent meeting to validate that the minutes has captured the proceedings of the said meeting accurately.
The Board has formalised a Board Charter which serves as a guiding document that governs the conduct of the Board, Board Committees and individual Directors. During the year under review, the Board has conducted a review of the Board Charter, Code of Ethics, Whistleblowing policy and other relevant policies and has updated them accordingly with reference to the MCCG. These documents serve as guiding literatures for the Board, Board Committees and individual Directors in the discharge of their responsibilities to the Company. The summarised version of each document is made available on the Company’s website.
II: Board composition
To support the Company’s vision of achieving sustainable growth and enhancing stockholders’ value, it is especially imperative for the Board to have an appropriate mix of skills, qualifications, attributes and experience. The Board presently comprises five (5) Executive Directors, three (3) Independent Non-Executive Directors and two (2) Non-Independent Non-Executive Directors. The Board, through the NC, periodically reviews its composition to ensure it is aligned to the needs and strategic direction of the Company. The combined skills and expertise of the Directors provide a breadth and depth of perspectives and unique insights that can refine the decision-making process of the Board in pertinent areas.
The presence of the Non-Executive Directors contributes the element of objectivity to the Board's decision-making process as they are able to constructively challenge and probe Management’s proposal for the Group’s strategies. Each of the Executive Director is in charge of different divisions and bring diverse skill sets and experiences to the Board. The Executive Director are accountable to the Board for the achievement of the Group’s goals and objectives as well as observance of Management’s authority limits. The Non-Executive Directors provide the relevant check and balance mechanism within the Group’s governance structure. They additionally serve as conduits between stakeholders and Management by taking into account feedback received from stakeholders during Board discussions. To foster greater objectivity and strengthen the Board’s collective oversight of Management, the Board has designated Dato’ Ghazi bin Ishak as the Senior Independent Director on 22 November 2017. The Board has also appointed Mr. Keiichi Yasuda as the Non-Independent Non-Executive Director on 9 April 2018 in replacement of Mr. Nobuhide Nagata.
The NC, chaired by Ms. Mary Geraldine Phipps who is an Independent Non-Executive Director, comprises wholly Non-Executive Directors, with a majority being Independent. The NC was formed by the Board with specific terms of reference to recommend to the Board the candidature of Directors, oversee assessment of the Board, Board Committees as well as individual Directors, appoint Directors to Board Committees and review the Board’s succession plans as well as training programmes.
The NC is responsible to review and assess the Board and Key Senior Management’s composition and skills mix and make recommendations on the appointment of new Directors and Key Senior Management (where relevant).
As a future priority for the Board, the NC will continue assessing the objectivity of the Board whilst keeping a close watch on any indication of entrenchment.
The NC undertakes the responsibility of sourcing for suitable candidates for directorships and Key Senior Management positions and make subsequent recommendations to the Board on the appointment of new Directors and Key Senior Management personnel, where needed. The NC will leverages on various sources to cast the net on a wider pool of candidates. This includes Directors’ network, referrals from Management and/or stockholders as well as independent sources such as directors’ registry, open advertisements and independent search firms. The Board, through the NC, ensures that the recruitment and selection process for the Directors and Key Senior Management are appropriately structured so as to ensure a diverse range of candidates are considered and that there are no conscious or unconscious biases against certain candidates. With regards to appointments to the Board, the NC is guided by the Board Diversity Policy which sets out the approach to ensure diversity in the boardroom.
In line with the policy pronouncement by the government to have at least 30% women representation on the boards of public listed companies, the Board of OHB has long comprised 30% women Directors since 2009 (i.e. three out of ten Directors are women). In respect of the workforce diversity, the female employees makes up 26% of the total workforce of the Group.
On an annual basis, the Board, Board Committees and individual Directors including Independent Directors are subjected to a comprehensive evaluation process that review their performance and assess their effectiveness during the year. The assessment is administered using questionnaires that incorporate a range of criteria including Board composition, skills and competencies, meeting conduct and administration as well as self and peer evaluation model. Whilst the Board evaluation exercise was carried out in-house, the results were compiled by an independent third party so as to elevate the objectivity and rigour of the assessment process. Additionally, anonymity is maintained when feedback from individual Directors are discussed with the Chairman of the NC and the Board as a whole.
The Board has formalised a policy that restricts the cumulative (consecutive or intermittent) tenure of Independent Directors to nine (9) years. Independent Directors may continue to serve on the Board beyond the 9-year tenure in the capacity of a Non-Independent Non-Executive Director. At the 56th AGM, the Board will seek early annual stockholders’ approval to retain Ms. Mary Geraldine Phipps as an Independent Director after reaching 9 years of tenure.
Based on the annual Board performance assessment carried out, the Board is satisfied with the current Board composition and believes the decisions were made objectively in the best interests of the Company taking into account diverse perspectives and insights. The Board is satisfied with the effectiveness of the Board, Board Committees and individual Directors, based on the mix and composition of the Board members which comprises wide skill set and range of experiences.
During the year under review, the Directors has attended relevant seminars, conferences and other training programmes in order to upskill themselves and keep themselves abreast of the latest market developments relevant to the growth and performance of the Group. All Directors attended the following training during the year except for Dato’ Ghazi bin Ishak:
- Malaysian Code on Corporate Governance
- Update on the Companies Act 2016
Additional training attended by the Directors during the year are as below:
The Board recognises a fair remuneration package is an important component to attract, retain and motivate Directors, both executive and non-executive. In this regard, the Board has formalised a Directors’ Remuneration Policy to guide the RC in determining the remuneration of Directors. For the Executive Directors, the component parts of their remuneration are structured so as to link rewards to the individual and Group’s performance. For Non-Executive Directors, the remuneration packages reflect their experience, time commitment, scope of responsibilities and contribution to the effective functioning of the Board.
During the financial year under review, the RC has reviewed and recommended to the Board the remuneration package for Executive Directors of the Company. The Board as a whole has deliberated on and subsequently decided on the remuneration package for Non-Executive Directors. The Directors concerned abstained from deciding and voting on their individual remuneration. The Board has agreed on the Directors’ fees and allowances to be tabled for stockholders’ approval during the forthcoming Annual General Meeting (“AGM”).
The remuneration of Executive Directors is structured to ensure the rewards are linked to their performance and contributions to the Group’s growth and profitability in order to align the interest of the Directors with those of stockholders. The Committee also considered the extent of responsibilities undertaken by the individual Executive Director and their respective contribution to the effective functioning of the Board in arriving at their level of remuneration.
N1: The Executive Committee members, by virtue of their positions as Executive Directors of the Group, form part of the Key Senior Management of the Group that is primarily responsible for the business operations of OHB’s core businesses and principal subsidiaries.
As for Non-Executive Directors, their level of remuneration reflects the experience, time commitment and scope of responsibilities undertaken by the said Directors as well as the onerous challenges in discharging their fiduciary duties.
All Directors are paid annual director fees of RM90,000 each for serving as members of the Board for FY2017. Effective from FY2018, Executive Director will be paid RM90,000 each and Non-Executive Director will be paid RM120,000 each. All Directors are also paid meeting allowance for each meeting attended. In recognition of the additional time and commitment required, the Directors also received annual allowances arising from their participation on various board committees.
The various allowances for the Directors as approved by the Board is set out as follows:
Details of remuneration of Directors of the Company for the financial year ended 31 December 2017 are provided in the Corporate Governance Report.
The Director’s Remuneration Policy and the Term of Reference of the RC, which address the roles and responsibility as well as matters reserved of the Committee are formalised in Board Charter and is made available on the Company’s website.
PRINCIPAL B: EFFECTIVE AUDIT AND RISK MANAGEMENT
I: Audit Committee
The Board has established an AC to provide a robust and comprehensive oversight on the financial matters as well as the External and Internal Audit processes of the Group. The AC is chaired by Ms Mary Geraldine Phipps, an Independent Non-Executive Director who is distinct from the Chairman of the Board. The composition of the AC allows it to possess the financial literacy that are required to have a sound understanding of the financial matters of the Company.
The AC has unfettered access to both the Internal and External Auditors, who, in turn report directly to the AC. The Board has established a formal and transparent arrangements to maintain an appropriate relationship with the External Auditor. This includes adopting policies and procedures to assess the suitability and independence of the External Auditors on an annual basis and implementing a mandatory two-year cooling off period for former key audit partners before being appointed as a Director or employee of the Company. Additionally, the AC has formalised the policy and procedures on the nature of non-audit services that may be provided by External Auditor.
During the year under review, the Board has received confirmation from its External Auditor that its personnel are and have been independent throughout the conduct of audit engagement in accordance with the terms of relevant professional and regulatory requirements.
Based on the outcome of director performance assessment conducted, the Board is satisfied with the AC's performance as its Chairman and members are able to understand matters under the purview of the AC including the financial reporting process. All members of the AC undertake continuous professional education programmes to keep themselves abreast of relevant developments in accounting and auditing standards, practices and rules.
II: Risk Management and Internal Control Framework
The Board, through the RMC, has established the risk management and internal control framework for the Group and respective divisions which facilitates the identification, evaluation and continuous monitoring of key business risks. The Heads of divisions within the Group undertake the responsibility of managing the identified risks by implementing appropriate mitigating measures and providing periodic reports to the Corporate Office and the RMC. The RMC has received updated Group risk compilation for the financial year ended 2017. Top 5 risks were identified with Management controls and action plan put in place to manage the risks.
The Group has established an in-house Internal Audit function. The AC assesses the performance of Internal Audit function on an annual basis to ensure the Internal Auditors have performed effectively and acted independently in undertaking the Internal Audit process. The Internal Audit Department adheres to a globally recognised framework, namely International Professional Practices Framework (“IPPF”) as promulgated by the Institution of Internal Auditors. All nine (9) Internal Audit personnel, including the Head of Internal Audit, are free from any relationships or conflicts of interest, which could impair their objectivity and independence, as disclosed in the Audit Committee Report.
The Board has also received written assurances from Executive Chairman, Executive Directors and Group Chief Financial Officer on the adequacy and effectiveness of the Group’s risk management and internal control system in all material aspects. The details of the Risk Management and Internal Control Framework are set out in the Statement on Risk Management and Internal Control of this Annual Report.
PRINCIPAL C: INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS
I: Communication with Stakeholders
The Board recognises the importance of fostering a transparent, active and constructive communication with its stakeholders. Towards this end, the Board has formalised a Corporate Disclosure and Communication Policy to govern the dissemination of information to stakeholders. Amongst others, the policy covers the procedures on publications of reports, conduct of events such as analyst and investors’ engagement sessions, procedures on responding to market rumours, confidential information and leakage of private information. Additionally, a summary of the key matters discussed during AGMs are also disclosed on its website.
The Group Chief Financial Officer serves as the primary contact person for inquiries from analysts and investors. In addition to the contact information of the Group Chief Financial Officer, OHB’s investor relations’ email address firstname.lastname@example.org is also provided on the website to increase accessibility of information for stakeholders, including potential investors.
Whilst OHB has yet to adopt Integrated Reporting regime, the Board is of the view that the existing Annual Report provides a holistic view of the Group’s performance as it covers key non-financial information in the form of Management Discussion and Analysis, Audit Committee Report and Statement on Risk Management and Internal Control, to complement the financial information. Additionally, the Company has, as in the previous year, produced a Sustainability Report to augment the Annual Report. The Annual Report and Sustainability Report have both adopted certain elements of an integrated report such as the organisation overview, outlook and external environment, governance policies, performance and the basis of preparation and presentation.
These developments signal a significant step forward and has positioned the Company on a solid footing to adopt Integrated Reporting. Moving forward, the Board would like to allow an advocacy period for the awareness of Integrated Reporting to be better appreciated by Management personnel before it is adopted.
II: Conduct of General Meetings
The AGM forms the principal avenue for a productive two-way dialogue between the Company and its stockholders. The questions and answer (Q&A) session conducted during the AGM allows stockholders to assess the Group by posing questions to the Board and Key Senior Management on the information disclosed in the Annual Report. During the AGM, stockholders are encouraged to participate in the deliberation on the resolutions being tabled as well as on the Group’s operations and business performance in general.
The notice of 55th AGM was circulated at least twenty-eight (28) days prior to the date of the meeting to grant stockholders with adequate time to prepare and ultimately make informed decisions during the AGM. The notice for AGM outlines the resolutions to be tabled during the meeting and is accompanied with explanatory notes and background information where applicable.
All the resolutions set out in the Notice of the 55th AGM were put to vote by poll. The outcome of the AGM was announced to Bursa Malaysia Securities Berhad on the same day.
All Directors attended the 55th AGM on 8 June 2017. The Group Chief Financial Officer shared the responses to questions submitted in advance by the Minority Shareholder Watchdog Group. The Executive Directors and Group Chief Financial Officer were responsible for answering the questions relating to business operations raised by shareholders. The Chairs of respective Board Committees additionally responded to the questions on matters pertinent to their respective Committees.
The notice to the upcoming AGM in 2018 has been provided more than twenty-eight (28) days in advance to enable stockholders to make adequate preparation.
This CG Overview Statement was approved by the Board of Directors of OHB on 9 April 2018.