Statement On Corporate Governance
COMPLIANCE WITH THE CODE
The Company’s Board of Directors (Board) is committed in ensuring that the Company practises good corporate governance in line with the principles, requirements, and best practices specified in the Malaysian Code on Corporate Governance 2012 (MCCG 2012). In this regard, the Company conducts its affairs with transparency, integrity and professionalism with checks and balances in place to directly and indirectly benefit the Company and its stakeholders.
THE GROUP GOVERNANCE MODEL
The Group has applied the eight principles of MCCG 2012 along with the Corporate Governance Model throughout the financial year ended 31 December 2015, as set out hereunder.
PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES
CLEAR FUNCTIONS OF THE BOARD AND MANAGEMENT
The Board has full and effective control over the business undertakings of the Company subject to the powers reserved for shareholders under the Company’s Memorandum and Articles of Association, the Listing Requirements and applicable laws. This includes responsibility for determining the Company’s overall strategic direction and the approval of annual and interim results, specific items of investments and divestments, as well as the risk management framework and internal control policies and procedures for the Company. The Group Managing Director is responsible for the day-to- day management of the operations of the Company.
CLEAR ROLES AND RESPONSIBILITIES OF THE BOARD
The Company is led by a Board comprising members with a wide range of business, financial, technical, legal and public service experience. This depth and diversity in expertise and perspectives as reflected in the Directors’ Profile from page 14 to page 19 bring vital ingredients necessary for the Company’s strategic direction and guidance in the management of the various business activities undertaken by the Protasco Group of Companies (the Group). In furtherance of its responsibilities, the Board will:
- Set the Group’s strategy, performance target and long term goals of the business and ensure that resources are available to meet its objective;
- Review the Group’s progress against its strategy, performance target and long term goals;
- Identify principal risks and ensure the implementation of appropriate systems to manage these risks;
- Review the adequacy and integrity of the Group’s internal control systems including compliance with applicable laws, regulations, rules, directives and guidelines;
- Establish such committees, policies and procedures to effectively discharge the Board’s roles and responsibilities;
- Review financial reporting processes and financial position.
CODE OF CONDUCT FOR DIRECTORS
The Company is aware of its responsibility to conduct itself in all aspects of its business to the highest ethical standards. Its Code of Conduct sets out the Company’s key rules and values that acts as guidelines for the Directors to make their decision. The Code of Conduct is available at Director’s Code of Conduct section.
The Company endeavors to operate its business in accordance with environmental, social and economic responsibility. This includes working within the law in order to be innovative and demonstrate initiative to meet the requirements of various stakeholders. The Company strives to achieve a sustainable long-term balance between meeting its business goals and preserving the environment. It recognises that the sustainability of the ecosystem is an integral part of sustaining its business. The strategies to promote sustainability and its implementation is available at Sustainability Policy section.
ACCESS TO INFORMATION AND PROFESSIONAL ADVICE
The Company provides the Board with full assistance and gives it complete access to necessary materials and relevant information. Together with proper counsel from qualified Company Secretaries and others, these have enabled the Board to discharge its functions properly. The Directors are also encouraged to and not prevented from making verifications and endorsements and seeking external guidance.
QUALIFIED AND COMPETENT COMPANY SECRETARY
Both Company Secretaries of the Company are qualified to act as Company Secretary under Section 139A of the Companies Act 1965. The Company Secretaries are responsible in advising the Board on issues relating to corporate compliance with the relevant laws, rules, and regulations affecting the Company and the Group as well as best practices of corporate governance. All Directors have access to the advice and services of the Company Secretaries.
The Board has adopted a Board Charter which sets out the roles, functions, compositions, operation and processes of the Board and which is intended to ensure that all the Board members acting on behalf of the Company are fully aware of their obligation of discharging their duties and responsibilities to the Company. The Board Charter serves as a source of reference and primary induction literature to provide insights to prospective Board members. In addition, it also assists the Board in the assessment of its own performance and that of its individual Directors.
The Board Charter will be periodically reviewed and updated in accordance with the needs of the Company and any new regulations that may have an impact on the discharge of the Board’s responsibilities. The last review by the Board was carried out on 31 March 2016.
PRINCIPLE 2: STRENGTHEN COMPOSITION OF THE BOARD
BOARD COMPOSITION AND BALANCE
At present, there are seven (7) members of the Board comprising two (2) Executive and five (5) Non-Executive Directors. There is a balance in the Board with the presence of four (4) Independent Directors in the seven (7) member board with the necessary skills and experience. Hence, the ratio of Independent Directors to Non-Independent Directors is 4:3. All the Independent Directors have neither business nor other relationships that could significantly interfere with the exercise of their independent judgment.
In discharging its duties, the Board is assisted by Board committees:
Each Committee operates within its respective defined Terms of Reference (TOR) which have been approved by the Board. The Board periodically review and assess their respective TORs to ensure the TORs remain relevant, adequate and concise in governing the functions and responsibilities of the Committees and reflect the latest developments in the Main Market Listing Requirement of Bursa Malaysia and the MCCG 2012.
The Board recognises the benefits of gender diversity in the Boardroom and the workforce at all levels which will promote greater diversity of thought and broader perspectives in approach. Although the Board does not endorse a specific target, it does commit itself to having representatives of women on the Board subject to identification of suitable candidates with appropriate skills.
APPOINTMENTS AND RE-ELECTION OF DIRECTORS
In compliance with the Company’s Articles of Association, at each Annual General Meeting, one-third (1/3) of Directors or if their number is not three (3), the number nearest to one-third (1/3), shall retire from office at least once in three (3) years. The Directors to retire shall be those who have been longest in office since their last re-election or appointment. Section 129 of the Companies Act 1965 requires Directors over the age of seventy (70) years to offer themselves for re-appointment at every Annual General Meeting. The Nomination and Remuneration Committee (NRC) will assess the Directors who are due for re-election at the Annual General Meeting based on the result of the annual performance evaluation and will submit its recommendation to the Board for approval.
The Board undertook performance evaluation annually which comprises Board assessment, self-assessment and assessment on Board committees. The Chairman of the NRC will be presented with the analysis of the overall performance evaluation and deliberated at the NRC meeting. The NRC will access and identify areas which require improvement and recommend to the Board for action.
The performance evaluation for the financial year under review was conducted in February 2016 covers the following areas:
|Board of Directors||Board contribution, composition, leadership, board paper, internal control processes and board / management relationship.|
|Individual Directors||Individual Director’s contributions, strengths and improvement.|
|Board Committees||Board Committees’ structure, meetings, appointment process and communication.|
NOMINATION AND REMUNERATION COMMITTEE (NRC) AND ITS PROCESSES
The Company’s NRC is responsible to recommend identified candidate(s) to the Board if a vacancy on the Board is anticipated or otherwise occurs due to resignation, retirement or any other reasons or if there is a need to appoint additional Director(s) with the required skill or profession in order to close the competency gap in the Board.
NRC shall strive for a structured assessment of individual members as well as of the Chairman of the Board to achieve a better balance in Board in terms of gender, age, background, experience and competency.
NRC considers candidates for directorship identified from various sources such as recommendation from the existing Directors, senior management staff, shareholders or third party referrals.
A Director candidate is evaluated by NRC based on the basic criteria established by the Committee from time to time before NRC recommends the candidate to the Board for its consideration.
NRC takes into consideration many factors in evaluating Director candidates, including the individual’s educational and professional background, employment record, whether the individual has any special experience in a relevant area, possession of the required skill and qualification, personal accomplishments and such other factors it deems appropriate. The Board, based on the recommendation of the NRC, would evaluate and decide on the appointment of the proposed candidates.
To ensure Directors have sufficient time to fulfil their roles and discharge their responsibilities effectively, one criterion for the NRC to determine candidates of potential Directors is that they must not hold directorships at more than five (5) Public Listed Companies (PLCs). During the financial year, NRC had reviewed and assessed the effectiveness of the individual Directors, the Board as a whole and the Board Committees. NRC was satisfied with the performance of the Board and Board Committees.
The remuneration of Directors is determined at a reasonable level for the Company, enabling it to attract and retain Directors with a good mix of relevant experiences and expertise. Details of the Directors’ Remuneration for the financial year ended 31 December 2015 are as follows:
The number of Directors whose total remuneration during the financial year fell within the following bands is analysed below:
The remuneration of the Executive Directors shall be proposed and subject to review by the NRC for Directors’ approval. The NRC shall take into consideration their responsibilities, scope of works, remuneration paid by other companies in a comparable sector and other relevant factors. Executive Directors shall also be entitled to other standard benefits provided to employees of the Company such as company car, medical expenses, insurance coverage and other additional benefits if so proposed by the NRC for the Board’s approval.
The remuneration of Non-Executive Directors shall be proposed by NRC and reviewed by the Board which comprises the following:
|Director Fee||Non-Executive Directors receive fees. The fees are to be determined and recommended by the Board and to be approved by Shareholders.
*The Company has at its Annual General Meeting held on 24 June 2014, obtained a shareholders’ mandate on payment of Directors’ fees of not exceeding RM500,000 per annum.
|Meeting Allowance||The Non-Executive Directors of the Company will receive meeting allowance for attending Board Committee meetings, Board meetings and general meeting. The meeting allowances are to be determined by the Board.|
|Other benefits||The Non-Executive Directors of the Company are also entitled to other benefits provided to employees of the Company such as receiving discount for purchasing of property(ies) or product(s) develop or sold by the Company.|
EMPLOYEE SHARES SCHEME COMMITTEE
At an Extraordinary General Meeting of the Company held on 1 October 2013, the shareholders approved the establishment of an Employees’ Share Scheme (ESS). The scheme came into effect on 4 October 2013 for a period of five (5) years with an option to extend for another five (5) years. Subsequently, an ESS Committee was established with delegated authority to assist the Board in determining all questions of policy and expediency that may arise in the administration of the scheme and generally exercises all acts that are required and necessary to promote the best interest of the Company. The ESS Committee administers the scheme in accordance with the ESS Bylaws and the Bursa Malaysia Securities Berhad Main Market Listing Requirements.
The ESS Committee also oversees the Management’s implementation of the scheme with regard to the eligibility of the employees to participate in the scheme, ESS shares grant, option offers, offer date, basis of allotment, exercise of option and option allocations (after taking into consideration the performance, seniority and number of years of service and the employees’ actual or potential contribution to the Group) as well as dispute and termination issues in relation to the scheme in line with the ESS Bylaws. The ESS Committee shall within the duration of the scheme, grant ESS shares or make offers to any eligible employee whom the ESS Committee may in its discretion select to subscribe for new Protasco shares.
Further information pertaining to the ESS for the year under review are presented in Annual Report 2015 as Item No. 8 on page 55.
PRINCIPLE 3: REINFORCE INDEPENDENCE OF THE BOARD
The Company has a nine (9) year policy for Independent Non-Executive Directors. The tenure of an Independent Director is capped at nine (9) years. An Independent Director who continues to serve the Company for more than nine (9) years shall serve in the capacity of a Non-Independent Director.
SEPARATION OF CHAIRMAN AND GROUP MANAGING DIRECTOR
The Company ensures the positions of the Chairman and the Group Managing Director are held by different individuals and that the Chairman post is a Non-Executive post.
The Chairman is responsible for ensuring the adequacy and effectiveness of the Board’s Governance process and acts as a facilitator at Board Meetings to ensure that contributions from Directors are forthcoming on matters being deliberated and that no Board Member dominates discussion.
The Group Managing Director implements the Group’s strategies, policies and decisions adopted by the Board and oversees the operations and business development of the Group.
PRINCIPLE 4: FOSTER COMMITMENT
BOARD MEETING AND TIME COMMITMENT
Board meetings, Audit Committee meetings and Annual General Meeting are always scheduled in advance prior to the new calendar year. The Board is aware of the commitments with respect to time that each has to commit as a member of the Board and each committee. All board papers are distributed within one week of the meetings to ensure Directors are well informed and prepared for the meetings.
During the year under review, five (5) board meetings were held. Details of Directors’ attendance are set out as follows:
All Directors have attended and obtained certification from the Mandatory Accreditation Programme. Upon recommendation made by the NRC who had accessed the training needs of the Directors, the Board decided that each Director shall attend at least one training programme during the financial year.
The Company arranges relevant training programme(s) for all Directors to keep themselves abreast with the relevant changes in laws, regulations and the business development and enhance their professionalism in discharging their fiduciary duties to the Company in compliance with paragraph 15.08 of the Main Market Listing Requirements of the Bursa Securities. Details of the training programmes, conferences and forums attended by the Directors during the year under review are set out as follows:
PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING
The Directors are required by the Companies Act 1965 to ensure that financial statements prepared for each financial year provide a true and fair view of the Company and the Group. The Directors deliberate on financial statements and ensure that the Group has used appropriate accounting policies, supported by reasonable and prudent judgment and estimates. The Audit Committee assists the Board by scrutinising the information to be disclosed.
The Group’s Financial Statements are presented in pages 58 to 171 of the Annual Report 2015.
THE ROLE OF AUDIT COMMITTEE IN FINANCIAL REPORTING
The Audit Committee plays an important part in the Company’s financial integrity for the shareholders. In general, the Audit Committee assume the following responsibilities:
- Understand management’s responsibilities and representations
- Understand and assess the appropriateness of management’s selection of accounting principles and the most critical accounting policies
- Understand management’s judgments and accounting estimates applied in financial reporting
- Review and monitor the suitability and independence of external auditors
- Confer with both management and the external auditors about the financial statements
- Assess whether financial statements are complete and fairly present, in all material respects, the financial position of the company and that disclosures are clear and transparent
- Review earnings releases, financial statements, and other information presented with the financial statements prior to release
- Review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work
- Ensure that external audit and internal audit complement each other and that their efforts are coordinated and effective
RELATIONSHIP WITH THE AUDITORS
Through the Audit Committee of the Board, the Group has established a professional, transparent and appropriate relationship with the Group’s auditors, both internal and external, particularly in obtaining their professional advice towards ensuring full compliance with applicable accounting standards.
The Audit Committee met the external auditors twice during the year under review on 25 February and 18 November 2015 without the presence of the Executive Directors and Management to exchange independent views on matters which require the Committee’s attention.
The Audit Committee had assessed the suitability and independence of the external auditors. In its assessment, the Audit Committee considered several factors such as competency and scope of audit and level of non-audit services rendered by Crowe Horwath for financial year 2015.
Crowe Horwath confirmed that they have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements for the financial year 2015.
Being satisfied with Crowe Horwath’s performance, technical competency and audit independence, the Audit Committee recommended the appointment of Crowe Horwath as external auditors for financial year ending 2016, which was concurred by the Board for it to be proposed for shareholders’ approval at the forthcoming Annual General Meeting.
The Board acknowledges their responsibility for the Group’s system of internal controls and reviews its effectiveness regularly via the Internal Audit Department which provides support to the Audit Committee in dispensing its responsibilities with respect to the adequacy and integrity of the system of internal control within the Group. A Statement on Risk Management and Internal Control outlining the internal controls within the Group is presented on pages 52 - 53 of Annual Report 2015.
PRINCIPLE 6: RECOGNISE AND MANAGE RISKS
RISK MANAGEMENT FRAMEWORK
The Board Risk Management Committee, which is guided by its Terms of Reference, was established to assist the Board to oversee the overall compliance to relevant laws and regulations, internal policies and procedures.
To ensure effectiveness, the Risk Management Working Committee, comprising management staff from the Corporate Finance Department, Corporate Affairs Department and Property & Infrastructure Division, is responsible to continuous monitoring and management of the risks of the Group. The Group adopts an enterprise wide risk management approach. Head of Divisions are responsible to review and update their respective division’s risk profile. The review and update of the risk profile includes identification of risks resulting from changing of business environment, both external and internal. Risks identified are evaluated based on their potential impact on the Group, the likelihood of occurrence as well as the effectiveness of available control procedures. The Business Risk Profile, where identified risks are recorded, is updated on an ongoing basis and presented to the Risk Management Committee on a half-yearly basis.
Significant risk matters that require the attention of the Board are reported by the Risk Management Working Committee to the Board Risk Management Committee.
INTERNAL AUDIT FUNCTION REPORTING TO THE AUDIT COMMITTEE
The Group has an Internal Audit Department, which reports to the Audit Committee and assists the Board in monitoring and managing risks and internal controls. The principal responsibility of the Internal Audit Department is to undertake an independent, regular and systematic review of the system of internal control so as to provide reasonable assurance that internal controls and risks are satisfactorily monitored and managed within the Group.
The reviews were performed in accordance to the International Professional Practices Framework (IPPF). This involved in assessing key risk areas, walkthrough or high level reviews of the major operations, discussions held with top management and key staff.
Information on internal control and risk management of the Group is detailed in the Audit Committee Report on Page 38, and Statement on Risk Management and Internal Control on pages 52 – 53 of Annual Report 2015.
PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE
To ensure quality disclosure, the Company has a corporate disclosure policy to ensure accurate, clear and timely disclosure of material information and take reasonable steps to ensure that the general public has access to such information. The Company’s dedicated Investor Relations unit is committed to communicate the Company’s strategy, operational performance, financial results, and other materials developments to Bursa Malaysia, analysts, investors, shareholders and other stakeholders in a timely, open, comprehensive manner. The Corporate Disclosure Policy is available at www.protasco.com.my.
GROUP CORPORATE WEBSITE
The Board is committed to leverage on information technology for effective dissemination of information on a timely manner. Protasco’s corporate website (www.protasco.com.my) provides easy access to information about the Group. Information available on the corporate website includes Protasco’s corporate profile, individual profiles of senior management, share and dividend information including the dividend reinvestment plan, investor presentations, financial results, Annual Reports and corporate news.
In addition, stakeholders can obtain regulatory announcements made by Protasco to Bursa Malaysia on the latter’s website at www.bursamalaysia.com.
The Company’s Annual Report provides a comprehensive report on the Group’s operations and financial performance for the year under review. It provides full disclosure and is in compliance with the relevant regulations to ensure greater transparency. The Annual Reports are also printed in summary form together with a digital version of the Annual Report in PDF format on CD-ROM. An online version of the Annual Report is also available on Protasco’s corporate website.
PRINCIPLE 8: STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS
ANNUAL GENERAL MEETING
The Annual General Meeting is the main delivery channel for dialogue with all shareholders. They are encouraged and are given ample opportunities to enquire about the Groups’ activities and prospects as well as to communicate their expectations and concerns.
The notices of Annual General Meeting are sent out to shareholders at least 21 days before the date of the meeting in accordance with the Company’s Articles of Association. Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf. Shareholders can also contact the Company with their queries.
Shareholders are encouraged to be aware of their rights with regards to the convening of general meetings, appointment of proxies, demand for poll voting and access to information. The details of the shareholder’s rights are available at www.protasco.com.my.
The Board encourages poll voting for substantive resolutions. The Board will evaluate the feasibility of carrying out electronic polling at its general meetings in the future.
The Company holds meetings with investors, journalists and financial analysts to update them on business performance, operations and corporate developments as well as obtain feedback and discuss matters of common interests.
In addition, the Company issues timely release of its financial results and other mandatory announcements and responds promptly to enquiries from investors, regulators, the public and financial analysts.
The Company has a dedicated website, www.protasco.com.my, designed to assist its stakeholders. The Company has subscribed to Bursa Malaysia website linking service so that the Company’s announcements made to Bursa Malaysia can be retrieved concurrently from both websites.
The Company also subscribes to the services provided by IR Chart Nexus Sdn Bhd, as recommended by Bursa Malaysia, to enhance its Investor Relations programmes.
|Contact Person||:||Han Long Kong,
Director, Investor Relations Department
Protasco Berhad expects high standard of integrity from all employees. It takes a serious view of any misconduct or wrongdoing of its employees with respect to their obligations for the Group’s interests. This Whistleblowing policy which is available at www.protasco.com.my is established to help employees and other stakeholders to raise their concerns without fear of retaliation on any known and/or suspected misconduct, wrongdoings, corruption, fraud or any other acts as illustrated in Whistle Blowing Policy section.
STATEMENT OF DIRECTOR’S RESPONSIBILITY FOR PREPARING THE FINANCIAL STATEMENTS
The Directors are required by the Companies Act 1965 to prepare financial statements for each financial year in accordance with the applicable approved accounting standards in Malaysia, giving a true and fair view of the financial position of the Group and Company at the end of the financial year and of the results and cash flows of the Group and Company for the financial year ended.
The Directors have the responsibility to ensure that the Company keeps proper accounting records, disclosing with reasonable accuracy the financial position of the Group and Company and ensuring that the financial statements comply with the Companies Act 1965.
The Directors have overall responsibilities for undertaking necessary steps that are reasonably open to them to protect and safeguard the assets of the Group to prevent and detect fraud and other irregularities. The Board has also ensured that the quarterly and annual financial statements of the Company and Group are released to Bursa Malaysia in a timely manner to keep the investing public well informed of the Groups’ latest development.
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