ASEAN Corporate Governance Scorecard Template

ASEAN Corporate Governance Scorecard QUESTIONNAIRE AND GUIDE

INTRODUCTION 1. The Securities & Exchange Commission has long issued a template for a Code of Corporate Governance that Philippine corporations may consider adopting; and after adopting it,

they may comply with the SEC requirement for them to submit a Corporate Governance Manual.

2. Since the requirement to adopt and submit a Corporate Governance Manual was issued a few years ago, there have been a few developments in the Philippine corporate governance scene. For instance, ICD---in partnership with the SEC and PSE---has been doing a Corporate Governance Scorecard to rate compliance with existing corporate governance rules, regulations, and best practices. This scorecard initiative has elevated close to 40 Philippine publicly listed companies to the silver, gold, and platinum categories for corporate governance compliance.

3. Recently, under the ASEAN Capital Market Forum, of which our SEC is a regular member, 6 ASEAN economies decided to adopt a common questionnaire that will be used for an ASEAN Corporate Governance Scorecard. This is in anticipation of the eventual inter-connection between the different participating ASEAN stock exchanges; it is also a step towards promoting the ASEAN brand to the international investment community. The Philippines is one of the 6 ASEAN economies, the others being: Indonesia, Malaysia, Singapore, Thailand, and Vietnam.

4. While the questionnaire for the ASEAN Corporate Governance Scorecard is substantively the same as the one we in the Philippines have been using for our Compliance Corporate Governance Scorecard, still there are a few differences. The OECD principles, grouped under 5 chapters, are the same principles that we have been using. But the group of ASEAN corporate governance experts, who have been working on the questionnaire, have decided to specify applications of those principles to the ASEAN investment context. A few of these specifications are more stringent---while others are looser---than the ones we have been using in the Philippines.

5. It is with a view towards helping Philippine publicly listed companies review their own Corporate Governance Manual and revise a few provisions in that Manual to be more in line with the ASEAN Corporate Governance Scorecard that ICD is issuing this template. Since there is some flexibility for bonus points to be earned, and correspondingly for penalty points to be deducted, we shall be introducing additional desirable practices which can help Philippine publicly listed companies obtain competitive advantage. For the moment, however, we have decided to adopt the ASEAN questionnaire in toto. But we shall be introducing possible additional bonus points for Philippine corporations to gain, when we make the calculations for purely domestic (Philippine) use, after we have done the calculations of the Corporate Governance Score for the ASEAN common initiative.

6. The template is only a reference and a guide as the Board of Directors of Philippine publicly listed companies consider introducing minor revisions and possible additions to their current Corporate Governance Manual. These revisions and additions may help them obtain higher scores in the new Philippine/ASEAN Corporate Governance Scorecard. Those with asterisks are practices which may earn bonus points or receive penalty points under the ASEAN Corporate Governance Scorecard. Those without asterisks relate to items in the regular questionnaire of said (ASEAN) CG Scorecard.

RIGHTS OF THE SHAREHOLDERS 7. A policy statement on welcoming shareholders:

a) Our company, as a publicly listed corporation in the Philippine Stock Exchange, subscribes to all the rules and regulations of the Securities and Exchange Commission (SEC) and of the Philippine Stock Exchange (PSE); and in particular to those rules and regulations concerning the development of the Philippine capital market.

b) In helping to develop the Philippine capital market, our company assumes an open and welcoming attitude towards investors---both retail and institutional---who wish to purchase shares of our company through the Philippine Stock Exchange.

c) It is the policy of our company to comply with the requirement of the PSE to maintain a minimum public float of our shares openly traded in the exchange.

d) We welcome the entry of institutional investors with an interest in owning shares of our company. While we respect the decisions that investors take in a free and open market for shares, we will work closely with institutional investors with a view towards having at least 5% of our shares held by them at any given time.

e) A specific policy we are adopting in line with our desire to attract institutional investors: we shall be facilitating their attendance and participation at our Annual General Meeting (AGM). We shall hold our AGMs at a place that is easily accessible to investors, including institutional investors.

f) Furthermore, on all matters of importance to all investors, especially institutional investors, such as decisions related to mergers and acquisitions, our company shall observe the principle of fair treatment of all shareholders. All resolutions put forward in an AGM concerning mergers and acquisitions shall be accompanied by a report, on fair value and on equitable terms and conditions for all shareholders, from an independent valuation company.

8. A policy statement on the right of shareholders to vote in the AGM.

a) Our company adopts the policy of respecting the right of shareholders to participate and vote in our AGM.

b) We have instructed the Office of the Corporate Secretary to issue the call for the AGM to all shareholders at least 21 business days before the date set for the AGM.

c) The call for the AGM shall specify the time and place for the meeting. It shall also contain the proposed agenda for the AGM. The agenda shall include the resolutions to be put forward at the meeting. Each resolution shall relate to only one agenda item, and it shall include a brief rationale or explanation for its inclusion in the AGM. There shall be no bundling of several issues in one resolution.

d) *We do not allow the introduction of additional, previously unannounced items into the agenda of the AGM or any items that had not been included in the call or notice of the AGM.

e) *Our company does not put up barriers or impediments that prevent shareholders from consulting or communicating with one another.

f) Shareholders may vote in person or by proxy. Arrangements for proxy voting or voting in absentia should be in line with pertinent rules and regulations.

g) *We arrange for secure electronic voting at our company’s AGM.

h) The company shall engage the services of an independent body that will be charged with the responsibility for ensuring that voting procedures adhere to standards of integrity, transparency, fairness, and professionalism.

i) The company adopts voting procedures designed to allow vote by polling for each agenda item. It is our policy not to conduct a vote by a mere show of hands.

j) Results of the vote by polling for each agenda item shall be posted and made available to all shareholders no later than the next business day after the AGM.

k) The company adopts the policy of asking shareholders to vote on all matters of fundamental importance. These shall include, but not limited to:

(i) Changes or amendments to the company’s by-laws and articles of incorporation;

(ii) Sale or purchase (or transfer) of a significant share of corporate assets that may result in a change in the character of the company;

(iii) Authorization for the issuance of additional shares of the company;

(iv) Non-controlling shareholders are given an opportunity to nominate candidates for seats in the Board of Directors;

(v) All shareholders are given an opportunity to elect individually the members of the Board of Directors. In this regard, the notice of call for an AGM shall include a profile of all nominees for seats in the Board of Directors. This profile shall include the nominees’ age, qualifications and experience, date of first appointment to the Board of the company, and other directorships in other publicly listed corporations (or subsidiaries, whether listed or non-listed, within a group of companies)

(vi) All shareholders are to approve the remuneration of all non-executive Directors (members of the Board).

(vii) All shareholders are to approve the appointment of the external auditor.

l) The company welcomes the participation of all shareholders by giving them an opportunity to ask, and receive answers to, questions of relevance to the corporation, its performance and prospects. In this regard, the company requires the attendance of the following at the AGM:

(i) The Chairman of the Board

(ii) The CEO

(iii) The chair of the Board Audit Committee

(iv) At least some of the directors, whose presence (or absence) should be noted in the Minutes of the AGM.

m) The Minutes of the AGM should include a least a summary of the questions asked and of the answers given to those questions. The Minutes should be posted at the latest by the next working day following the AGM.

9. A policy statement regarding the right of shareholders to participate in the profits of the company.

a) Our company subscribes to the basic principle that the major responsibility of the Board of Directors is to optimize the long-term value of the company, and that all shareholders have the right to participate in the benefits arising from such long-term optimal growth of company value.

b) Our company adopts a dividend policy, and any changes in that policy shall be disclosed. Our company shall also disclose annually the amount payable of final dividends as recorded in our company’s books.

c) Our company observes the policy of treating all shareholders equitably, in particular with respect to the timing in receiving dividends after they have been declared and finally cleared. We shall observe a 30-day time horizon for the payment of dividends to all shareholders, after receiving final regulatory clearance for the payment of dividends.

EQUITABLE TREATMENT OF SHAREHOLDERS 10. Our company adopts and observes the basic principle of “one vote per one common share”. We do not intend to deviate from this principle. 11. *We disclose any current practice that may have led us to award disproportionate voting rights to select shareholders such as through shareholders’ agreements, voting caps,

and multiple voting rights for certain shares. 12. Should extraordinary circumstances demand that we have to make further special arrangements where we issue special classes of shares, giving them a disproportionate claim

on voting rights, we shall fully disclose and justify the action. We shall seek shareholder approval before taking such an extraordinary action. 13. Our company commits to provide adequate protection to minority shareholders from abusive and inequitable conduct on the part of majority shareholders, directors, officers,

and employees of the company. In this regard, we have adopted clear rules and explicit prohibition against any shareholder, director, officer or employee benefiting from knowledge not available to minority shareholders and the general public.

14. *We consider insider trading a very serious offense. Our company, within the ambit of law, does not permit the continued service of any director, officer, or employee who has

been convicted for insider trading. 15. *We require all directors, officers and employees to disclose one business day in advance before they deal in our company’s shares. 16. We require all dealings and transactions in our company’s shares by any director, officer, or employee to be disclosed within 3 business days after the transaction. 17. We require all directors, officers, and employees to disclose any interest in any transactions of our company that may place them in a conflict of interest position. 18. We have adopted the rule that directors should inhibit themselves from participating in any discussion, deliberation, and decision-making concerning any issue or transaction

where they may be conflicted. 19. We require that a committee of independent directors should be given the responsibility to pass upon any related party transaction with any material significance, and to render

an opinion on whether the transaction can be cleared, after assessing that the transaction is in the best interest of the corporation.

20. We have imposed a ban or prohibition on any loan or assistance from the company to any related party. Any exceptions to this general rule should be duly justified; moreover, such loan or assistance can only be provided on an arms’ length basis, under terms and conditions that do not deviate from those of the market, and do not jeopardize the best interests of the company.

21. We have also adopted a policy of prohibiting the grant of any special financial assistance to entities other than to wholly-owned subsidiaries. 22. *With regard to share repurchases, all shareholders are treated equally and fairly.

ROLE OF STAKEHOLDERS 23. Our company duly acknowledges the duties we owe to other parties that may not have equity stakes in our company. They are stakeholders of the company, although they are

not shareholders. As mandated by several relevant laws, we respect, defend, and promote the rights of these other stakeholders.

a) Our company’s policy towards consumers and customers is rooted on the core principle of providing quality care and service in the provision of goods and services to them under terms and conditions that are fair and satisfactory. We abide by the rules aimed at ensuring their health and safety.

b) We value our relationship with our suppliers and contractors. We follow the rules concerning the fair and transparent process of selecting them.

c) We ensure the environmental friendliness of our corporate operations, and we contribute to the over-all sustainability of the physical environment where our company operates.

d) We look upon the local communities where we have operations as effective partners in our common interest to uplift and upgrade the life, in its various dimensions, of those communities.

e) We actively support the government with its private sector partners in spreading a good governance regime, which makes no room for corruption and bribery.

f) We value the contribution that creditors give to our growth and development. We respect the rights of creditors, who have interests that the law safeguards.

g) Our company has designated an office to listen to, and address, the concerns and complaints from all our external stakeholders. Moreover, such an office, whose contact parameters are on our company website, is mandated to take a pro-active stance in caring for and promoting the just and proper interests of all our external stakeholders.

24. *We uphold all laws concerning the proper and fair treatment of all our external stakeholders, particularly our consumers, creditors, the environment and its sustainability, the government and the local communities where our company has operations. We consider violations of such laws as well as violations of our country’s commercial and competition laws a serious offense; and those in our company found to be responsible for such violations are to be dealt with in line with our company’s policy on sanctions. We also uphold all laws concerning the proper and fair treatment of our officers and employees.

25. Our company has very important internal stakeholders in the officers and employees who work in our company. We owe them more than their due share of attention and care. We invest in their continuing learning and growth.

a) We make actual provision for their training and continuing development, in over-all consistency with their dignity as individual persons.

b) We provide for their health, safety, and over-all welfare, as the law mandates.

c) We have installed a system of rewards, recognition, and remuneration that promotes and provides strong incentives to long-term performance.

d) We promote a culture of ethical and clean practices, and we have installed clear processes and robust protection for whistle-blowing and the airing of complaints against unethical and corrupt practices.

26. Our company puts a premium on profit maximization and the optimization of shareholder value. However, we also recognize that for long-term sustainability and strength, we answer to the imperative of striking a proper balance between purely short-term financial performance and the longer-term over-all corporate performance: this is underpinned and secured by several non-financial factors as well, which may include, but not limited to, the loyalty and commitment of all external and internal stakeholders to the health, sustainability and strength of our company.

DISCLOSURE AND TRANSPARENCY 27. Our company adheres to the principle of transparency and commits to a regime of open disclosure in line with the general demands of corporate governance and the relevant

rules and regulations to assure proper governance practices. 28. *We commit to meet all disclosure requirements, mandated by our regulators, particularly those involving material events. Moreover, we shall make such disclosure within the

prescribed reporting period. 29. We report on our Annual Report and provide regular updates on our website on the shareholders with significant ownership of the shares of our company as well as on their

relationship with, including their ownership, of related companies.

a) We identify those who have ownership, including beneficial ownership whether direct or indirect, of at least 5% of the shares of the company. b) We also disclose the direct or indirect ownership of the shares of our company that directors and other senior officers may hold. c) We provide information on subsidiaries, joint ventures, and special purpose vehicles of our company and the participation in them of our significant shareholders,

directors, and senior officers. 30. *In our public disclosure, we shall be fully transparent about our company’s structure of crossholdings and the pyramid ownership that may have been built up over the years. 31. We issue an Annual Report, which contains at least the following items:

a) Report on our company’s financial performance, following the IFRS, as mandated by the Philippine SEC. b) Report on some of the key non-financial performance measures, which will include, among others: our investment in the training and development of our officers and

staff; improvements in our core internal processes; the quality standards with which we satisfy our customers; the proper management of risks embedded in our core processes; our social and economic impact.

c) Report on the pursuit of our corporate objectives or strategic priorities, particularly those included in our corporate strategy map. d) A restatement of our company’s dividend policy and its specific application to the year covered by the Annual Report. e) Information on currently serving directors: their age; experience; date of first appointment to our company’s Board; participation in director training and on continuing

education program for corporate directors; attendance at Board and Board Committee meetings; and remuneration of each director. f) Board of Directors’ certification on full compliance with the SEC Code of Corporate Governance (and in case there is non-compliance with respect to any item, an

explanation should be given for such non-compliance).

g) Report on compliance with, and application of, policies on insider trading and related party transactions. This should include disclosure on the name of the related party, the nature and value of each material RPT.

h) Report on the external auditor, on audit fees and non-audit fees paid. 32. To help ensure that our disclosure remains adequate and robust, our company has decided to adopt the following disclosure practices:

a) We conduct regular (quarterly) briefing for analysts and the media. b) We commit to the timely issuance of our audited financial statement. We target the release of such a statement 60 business days after the close of the financial year. In

no case shall the issuance of our audited financial statement be later than 90 business days after the close of our financial year. In addition, our Board of Directors shall issue a certification together with our audited financial statement that the financial statement is true and fair

c) We use our company website to provide up-to-date information on the results, both financial and non-financial, of our company’s business operations, as well as on changes in our company’s ownership structure, business group structure. Our website shall have a downloadable Annual Report as well as copies of notice of call for the AGM, our current by-laws and articles of incorporation as well as our company strategy map.

d) Our company maintains an Investors Relations Office, whose responsible officers are identified, including information on their contact parameters.

BOARD RESPONSIBILITY

33. Our company has adopted a code of corporate governance, as mandated by our SEC. This code specifies the role, duties and responsibilities of our Board of Directors, in line with relevant Philippine laws, rules and regulations, and in full consistency with the principles of corporate governance.

34. The duties and responsibilities of our Board of Directors include, but not limited to, the following:

a) Approval and final adoption of the corporate strategy, with pro-active oversight of strategy execution.

b) Formulation and adoption of corporate policy, starting with policy related to corporate governance and oversight of strategy execution.

c) Performance monitoring, which covers financial and non-financial performance as well as oversight of risk management.

d) Setting up of an accountability system, which includes provision for rewards, incentives and penalties.

e) Promotion of a culture of ethics, social responsibility, and good governance.

35. Our company’s Board of Directors has adopted a board protocol, which contains clear and specific guidelines on internal Board processes and in particular the types of decisions requiring Board approval.

36. Our company’s Board of Directors has approved and adopted a company governance charter, which includes:

a) Our Corporate Vision

b) Our Corporate Mission

c) Our Corporate Core Values.

37. Moreover, our Board has adopted a Board Calendar, which allows for a periodic revisit and review of the elements of our company governance charter and of our corporate strategy map, with its corresponding performance scorecards.

38. As part of our company’s Board protocol, we have adopted the following guiding practices related to “board structure and composition”:

a) We limit the size of our Board of Directors to only 12 members.

b) Among the members of our Board, there are at least 3 independent directors. *Their identity as independent directors is to be clearly marked, with the information on the date of their first election to the Board of Directors.

c) We nominate to our Board of Directors only those individuals who can and do exercise independent judgment. In this regard, we follow the policy of excluding from our list of independent directors, those with any close relationship, either by blood (within the second degree of consanguinity) or marriage, with significant stockholders, the CEO or any member of our company’s top management team. We also exclude from the list of independent directors those who may have served our company as an officer or significant service provider, unless two years have elapsed since the termination of that service.

d) We do not allow our independent directors to serve for five consecutive terms and remain listed as independent directors. A lapse of two years is required before re-nominating the same directors as independent directors. We do not allow any further re-nomination as independent directors after the second set of 5 consecutive years. *In the event of our company having to make exception to the rule on limits for continuous service of independent directors, we shall justify and disclose it.

e) We set a limit of five board seats in publicly listed companies that our independent directors can serve on at any given time. A limit of two board seats in publicly listed companies is imposed on directors who may at the same time be holding management positions in any publicly listed company.

f) *The limit on board seats applies when subsidiaries in a group of companies are involved, whether those subsidiaries are listed or unlisted.

g) *Our company does not allow election to our Board of Directors any former partner or employee of our current external auditor, unless two years have elapsed since the relationship with such auditing firm has been terminated.

39. Included in our company’s Board protocol are policies concerning the “skills and competencies” of our Board directors. These policies include:

a) We require that at least one of our non-executive directors should have prior working experience in the sector or broad industry group to which our company belongs.

b) We value, promote, and observe a policy on diversity in the composition of our company’s Board. In particular, provided all other qualifications are met, there should be women in our Board of Directors. *We ensure that at any given time, at least one woman independent director sits in our Board.

c) It is our policy to comply with the directive of requiring all our directors to undergo an orientation program on corporate governance.

d) We also have adopted a policy of actively encouraging and supporting our directors to attend continuing education programs on corporate directorship.

40. Our company’s Board protocol sets out various policies concerning internal Board process. Those policies include the following:

a) We have laid out in clear terms the role and responsibilities of the Chairman of the Board. *These include, among others, having to listen to and address satisfactorily any governance-related issues that non-executive independent directors may raise.

b) *In particular, the Chairman of the Board has the responsibility of ensuring that the Board of Directors exercises strong oversight over the company and its management such that the prospect of any corporate scandals is minimized if not totally eliminated.

c) We have separated the role and responsibilities of the Chairman of the Board from the role and responsibilities of the CEO. It is our company’s policy that these two positions---Chairman of the Board and CEO---shall be held by two different persons.

d) We hold as policy that the Chairman should not be the immediate past CEO. We hold as ideal that the Chairman should be an independent director.

e) We schedule our Board meetings in advance, and we set the dates for our Board meetings at the beginning of the year.

f) Our Board meets regularly, and for no less than 6 times a year.

g) We require our directors to be physically present at 50% of the meetings of the Board. With arrangements for electronic presence at Board meetings, we require our directors to be present at 75% of all meetings of the Board

h) When important decisions are on the agenda, in particular when issues that will have significant impact on the character of our company are on the agenda, we require that for determining the quorum of the meeting, two-thirds of the directors should be present.

i) We encourage and arrange for all our non-executive directors to meet as a group at least once a year, without the presence of any executive director or representative from management.

41. In compliance with the rules and regulations that have been issued, our Board of Directors has set up several Board Committees. Our company observes the best practice guidelines our regulators have issued concerning the required number of Board Committees, which ideally should be relatively few. In view of such guidelines, our company has set up a Governance Committee, with three separate, largely autonomous sub-committees. The first of these is the Nomination Committee.

a) The Nomination Committee has been set up as an independent sub-committee of the bigger Governance Committee of the Board.

b) We have included in the written charter of this committee the following specific provisions: its Chairman has to be an independent director; *all members (not just the majority) of this committee have to be independent directors.

c) The written charter of this committee, which clearly spells out its duties and responsibilities, calls for it to meet at least twice a year, and with the relevant information from those meetings being included in our company’s Annual Report (e.g. attendance at its meetings).

d) The committee is called upon to disclose the criteria it uses in the selection and nomination of members of the Board of Directors.

e) *The committee discloses the process by which it considers candidates for nomination to our company’s Board of Directors. In particular, this process includes the proper profiling of the skills and competencies of the currently serving Directors, the gaps in skills and competencies identified, and the search for candidates to fill the gaps.

f) *The committee uses an external search agency or uses external data bases for qualified corporate directors in its search for candidates to the Board of Directors.

g) It also discloses the process it follows in selecting the CEO and in installing succession planning for the position of CEO and all key senior officer positions of our company.

h) The committee adheres to the policy, consistent with rules and regulations, of submitting all directors for election or re-election once a year.

42. The second Board Committee of our company’s Board of Directors is the Performance Appraisal Committee.

a) It is an independent sub-committee of the broader Governance Committee of our company’s Board.

b) It has a written charter, which articulates its duty of conducting performance appraisal at the Board level.

c) It discloses the process and criteria for conducting an annual performance appraisal of the entire Board, of the Board committees, and of individual directors.

d) *It calls upon the professional assistance of external facilitators in the regular conduct of Board performance evaluation.

e) In addition, it conducts a performance appraisal of the CEO, who is given full responsibility for over-all corporate performance, using performance scorecards, associated with the pursuit of the strategy map of the company.

43. A third Board Committee is the Remuneration or Compensation Committee.

a) This too is an independent sub-committee of the Governance Committee of our company’s Board of Directors.

b) This committee also has a written charter, which lays out its terms of reference.

c) Its chairman and the majority of its members have to be independent directors.

d) It is mandated to meet at least twice a year, and the relevant information on its meetings should be included in the company’s Annual Report.

e) It discloses the remuneration policy of our company, with remuneration covering “fees, allowances, benefits in kind and other emoluments”. The remuneration structure for non-executive directors is submitted to shareholders for approval and is disclosed: this may include “options, performance shares or bonuses” for independent directors (this too must be specifically disclosed).

f) It submits through the Board of Directors for approval by shareholders also the remuneration of the CEO and of the other key senior officers of the company. The applicable remuneration structure calls for a proper mix of short-term and long-term incentives, which in the case of the CEO and senior officers are tied to performance measures and other elements of their respective performance scorecards.

g) It discloses the identity, independence, and absence of conflict of interest on the part of any adviser or consultant it may hire to assist the committee carry out its tasks.

44. A fully separate, stand-alone, independent committee of the Board of Directors is the Audit Committee.

a) It has a written charter, which clearly sets out is duties and responsibilities. It is primarily responsible for the appointment, re-appointment or removal of the external auditor. Moreover, our company has stipulated that the head of the internal audit office should report to the Audit Committee. Furthermore, the appointment or removal of the head of our company’s internal audit office is subject to approval of this Committee.

b) *The Audit Committee with its strong oversight function over the work of the external and internal auditors shall address all issues and concerns from the auditors expeditiously and effectively to avoid the possibility of their having to render a qualified or adverse opinion, including substantive and significant disclaimers.

c) *The Audit Committee has the responsibility of ensuring that no revisions to the company’s financial statements are necessary for reasons other than mandated changes in accounting practices.

d) All its members must be capable of exercising independent judgment. All members must be non-executive directors. At least a majority of the members must be independent directors; and at least one of these independent directors should have accounting expertise. Our company has specified that the chair of the Audit Committee is an independent director.

e) The Audit Committee’s charter calls for this Committee to meet at least four times a year, and relevant information on these meetings (including attendance of the directors) should be included in the company’s Annual Report.

f) *The committee jointly with the Risk Oversight Committee certifies in behalf of the Board of Directors as to the adequacy of the company’s internal controls and risk management system.

35. Another separate, stand-alone, independent committee of the Board of Directors is the Risk Oversight Committee.

a) This committee also has a written charter, which mandates it with the duty and responsibility of ensuring that internal control procedures and risk management systems are in place and are operative as well as effective.

b) Once these systems have been installed, the Committee is mandated to review their adequacy and effectiveness.

c) This Committee has direct oversight function for the management of our company’s key risk factors. Through the Board of Directors, this committee discloses how our company manages these risk factors.

d) *It works with the Audit Committee in including in the company’s Annual Report a certification as to the adequacy of the company’s internal controls and risk management system.

36. In compliance with the SEC rules and regulations, our company has set up the Office of the Corporate Secretary, whose main task is to provide adequate and reasonable support to the Board of Directors and the members of the Board in the discharge of their functions. Among the duties of the Office of the Corporate Secretary, our company has specified the following:

a) To provide the requisite board papers associated with items on the agenda of a Board meeting and to arrange that these are sent to all directors at least five business days in advance of the scheduled Board meeting.

b) To provide ready and reasonable access to information that directors may need for their deliberation on issues listed on the agenda of the Board.

c) To ensure that the Corporate Secretary has access to training in “legal, accountancy and company secretarial best practices”, which help raise the standards of professionalism actually observed by the Office of the Corporate Secretary.

37. Our Board has adopted a Code of Conduct, which provides guidelines for all directors, officers, and employees of the company in the conduct of corporate operations in all facets and at all levels.

a) The Code of Conduct aims to promote and foster observance of principles founded on ethics, social responsibility, and good governance. We post our company’s Code of Conduct on our company website.

b) Our Board has imposed a policy of full compliance with the company’s Code of Conduct on the part of all directors, officers, and employees of our company.

c) Our company has set up an Office for Ethics and Corporate Culture, which is charged with ensuring that the mechanisms to implement and monitor compliance with our company’s Code of Conduct are effective.

CONCLUSION 38. This template serves only as a reference. It addresses only those points which the ASEAN Experts Group had decided to include in the ASEAN Corporate Governance Scorecard,

including the bonus and penalty points. After vetting by the International Corporate Governance Network and the OECD, and in particular after adoption by the ASEAN Capital Market Forum, of which our SEC is a member, we are putting them forward for Philippine publicly listed companies to consider adopting, with a view towards them obtaining high corporate governance scores.

39. As a reference, this template may be used as a “codigo” or guide in tweaking---with some revisions, additions, and subtractions---the current corporate governance manuals that Philippine publicly listed companies already have, and which they had submitted to the SEC. ICD is putting out this template as a service to all Philippine publicly listed companies.

40. Under the ASEAN program, all participating ASEAN economies---the Philippines included---are given 3 years during which, using the ASEAN Corporate Governance Scorecard, with its corresponding common (ASEAN) questionnaire, the top 50 Philippine corporations, with corresponding individual scores, are to be named. During these 3 years, there shall be no cross-country comparisons of corporations (although the same questionnaire would already be used). Only after three years, would there be a list of 50 top ASEAN publicly listed companies. It is our hope---and duty---that many Philippine publicly listed corporations shall be on that top 50 ASEAN list.

41. We at ICD are committed to work closely with the SEC and PSE as well as all the listed companies on our PSE towards higher standards of actual corporate governance practices. Our advocacy does not stop at mere compliance; it extends to helping raise the standards of corporate performance, using the governance framework, on the part of Philippine corporations that deserve a competitive advantage through their adherence to a robust corporate governance framework.

PART A

RIGHTS OF THE SHAREHOLDERS

Guiding Reference Assessment Guidance / Notes to Assessors Source Document/

Location of Information Points

A.1 Basic Shareholder Rights Y N A.1.1 Does the company pay (interim and

final/annual) dividends in an equitable and timely manner; that is, all shareholders are treated equally and paid within 30 days after being (i) declared for interim dividends and (ii) approved by annual general meeting (AGM) for final dividends?

OECD Principle II: The Rights of Shareholders and Key Ownership Functions (A) Basic shareholder rights should include the right to, amongst others: (6) share in the profits of the corporation.

Not Applicable (N/A) = for those that don't pay dividend. To assign 'Y', both interim and final dividends have to be paid within 30 days after being declared or approved by shareholders respectively and all shareholders within the same class of share are treated equally. Shareholders within the same class of share are treated equally when they receive the same amount of dividend per share and the dividends are paid at the same time.

Dividends announcement 1 0

A.2 Right to participate in decisions concerning fundamental corporate changes.

Do shareholders have the right to participate in:

A.2.1 Amendments to the company's constitution?

OECD Principle II (B) Shareholders should have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes such as: (1) amendments to the statutes, or articles of incorporation or similar governing documents of the company

As the owners of a company, shareholders have the right to be involved in decisions concerning fundamental corporate changes specified in point A.2.1 - A.2.3 to provide a check and balance and to assure that these changes are not abused. These rights need to be publicly disclosed to shareholders. If not disclosed, assign 'N'. Example of A.2.3 is the sale of a business unit/a subsidiary that accounts for a majority portion of the company's assets.

Annual Report/ Company website/Articles of Association.

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A.2.2 The authorisation of additional shares? OECD Principle II (B): (2) the authorisation of additional shares

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A.2.3 The transfer of all or substantially all assets, which in effect results in the sale of the company?

OECD Principle II.(B): (3) extraordinary transactions, including the transfer of all or substantially all assets, that in effect result in the sale of the company

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A.3 Right to participate effectively in and vote in general shareholder meetings and should be informed of the rules, including voting procedures that govern general shareholder meetings.

A.3.1 Do shareholders have the opportunity, evidenced by an agenda item, to approve remuneration (fees, allowances, benefit-in-kind and other emoluments) or any increases in remuneration for the non-executive directors/commissioners?

OECD Principle II (C): (3) Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. Shareholders should be able to make their views known on the remuneration policy for board members and key executives. The equity component of compensation schemes for board members and employees should be subject to shareholder approval.

The definition of total remuneration refers to all forms of remuneration, and not just fees. If not disclosed, assign 'N'. Where shareholders give the authorization to the Board to set or determine total remuneration then it is also "N".

Announcement of AGM/Articles of Association/Annual Report/Company website.

1 0

A.3.2 Does the company provide non-controlling shareholders a right to nominate candidates for board of directors/commissioners?

In most jurisdictions, shareholders owning at least more than a certain threshold may nominate board members. If not disclosed, assign zero.

Annual Report/Company website/Articles of Association.

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A.3.3 Does the company allow shareholders to elect directors/commissioners individually?

If not disclosed, assign 'N'. Minutes of AGM/Result announcement of AGM/Articles of Association/Annual Report/website.

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A.3.4 Does the company disclose the voting and vote tabulation procedures used, declaring both before the meeting proceeds?

OECD Principle II (C): Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures, that govern general shareholder meetings.

If not disclosed, assign 'N'. AGM Minutes/Articles of Association/Company website.

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A.3.5 Do the minutes of the most recent AGM record that there was an opportunity allowing for shareholders to ask questions or raise issues?

OECD Principle II (C): (2) Shareholders should have the opportunity to ask questions to the board, including questions relating to the annual external audit, to place items on the

AGM provides the avenue for shareholders (and especially for non-controlling shareholders) to exercise their rights, including raising questions/issues to members

AGM Minutes/ Summary of Minutes

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A.3.6 Do the minutes of the most recent AGM record questions and answers?

agenda of general meetings, and to propose resolutions, subject to reasonable limitations.

of the board and the executive team. Therefore, board members' attendance at the AGM is necessary to facilitate this. Since some shareholders may not be able to attend the AGM, it is important that companies publicly disclose board attendance at the AGM so shareholders will be able to identify board members who do not attend the meeting and to assess board members' commitment to their duties. If not disclosed, assign 'N'. Only information in English can be assessed.

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A.3.7 Does the disclosure of the outcome of the most recent AGM include resolution(s)?

1 0

A.3.8 Does the company disclose the voting results including approving, dissenting, and abstaining votes for each agenda item for the most recent AGM?

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A.3.9 Does the company disclose the list of board members who attended the most recent AGM?

OECD Principle II (C); and ICGN 2.4.2: All directors need to be able to allocate sufficient time to the board to perform their responsibilities effectively, including allowing some leeway for occasions when greater than usual time demands are made.

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A.3.10 Did the chairman of the board of directors/commissioners attend the most recent AGM?

1 0

A.3.11 Did the CEO/Managing Director/President attend the most recent AGM?

1 0

A.3.12 Did the chairman of the Audit Committee attend the most recent AGM?

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A.3.13 Did the company organise their most recent AGM in an easy to reach location?

OECD Principle II (C) 'Easy to reach location' means that the meeting location is where the majority of shareholders reside or the meeting location is easily accessible.

Notice of AGM/Company website.

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A.3.14 Does the company allow for voting in absentia?

OECD Principle II (C): (4) Shareholders should be able to vote in person or in absentia, and equal effect should be given to votes whether cast in person or in absentia.

If not disclosed, assign 'N'. For purposes of this document voting in absentia means the opportunity to vote without physically participating at a general meeting, and includes appointing any person physically present at the general meeting to vote on the shareholder's behalf (e.g. voting via proxy, email, electronic, and/or post).

AGM Announcement/AGM Minutes/Articles of Association

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A.3.15 Did the company vote by poll (as opposed to by show of hands) for all resolutions at the most recent AGM?

OECD Principle II (C) If not disclosed, assign 'N'. AGM Minutes. 1 0

A.3.16 Does the company disclose that it has appointed an independent party (scrutineers/inspectors) to count and/or validate the votes at the AGM?

If not disclosed, assign 'N'. AGM Minutes. 1 0

A.3.17 Does the company make publicly available by the next working day the result of the votes taken during the most recent AGM for all resolutions?

OECD Principle II (C): (1) Shareholders should be furnished with sufficient and timely information concerning the date, location and agenda of general meetings, as well as full and timely information regarding the issues to be decided at the meeting.

Self-explanatory. Company announcement/Company website.

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A.3.18 Do companies provide at least 21 days’ notice for all resolutions?

Self-explanatory. Company announcements/Articles of Association/Annual Report/Company website.

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A.3.19 Does the company provide the rationale and explanation for each agenda item which require shareholders’ approval in the notice of AGM/circulars and/or the accompanying statement?

Self-explanatory. Company announcements/Articles of Association/ Annual Report/ Company website.

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A.4 Markets for corporate control should be allowed to function in an efficient and transparent manner.

A.4.1 In cases of mergers, acquisitions and/or takeovers, does the board of directors/commissioners of the offeree company appoint an independent party to evaluate the fairness of the transaction price?

OECD Principle II (E): Markets for corporate control should be allowed to function in an efficient and transparent manner. (1) The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class.

Merger announcement/Company Report on the merger.

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A.5 The exercise of ownership rights by all shareholders, including institutional investors, should be facilitated.

A.5.1 Does the company publicly disclose policies to encourage shareholders including institutional shareholders to attend the AGM?

OECD Principle II (F): The exercise of ownership rights by all shareholders, including institutional investors, should be facilitated.

An institutional investor is an entity which pool large sums of money and invest them in securities, real property and other investment assets. Types of institutional investors typically include banks, insurance companies, mutual funds, pension funds, hedge funds, investment advisors. An example of the policy is having continuous dialogue with institutional investors. There

Annual Report/ Company website.

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should be an explicit statement of policy to score a "Y" Emphasis here is on the company's active and positive stance towards encouraging participation of shareholders, including institutional investors at AGMs.

A.5.2 Is the share ownership by institutional investors, other than controlling shareholders, greater than 5%?

If the controlling shareholder is an institutional investor, then only ownership share of other institutional investors are counted in determining if their ownership is greater than 5%. For the purposes of this document a controlling shareholder means any person who is or a group of persons who together are entitled to exercise or control the exercise of at least 33% of the voting shares in a company (or such other percentage as may be prescribed in the respective home country's Code On Take-Overs and Mergers as being the level for triggering a mandatory general offer) or who is or are in a position to control the composition of a majority of the board of directors of such company or has/have domination or control of the company.

Annual Report/Company website.

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PART B

EQUITABLE TREATMENT OF SHAREHOLDERS

Guiding Reference Assessment Guidance / Notes to Assessors Source Document/ Location of Information

Points

B.1 Shares and voting rights Y N B.1.1 Do the company's ordinary or common

shares have one vote for one share? OECD Principle III (A) All shareholders of the same series of a class should be treated equally. (1) Within any series of a class, all shares should carry the same rights. All investors should be able to obtain information about the rights attached to all series and classes of shares before they purchase. Any changes in voting rights should be subject to approval by those classes of shares which are negatively affected. ICGN 8.3.1 Unequal voting rights Companies ordinary or common shares should feature one vote for one share. Divergence from a 'one-share, one-vote' standard which gives certain shareholders power which is disproportionate to their equity ownership should be both disclosed and justified.

Self-explanatory Annual Report Company website / announcement

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B.1.2 Where the company has more than one class of shares, does the company publicise the voting rights attached to each class of shares (e.g. through the company website / reports/ the stock exchange/ the regulator's website)?

The voting rights attached to a class of shares (e.g. one vote per ordinary share) is deemed to have been publicised when such information is explicitly disclosed in any medium of communication - including, corporate annual report, corporate website, and websites of the exchanges and/or regulators. N/A when company has only once class of shares.

Annual Report / Company website announcement

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B.2 Notice of AGM B.2.1 Does each resolution in the most recent

AGM deal with only one item, i.e., there is no bundling of several items into the same resolution?

OECD Principle III (C) Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures, that

Self-explanatory Notice of AGM 1 0

B.2.2 Are the company's notice of the most recent AGM/circulars fully translated into English and published on the same date as the local-language version?

govern shareholder meetings: (1) Shareholders should be furnished with sufficient and timely information concerning the date, location and agenda of general meetings, as well as full and timely information regarding the issues to be decided at the meeting. (3) Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. OECD Principle III (A) All shareholders of the same series of a class should be treat equally. (4) Impediments to cross border voting should be eliminated. ICGN 8.3.2 Shareholder participation in governance Shareholders should have the right to participate in key corporate governance decisions, such as the right to nominate, appoint and remove directors in an individual basis and also the right to appoint external auditor. ICGN 8.4.1 Shareholder ownership rights The exercise of ownership rights by all

The English-language version of these documents MUST be available on the same day when the company published or made publicly available the local-language version of such documents

Notice of AGM 1 0

Does the notice of AGM/circulars have the following details:

B.2.3 Are the profiles of directors/commissioners ( at least age, qualification, date of first appointment, experience, and directorships in other listed companies) in seeking election/re-election included?

Profile refers to age, qualifications, experiences, and positions or directorships in other listed companies

Notice of AGM/Annual Report 1 0

B.2.4 Are the auditors seeking appointment/re-appointment clearly identified?

The name of the audit firm must be explicitly stated either in the resolution or explanatory notes.

Notice of AGM/Annual Report 1 0

B.2.5 Has an explanation of the dividend policy been provided?

Merely disclosing the dividend rate or amount is not sufficient.

Notice of AGM 1 0

B.2.6 Is the amount payable for final dividends disclosed?

Not Applicable (N/A) = if no final dividends are paid out

Notice of AGM 1 0

B.2.7 Documents required to be proxy/ Were the proxy documents made easily available?

shareholders should be facilitated, including giving shareholders timely and adequate notice of all matters proposed for shareholder vote.

Companies must clearly specify the nature or type of documents required to be proxy, if relevant.

Notice of AGM 1 0

B.3 Insider trading and abusive self-dealing should be prohibited.

B.3.1 Does the company have policies and/or rules prohibiting directors/commissioners and employees to benefit from knowledge which is not generally available to the market?

OECD Principle III (B) Insider trading and abusive dealing should be prohibited ICGN 3.5 Employee share dealing Companies should have clear rules regarding any trading by directors and employees in the company's own securities. Among other issues, these must seek to ensure individuals do not benefit from knowledge which is not generally available to the market. ICGN 8.5 Shareholder rights of action ... Minority shareholders should be afforded protection and remedies against abusive or oppressive conduct.

This policy/rule must be explicitly stated. Otherwise, 'N'.

Annual Report / Company website / announcement

1 0

B.3.2 Are the directors and commissioners required to report their dealings in company shares within 3 business days?

Y' only if it is explicitly stated that directors are required to inform or report to the company when transacting in company shares regardless whether dealings are within or outside blackout/closed periods. Otherwise, 'N'.


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B.4 Related party transactions by directors and key executives.

B.4.1 Are directors and commissioners required to disclose their interest in transactions and any other conflicts of interest?

OECD Principle III (C) Members of the board and key executives should be required to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the corporation. ICGN 2.11.1 Related party transactions Companies should have a process for reviewing and monitoring any related party transaction. A committee of independent directors should review significant related party transactions to determine whether they are in the best interests of the company and if so to determine what terms are fair. ICGN 2.11.2 Director conflicts of interest Companies should have a process for identifying and managing conflicts of interest directors may have. If a director has an interest in a matter under consideration by the board, then the director should not

The presence of this policy must be evident. Annual Report / Company website / announcement

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B.4.2 Does the company have a policy requiring a committee of independent directors/commissioners to review material/significant RPTs to determine whether they are in the best interests of the company?

The task to review material/significant RPT (i.e., RPTs that meet the threshold level stipulated by the respective jurisdictions' rules/regulations/requirements on RPT) normally vests with the Audit Committee (AC). Hence, to check the AC's terms of reference. Note: Any cases of non-compliance with prevailing rules/regulations/requirements pertaining to material/significant RPT is to be handled as a penalty as per item B.2.1(P).


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B.4.3 Does the company have a policy requiring board members (directors/commissioners) to abstain from participating in the board discussion on a particular agenda when they are conflicted?

participate in those discussions and the board should follow any further appropriate processes. Individual directors should be conscious of shareholder and public perceptions and seek to avoid situations where there might be an appearance of a conflict of interest.

This policy must be clearly stated. Annual Report / Company website / announcement

1 0

B.4.4 Does the company have policies on loans to directors and commissioners either forbidding this practice or ensuring that they are being conducted at arm's length basis and at market rates.

This policy must be clearly stated. Annual Report / Company website / announcement

1 0

B.5 Protecting minority shareholders from abusive actions B.5.1 Were there any RPTs that can be classified

as financial assistance to entities other than wholly-owned subsidiary companies?

OECD Principle III (A) All shareholders of the same series of a class should be treated equally. (2) Minority shareholders should be protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly, and should have effective means of redress. ICGN 2.11.1 Related party transactions Companies should have a process for reviewing and monitoring any related party transaction. A committee of independent directors should review significant related party transactions to determine whether they are in the best interests of the company and if so to determine what terms are fair. ICGN 2.11.2 Director conflicts of interest

The details of RPT need to be examined. Particular focus pertains to transactions between the PLC and other than wholly owned subsidiary. Financial assistance need not be in cash form only. An example of non-cash form of financial assistance is forgiving a debt. A company can be considered as giving financial assistance if the terms and conditions are not in normal commercial terms. Where there are loans to related parties, there should be an explicit statement that those loans are provided at prevailing market interest rate. In the absence of such a statement, financial assistance would be presumed.

Annual Report / Company website / announcement / Media

1 0

B.5.2 Does the company disclose that RPTs are conducted in such a way to ensure that they are fair and at arms' length?

Companies should have a process for identifying and managing conflicts of interest directors may have. If a director has an interest in a matter under consideration by the board, then the director should not participate in those discussions and the board should follow any further appropriate processes. Individual directors should be conscious of shareholder and public perceptions and seek to avoid situations where there might be an appearance of a conflict of interest. ICGN 8.5 Shareholder rights of action Shareholders should be afforded rights of action and remedies which are readily accessible in order to redress conduct of company which treats them inequitably. Minority shareholders should be afforded protection and remedies against abusive or oppressive conduct.

It must be clearly stated any RPT conducted is fair and at arms' length transactions, or "fair or normal commercial terms”. Otherwise, 'N'. The term fair and at arms' length for the purposes of this document refers to transactions in an open and unrestricted market and between a willing buyer and a willing seller who are knowledgeable, informed, and acting independently of each other. Normal commercial terms are stronger than normal business terms.


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PART C

ROLE OF STAKEHOLDERS


Points

C.1 The rights of stakeholders that are established by law or through mutual agreements are to be respected. Y N

Does the company disclose a policy that :

C.1.1 Stipulates the existence and scope of the company's efforts to address customers' health and safety?

OECD Principle IV (A): The rights of stakeholders that are established by law or through mutual agreements are to be respected. In all OECD countries, the rights of stakeholders are established by law (e.g. labour, business, commercial and insolvency laws) or by contractual relations. Even in areas where stakeholder interests are not legislated, many firms make additional commitments to stakeholders, and concern over corporate reputation and corporate performance often requires the recognition of broader interests. Global Reporting Initiative: Sustainability Report (C1.1 - C.15) International Accounting Standards 1: Presentation of Financial Statements

Customers expect products and services to perform their intended functions satisfactorily, and not pose a risk to health and safety. The term 'health and safety (including security)' includes both physical as well as non-physical aspects. Examples of such policies: a policy on product recall, a policy on customer refund for failure to deliver service as promised, a policy on health and safety in the premises of the company, a policy on anti-harassment to stakeholders. To assign 'Y', there should be at least one paragraph explaining the policy related to this issue.

Annual Report/Company website/Sustainability or Corporate Responsibility Report (CSR)

1 0

C.1.2 Explains supplier/contractor selection practice?

Disclosure of supplier/contractor selection practices may reveal if a company's considerations include both economic and non-economic factors, such as environment, social, or human rights. To assign 'Y', there should be at least one paragraph explaining the policy related to this issue.

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C.1.3 Describes the company's efforts to ensure that its value chain is environmentally friendly or is consistent with promoting sustainable development?

Value chain consists of inputs to the production process, the production process itself and the resulting output. Environmentally friendly/sustainable development means that the company not only complies with existing environmental regulation but also voluntarily employs value chain processes that reduce waste/pollution/damage to the environment. To assign 'Y', there should be at least one paragraph explaining the policy related to this issue.

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C.1.4 Elaborates the company's efforts to interact with the communities in which they operate?

To assign 'Y', there should be at least one paragraph explaining the company's efforts to interact with the relevant communities. There must be clear and stated goal(s) of the company's community programmes and thus, its interaction is not ad hoc or arbitrary. An example is a company's programme that focuses on three pillars: building human capital community outreach and strengthening economic value.

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C.1.5 Directs the company's anti-corruption programmes and procedures?

Corrupt practices include bribery, fraud, extortion, collusion, conflict of interest, and money laundering. In this context, these include an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do something that is dishonest, illegal, or a breach of trust in the conduct of the enterprise’s business (Transparency International in GRI). Thus, an anti-corruption policy should address programmes to

1 0

mitigate corrupt practices. Examples of anti-corruption programmes are conducting risk analysis on business unit to assess the potential for incidents of corruption within the unit, conducting training to employees on the company's policy and procedures on anti-corruption. To assign 'Y', there should be at least one paragraph explaining the policy related to this issue.

C.1.6 Describes how creditors' rights are safeguarded?

To assign 'Y', there should be at least one paragraph explaining the company's policy for safeguarding creditors’ rights. Policies on safeguarding creditors' rights among others include a) policy on collaterals of the company's assets, guarantees, and sub-ordinated debt, b) policy on debt covenants, c) protection in the case of default/distress, and d) disclosing information that enables external parties to evaluate the entity's objectives, policies, and processes for managing capital, such as elaborated in IAS 1:134-136.

Annual Report/Company website/financial statements

1 0

Does the company disclose the activities that it has undertaken to implement the above mentioned policies?

C.1.7 Customer health and safety OECD Principle IV (A) & Global Reporting Initiative

In the Annual Report/Company website and for each stakeholder, to assign 'Y', there should be at least one paragraph explaining activities that the company has undertaken to implement the policies.

Annual Report/company website/Sustainability or CR Report

1 0

C.1.8 Supplier/Contractor selection and criteria 1 0

C.1.9 Environmentally-friendly value chain 1 0

C.1.10 Interaction with the communities 1 1

C.1.11 Anti-corruption programmes and procedures

1 0

C.1.12 Creditors' rights In the Annual Report/Company website/financial statements, to assign 'Y', there should be at least one paragraph explaining activities that the company has undertaken to implement such policies.

Annual Report/Company website/financial statements

1 0

C.1.13 Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

OECD Principle V (A): Disclosure should include, but not be limited to, material information on: (7) Issues regarding employees and other stakeholders. Companies are encouraged to provide information on key issues relevant to employees and other stakeholders that may materially affect the long term sustainability of the company.

CR Report/Sustainability Report is a separate report from the Annual Report. CR Section/Sustainability Section is a section within the Annual Report that integrates all stakeholders issues in one section. Corporate responsibility includes social and environmental issues. If a company practices integrated reporting, this would satisfy the requirement for a "Y".

Annual Report/Company website/Sustainability or CR Report.

1 0

C.2 Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain effective redress for violation of their rights.

C.2.1 Does the company provide contact details via the company's website or Annual Report which stakeholders (e.g. customers, suppliers, general public etc.) can use to voice their concerns and/or complaints for possible violation of their rights?

OECD Principle IV (B): Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain effective redress for violation of their rights. The governance framework and processes should be transparent and not impede the ability of stakeholders to communicate and to obtain redress for the violation of rights.

To receive a score of one, contact details must include a dedicated phone number or e-mail address.

Company website/Annual Report. 1 0

C.3 Performance-enhancing mechanisms for employee participation should be permitted to develop.

C.3.1 Does the company explicitly disclose the health, safety, and welfare policy for its employees?

OECD Principle IV (C): Performance-enhancing mechanisms for employee participation should be permitted to develop. In the context of corporate governance, performance enhancing mechanisms for participation may benefit companies directly as well as indirectly through the readiness by employees to invest in firm specific skills. Firm specific skills are those skills/competencies that are related to production technology and/or organizational aspects that are unique to a firm. Examples of mechanisms for employee participation include: employee

To assign 'Y', there should be at least one or two paragraphs describing the company's policy regarding the health, safety, and welfare policy of its employees.

Annual Report/Company website/ separate CR or ESG report as the case may be

1 0

C.3.2 Does the company publish data relating to health, safety and welfare of its employees?

To assign 'Y', the company should publish rates of injury/occupational diseases, lost days/absenteeism, and benefits provided to full-time employees.


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C.3.3 Does the company have training and development programmes for its employees?

To assign 'Y', there should be at least one paragraph describing the company's training and development programmes for its employees.


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C.3.4 Does the company publish data on training and development programmes for its employees?

representation on boards; and governance processes such as works councils that consider employee viewpoints in certain key decisions. With respect to performance enhancing mechanisms, employee stock ownership plans or other profit sharing mechanisms are to be found in many countries.

To assign 'Y', the company should publish average hours of training per year per employee by employee category.


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C.3.5 Does the company have a reward/compensation policy that accounts for the performance of the company beyond short-term financial measures?

This refers to employees other than directors and CEO. An example of short-term financial measure is last year profit/EPS/Return on Investment. Examples of measures beyond short-term financial measures are: Balanced Scorecard, Employee Stock Ownership Plan with exercise price significantly higher than the current stock price.


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C.4 Stakeholders including individual employee and their representative bodies, should be able to freely communicate their concerns about illegal or unethical practices to the board and their rights should not be compromised for doing this.

C.4.1 Does the company have procedures for complaints by employees concerning illegal (including corruption) and unethical behaviour?

OECD Principle IV (E): Stakeholders, including individual employees and their representative bodies, should be able to freely communicate their concerns about illegal or unethical practices to the board and their rights should not be compromised for doing this.

To assign 'Y', the company should explicitly disclose the procedures.

Annual Report/Company website 1 0

C.4.2 Does the company have a policy or procedures to protect an employee/person who reveals illegal/unethical behavior from retaliation?

To assign 'Y', the company should explicitly disclose the procedures.


PART D

DISCLOSURE AND TRANSPARENCY


Points

D.1 Transparent ownership structure Y N D.1.1 Does the information on shareholdings reveal

the identity of beneficial owners, holding 5% shareholding or more?

OECD Principle V: Disclosure and Transparency (A) Disclosure should include, but not limited to, material information on: (3) Major share ownership and voting rights, including group structures, intra-group relations, ownership data, and beneficial ownership. ICGN 7.6 Disclosure of ownership ... the disclosure should include a description of the relationship of the company to other companies in the corporate group, data on major shareholders and any other information necessary for a proper understanding of the company's relationship with its public shareholders.

Assign 'Y' only if the identity of all beneficial owners holding more than 5% of issued shares is revealed. If the shareholder is deemed to be an institutional investor, the end beneficial owners need not be disclosed.

Annual Report 1 0

D.1.2 Does the company disclose the direct and indirect (deemed) shareholdings of major and/or substantial shareholders?

Assign "Y" only if the company explicitly discloses both direct and indirect shareholdings. If the substantial shareholder is a company, the ultimate owner of the company must be disclosed.

Annual Report 1 0

D.1.3 Does the company disclose the direct and indirect (deemed) shareholdings of directors (commissioners)?

Assign "Y" only if the company explicitly disclosed both direct and indirect shareholdings.

Annual Report 1 0

D.1.4 Does the company disclose the direct and indirect (deemed) shareholdings of senior management?

Senior management refers to the level below the board of directors, which typically refers to the C-level officers. Assign "Y" only if the company explicitly discloses both direct and indirect shareholdings.

Annual Report 1 0

D.1.5 Does the company disclose details of the subsidiaries, associates, joint ventures and special purpose enterprises/ vehicles (SPEs)/ (SPVs)?

Apart from identifying the subsidiary, associates, JV/SPE, the shareholding interest (%) must also be disclosed. If the company does not have any of these, then assign "N/A".

Annual Report 1 0

D.2 Quality of Annual Report Does the company's annual report disclose

the following items: "OECD Principle V (A): (1) The financial and operating results of the company; (2) Company objectives, including ethics, environment, and other public policy commitments; (3) Major share ownership and voting rights, including group structures, intra-group relations, ownership data, beneficial ownership; (4) Remuneration policy for members of the board and key executives, including their qualifications, the selection process, other company directorships and whether they are regarded as independent by the board; (6) Foreseeable risk factors, including risk management system; (7) Issues regarding employees and other stakeholders; (8) Governance structure and policies, in

D.2.1 Key risks The risks must be those beyond the financial risk. For example, product risk, country risk etc.

Annual Report 1 0

D.2.2 Corporate objectives Some explanation/details of the corporate objective is expected. Performance target or long-term goals are to be counted as objectives.

Annual Report 1 0

D.2.3 Financial performance indicators At least one financial performance indicator is expected. Examples include, ROI, ROE, ROS, and EPS.

Annual Report 1 0

D.2.4 Non-financial performance indicators At least one quantifiable non- financial performance indicator is expected. Examples include, customer satisfaction index, and market share.

Annual Report 1 0

D.2.5 Dividend policy particular, the content of any corporate governance code or policy and the process by which it is implemented. OECD Principle V (E): Channels for disseminating information should provide for equal, timely and cost-efficient access to relevant information by users. ICGN 2.4 Composition and structure of the board ICGN 2.4.1 Skills and experience ICGN 2.4.3 Independence ICGN 5.0 Remuneration ICGN 5.4 Transparency UK Corporate Governance Code (2010) A.1.2 - the number of meetings of the board and those committees and individual attendance by directors. CLSA-ACGA (2010) CG Watch 2010 - Appendix 2 (I) CG rules and practices (19) Disclose the exact remuneration of individual directors. "

To assign 'Y', the company must disclose a quantifiable dividend policy, for example a target dividend payout ratio/dividend per share.

Annual Report 1 0

D.2.6 Details of whistle-blowing policy Details on how the policy is implemented and/or monitoring process is expected.

Annual Report 1 0

D.2.7 Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

To assign "Y" only if all the specified biographical details are disclosed.

Annual Report 1 0

D.2.8 Training and/or continuing education programme attended by each director/commissioner

The training and/or continuing education must be for each director for the most recent financial year.

Annual Report 1 0

D.2.9 Number of board of directors/commissioners meetings held during the year

Self-explanatory Annual Report 1 0

D.2.10 Attendance details of each director/commissioner in respect of meetings held


D.2.11 Details of remuneration of the CEO and each member of the board of directors/commissioners

The total remuneration paid/payable to EACH director/commissioner must be revealed.

Annual Report 1 0

Corporate Governance Confirmation Statement

D.2.12 Does the Annual Report contain a statement confirming the company's full compliance with the code of corporate governance and where there is non-compliance, identify and explain reasons for each such issue?

OECD PRINCIPLE V (A) (8) UK CODE (JUNE 2010): Listing Rules 9.8.6 R (for UK incorporated companies) and 9.8.7 R (for overseas incorporated companies) state that in the case of a company that has a Premium listing of equity shares, the following items must be included in its Annual Report and accounts: a statement of how the listed company has applied the Main Principles set out in the UK CG Code, in a manner that would enable shareholders to evaluate how the principles have been applied; a statement as to whether the listed company has complied throughout the accounting period with all relevant provisions set out in the UK CG Code; or not complied throughout the accounting period with all relevant provisions set out in the UK CG Code, and if so, setting out: (i) those provisions, if any, it has not complied with; (ii) in the case of provisions whose requirements are of a continuing nature, the period within which, if any, it did not comply with some or all of those provisions; and (iii) the company’s reasons for non-compliance. ASX CODE: Under ASX Listing Rule 4.10.3, companies

The company has to specifically state that they have complied with all the guidelines in the code and identify specific deviations. Using terms such as "generally complied", "complied where applicable" or "complied with best practices" should not be taken as full compliance. The company may have one statement in the Annual Report confirming compliance or it may have the information in a tabular form indicating each principle and guideline and commenting on if they have complied or not. For those not complied with, an explanation should be given. Either method of disclosure can assign a 'Y'.

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are required to provide a statement in their Annual Report disclosing the extent to which they have followed the Recommendations in the reporting period. Where companies have not followed all the Recommendations, they must identify the Recommendations that have not been followed and give reasons for not following them. Annual Reporting does not diminish the company’s obligation to provide disclosure under ASX Listing Rule 3.1.

D.3. Disclosure of related party transactions (RPT)

D.3.1 Does the company disclose its policy covering the review and approval of material/significant RPTs?

OECD Principle V: Disclosure and Transparency (A) Disclosure should include, but not limited to, material information on: (5) Related party transactions ICGN 2.11.1 Related party transactions The company should disclose details of all material related party transactions in its Annual Report.

RPTs disclosed in Annual Report are deemed to be material/significant RPT as these transactions have satisfied the threshold level stipulated by the respective jurisdictions' rules/regulations/requirements on RPT. The task to review and/or approve these material/significant RPTs normally vests with the Audit Committee. Hence, to check the AC's terms of reference. Other details, including the process and procedures, are acceptable. Note: Any cases of non-compliance with prevailing rules/regulations/requirements pertaining to material/significant RPT is to be dealt as penalty as per item B.2.1(P).

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D.3.2 Does the company disclose the name of the related party and relationship for each material/significant RPT?


D.3.3 Does the company disclose the nature and value for each material/significant RPT?


D.4 Directors and commissioners dealings in shares of the company

D.4.1 Does the company disclose trading in the company's shares by insiders?

OECD Principle V (A): (3) Major share ownership and voting rights ICGN 3.5 Employee share dealing Companies should have clear rules regarding any trading by directors and employees in the company's own securities. ICGN 5.5 Share ownership Every company should have and disclose a policy concerning ownership of shares of the company by senior managers and executive directors with the objective of aligning the interests of these key executives with those of shareholders.

The disclosure should preferably be presented in tabular form showing the levels of holding at the beginning and at the end of the year, and also the aggregate changes (bought and sold) during the year. Other forms of disclosure are also accepted. Where there is no trading by insiders, companies should make a statement to that effect. Insiders refer to directors, members of management or key officers (senior members of management one level below the board), major shareholders or connected persons.

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D.5 External auditor and Auditor Report

D.5.1 Are audit fees disclosed? OECD Principle V (C): Self-explanatory Annual Report 1 0

Where the same audit firm is engaged for both audit and non-audit services,

An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects. OECD Principle V (D): External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit. ICGN 6.5 Ethical standards (Audit) The auditors should observe high-quality auditing and ethical standards. To limit the possible risk of possible conflicts of interest, non-audit services and fees paid to auditors for non-audit services should be both approved in advance by the audit committee and disclosed in the Annual Report.

D.5.2 Are the non-audit fees disclosed? Assign "Y" if the company discloses non audit fees or when the company discloses that the auditor does not provide non-audit services.

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D.5.3 Does the non-audit fees exceed the audit fees?

If non-audit fees are more than the audit fees, then assign 'Y'. If there is no disclosure of non-audit fees, assign "N/A"

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D.6 Medium of communications

Does the company use the following modes of communication?

OECD Principle V (E): Channels for disseminating information should provide for equal, timely and cost-

D.6.1 Quarterly reporting efficient access to relevant information by users. ICGN 7.1 Transparent and open communication Every company should aspire to transparent and open communication about its aims, its challenges, its achievements and its failures. ICGN 7.2 Timely disclosure Companies should disclose relevant and material information concerning themselves on a timely basis, in particular meeting market guidelines where they exist, so as to allow investors to make informed decisions about the acquisition, ownership obligations and rights, and sales of shares.

Not necessarily in the form of published reports.

Announcement /Company website

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D.6.2 Company website Self-explanatory Company website 1 0

D.6.3 Analyst's briefing Self-explanatory Annual Report / Announcement / Company website

1 0

D.6.4 Media briefings /press conferences Media releases, per se, are not media briefings/press conferences. There must be evidence of actual conduct of media briefings/press conference during the year under review.

Annual Report / Announcement / Company website

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D.7 Timely filing/release of annual/financial reports

D.7.1 Is the audited annual financial report released within 120 days from the financial year end?

OECD Principle V (C) OECD Principle V (E) ICGN 7.2 Timely disclosure

The number of days refers to the days between the company's financial year end and the date of announcement.

Announcement 1 0

D.7.2 Is the audited annual financial report released within 90 days from the financial year end?

ICGN 7.3 Affirmation of financial statements The board of directors and the corporate officers of the company should affirm at least annually the accuracy of the company's financial statements or financial accounts.

The number of days refers to the days between the company's financial year end and the date of announcement.

Announcement 1 0

D.7.3 Is the audited annual/financial report released within 60 days from the financial year end?

The number of days refers to the days between the company's financial year end and the date of release

Announcement 1 0

D.7.4 Is the true and fairness/fair representation of the annual financial statement/reports affirmed by the board of directors/commissioners and/or the relevant officers of the company?

Assign "Y" only if there is an opinion about true and fairness/fair representation.

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D.8 Company website

Does the company have a website disclosing up-to-date information on the following:

OECD Principle V (A) OECD Principle V (E) ICGN 7.1 Transparent and open communication ICGN 7.2 Timely disclosure

D.8.1 Business operations Details pertaining to the company's major product lines or business, including the types (local/export) and locations of major plants/operations.

Company website 1 0

D.8.2 Financial statements/reports (current and prior years)

The Annual Report/financial statements of the current and at least the immediate prior year must be available on the company's website. Otherwise, 'N'.

Company website 1 0

D.8.3 Materials provided in briefings to analysts and media

The said materials can include presentation slides/notes, and/or media/news releases.

Company website 1 0

D.8.4 Shareholding structure This refers to details in terms of major classifications of the company's shareholders and their shareholdings.

Company website 1 0

D.8.5 Group corporate structure Apart from identifying the subsidiary, associates, JV/SPE, the shareholding interest (%) must also be disclosed.

Company website 1 0

D.8.6 Downloadable annual report The Annual Report, in whole or in parts, should be in a downloadable format. The format is normally pdf.

Company website 1 0

D.8.7 Notice of AGM and/or EGM This can be in HTML format or downloadable documents (.e.g. PDF, MS-Word etc.).

Company website 1 0

D.8.8 Company's constitution (company's by-laws, memorandum and articles of association)

This can be in HTML format or downloadable documents (.e.g. pdf, ms-word etc.).

Company website 1 0

D.8.9 All of the above (D.8.1 to D.8.8) are available in English

Apart from the company website itself, the items D.8.1 to D.8.8 should also be available in the English language.

Company website 1 0

D.9 Investor relations

D.9.1 Does the company disclose the contact details (e.g. telephone, fax, and email) of the officer responsible for investor relations?

ICGN 7.1 Transparent and open communication

Dedicated contact details of a person or department responsible for investor relations would be sufficient.

Annual Report / Company website 1 0

PART E

BOARD RESPONSIBILITIES

Guiding Reference Assessment Guidance / Notes to Assessors Source Document/ Location of Information Points

E.1 Clearly defined board responsibilities and corporate governance policy Y N

E.1.1 Are the roles and responsibilities of the board of directors/commissioners clearly stated ?

OECD PRINCIPLE VI: The Responsibilities of the Board (D) The board should fulfill certain key functions, including: 1. Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestitures. 2. Monitoring the effectiveness of the company’s governance practices and making changes as needed. 3. Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning. 4. Aligning key executive and board remuneration with the longer term interests of the company and its shareholders. 5. Ensuring a formal and transparent board nomination and election process. 6. Monitoring and managing potential conflicts of interest of management, board members and shareholders, including

The Annual Report should clearly list out the duties of the board such as overseeing the business affairs of the company, overseeing the processes for evaluating the adequacy of internal controls and risk management systems, approving broad policies, strategies and objectives of the company, etc.

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misuse of corporate assets and abuse in related party transactions. 7. Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. 8. Overseeing the process of disclosure and communications.

E.1.2 Are the types of decisions requiring board of directors/commissioners' approval disclosed ?

OECD PRINCIPLE VI (D) This refers to the issues for which board approval is specifically required, such as acquisitions and disposals, share issuances, financial restructuring, etc. Watch for key words such as "approval", "reserved", "determines".


E.1.3 Does the company disclose its corporate governance policy / board charter?

OECD PRINCIPLE V: Disclosure and Transparency (A) Disclosure should include, but not be limited to, material information on: 8. Governance structures and policies, in particular, the content of any corporate governance code or policy and the process by which it is implemented.

The company should disclose its own corporate governance policy or board charter for this to be Y. The complete policy or a summary of the policy should be made available in the annual report or website. Stating that the company has adopted the code of governance set by the regulators and providing a link to this code should not be considered as having the company's own corporate governance policy.


E.2 Code of ethics or conduct

E.2.1 Does the company have a code of ethics or conduct?

OECD PRINCIPLE VI (C) The board should apply high ethical standards. It should take into account the interests of stakeholders. The board has a key role in setting the ethical tone of a company, not only by its own actions, but also in appointing and overseeing key executives and consequently the management in general. High ethical standards are in the long term interests of the company as a means to make it credible and trustworthy, not only in day-to-day operations but also with respect to longer term commitments. To make the objectives of the board clear and operational, many companies have found it useful to develop company codes of conduct based on, inter alia, professional standards and sometimes broader codes of behaviour. The latter might include a voluntary commitment by the company (including its subsidiaries) to comply with the OECD Guidelines for Multinational Enterprises which reflect all four principles contained in the ILO Declaration on Fundamental Labour Rights. Company-wide codes serve as a standard for conduct by both the board and key executives, setting the framework for the exercise of judgement in dealing with varying and often conflicting constituencies. At a minimum, the ethical code should set clear limits on the pursuit of private

Self-explanatory Annual Report/website 1 0

E.2.2 Are the details of the code of ethics or conduct disclosed?

The details of the code should be provided such as who it covers, what are the items being covered, how are breaches handled, etc. Just having a few sentences on the code of ethics in the Annual Report or website should not be given a Y.


E.2.3 Does the company disclose that all directors/commissioners, senior management and employees are required to comply with the code?

The company should disclose that all the three parties indicated should comply with the code. If it only applies to employees, this should be 'N'. Company can score “Y” if it has separate code of ethics for directors.


E.2.4 Does the company discloses how it implements and monitors compliance with the code of ethics or conduct?

interests, including dealings in the shares of the company. An overall framework for ethical conduct goes beyond compliance with the law, which should always be a fundamental requirement.

This could involve items such as: - communicating the code to all existing and new employees and directors - making the code available on the company intranet for ease of access - requiring all parties to declare annually that they have complied with the code of ethics or conduct


E.3 Corporate Vision/Mission

E.3.1 Does the board of directors/commissioners periodically review and approve the vision and mission?

While not explicitly stated in most codes of corporate governance, this is consistent with most codes specifying the roles of the board as including setting the direction and providing strategic leadership.

The company should specifically state that the board has reviewed and approved the vision and mission at least once during the last 5 years. Disclosing only the company's vision and mission should not be given a 'Y'.


E.4 Board Structure & Composition

E.4.1 Does the board of directors/ commissioners comprise at least five members and no more than 12 members? (i.e., between 5 - 12 members)

UK Code B.1 Supporting Principle states: The board should be of sufficient size that the requirements of the business can be met and changes to the board's composition and that of its committees can be managed without undue disruption, and should not be so large as to be unwieldy. Most codes of corporate governance specify that the board should be of appropriate size but should not be too large.

The range of 5 to 12 is based on companies needing enough board members to ensure adequate range of competencies and diversity on the one hand, and not being too large as to become cumbersome on the other. Empirically, the average board size of large companies in developed markets is between 10 to 11, and there is substantial research that overly large boards are associated with lower value. Some companies will have board changes during the financial year. The number of board members as at the date the Annual Report has been published should be taken into account when answering this question. However, directors proposed for appointment based on shareholder approval at the AGM should not be included. In addition, all questions which uses information on number of directors (such as board size and percentage of independent directors) should exclude alternate directors.

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E.4.2 Do independent, non-executive directors/commissioners number at least three and make up more than 50% of the board of directors/commissioners?

OECD PRINCIPLE VI (E) In order to exercise its duties of monitoring managerial performance, preventing conflicts of interest and balancing competing demands on the corporation, it is essential that the board is able to exercise objective judgement. In the first instance this will mean independence and objectivity with respect to management with important implications for the composition and structure of the board. Board independence in these circumstances usually requires that a sufficient number of board members will need to be independent of management. The ASX Code recommends at least a majority of independent directors, while the UK Code recommends at least half of the board, excluding the Chairman, be independent directors. The minimum of three independent directors is to ensure that companies with small boards have enough independent directors (note that stock exchange rules often require at least two independent directors).

The percentage of independent directors should be computed by dividing the number of independent directors by the total number of directors. To score a Y, this percentage should be greater than 50% and the number of independent directors must also be at least 3.

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E.4.3 Does the company provide a definition of independence in its Annual Report?

OECD PRINCIPLE VI: (E) The board should be able to exercise objective independent judgement on corporate affairs. In defining independent members of the board, some principles of corporate governance have specified quite detailed presumptions for nonindependence which are frequently reflected in listing requirements. While establishing necessary conditions, such ‘negative’ criteria defining when an individual is not regarded as independent can usefully be complemented by ‘positive’ examples of qualities that will increase the probability of effective independence. Independent board members can contribute significantly to the decision-making of the board. They can bring an objective view to the evaluation of the performance of the board and management.

If the company only states that they follow the definition of independence given in the Code/ Listing Requirements, this should be 'N'. The company should give a definition such as: independent from management or from substantial shareholders or has no relationship with the company, etc.

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E.4.4 Are the independent directors/commissioners independent of management and major/ substantial shareholders?

OECD PRINCIPLE VI (E) In order to exercise its duties of monitoring managerial performance, preventing conflicts of interest and balancing competing demands on the corporation, it is essential that the board is able to exercise objective judgement. In the first instance this will mean independence and objectivity with respect to management with important implications for the composition and structure of the board. Board independence

If they are, the company should clearly state this in the Annual Report that ALL the independent directors are independent of management and major/substantial shareholders. In addition, It is a 'N' where one or more of the independent directors are closely linked to a major/ substantial shareholder (e.g., business associates) even if the company asserts independence.

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in these circumstances usually requires that a sufficient number of board members will need to be independent of management. The variety of board structures, ownership patterns and practices in different countries will thus require different approaches to the issue of board objectivity. In many instances objectivity requires that a sufficient number of board members not be employed by the company or its affiliates and not be closely related to the company or its management through significant economic, family or other ties. This does not prevent shareholders from being board members. In others, independence from controlling shareholders or another controlling body will need to be emphasised, in particular if the exante rights of minority shareholders are weak and opportunities to obtain redress are limited. This has led to both codes, and the law in some jurisdictions, to call for some board members to be independent of dominant shareholders, independence extending to not being their representative or having close business ties with them.

E.4.5 Does the company have a term limit of nine years or less for its independent directors/commissioners?

Previous GN: ICGN: 2.4.3 Independence Not all non-executive directors will be fully independent of the executives or from dominant shareholders. Among the factors which can impact the independence of non-executive directors are the following:(a) former employment with the company, unless there is an appropriate period of years between the end of the executive role and joining the board;(b) personal, business or financial relationships between the directors and the company, its key executives or large shareholders;(c) length of tenure; and (d) the receipt of incentive pay which aligns the director’s interests with those of the executives rather than the shareholders. While these are important factors, independence is more than anything a state of mind, requiring a disciplined and challenging approach to the role. Every company should make substantive disclosures as to its definition of independence and its determination as to whether each member of its board is independent. Any deviation from local best practice on independence should be disclosed and explained. Notwithstanding any perceived lack of independence, all directors are fiduciaries and so are obliged to exercise objective judgment in the best interests of the company. All are expected to bring independence of mind to board decisions.

To score a 'Y', term limit should be no more than nine years.


UK CG Code (June 2010): B.1.1 The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director has served on the board for more than nine years from the date of their first election.B.2.3 Non-executive directors should be appointed for specified terms subject to re-election and to statutory provisions relating to the removal of a director. Any term beyond six years for a non-executive director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the board. Current: UK CODE (JUNE 2010): Non-executive directors should be appointed for specified terms subject to re-election and to statutory provisions relating to the removal of a director. Any term beyond six years for a non-executive director should be subject to particularly rigorous review, and should take into account the need for progressive refreshing of the board and to succession for appointments to the board and to senior management, so as to maintain an appropriate balance of skills and experience within the company and on the board.

E.4.6 Has the company set a limit of five board seats in publicly-listed companies that an individual director/commissioner may hold simultaneously?

OECD PRINCIPLE VI (E) (3) Board members should be able to commit themselves effectively to their responsibilities. Service on too many boards can interfere with the performance of board members. Companies may wish to consider whether multiple board memberships by the same person are compatible with effective board performance and disclose the information to shareholders.

This refers to directorships in listed companies and not private companies. The limit of 5 is considered reasonable in light of regulators, institutional investors, and shareholder and director bodies specifying around five or six as the maximum number.

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E.4.7 Does the company have any independent directors/commissioners who serve on more than five boards of publicly-listed companies?

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E.4.8 Does the company have any executive directors who serve on more than two boards of listed companies outside of the group?

This refers to directorships in listed companies and not private companies. Executive directors are expected to focus their attention on the company/group in which they are employed.

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E.5 Skills and Competencies

E.5.1 Does at least one non-executive director/commissioner have prior working experience in the major industry the company is operating in?

ICGN: 2.4.3 Independence Alongside appropriate skill, competence and experience, and the appropriate context to encourage effective behaviours, one of the principal features of a well-governed corporation is the exercise by its board of directors of independent judgement, meaning judgement in the best interests of the corporation, free of any external influence on any individual director, or the board as a whole. In order to provide this independent judgement, and to generate confidence that independent judgement is being applied, a board should include a strong presence of independent non-executive directors with appropriate competencies including key industry sector knowledge and experience. There should be at least a majority of independent directors on each board.

If a person has only held a non-executive director position in a company in the same industry, that would not be considered as having industry experience.

Annual Report Corporate website or the Exchange website may need to be used to identify the major industry the company is in

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E.5.2 Does the company disclose a board of directors/commissioners diversity policy?

ASX Code Recommendation 3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them. Regulations and codes of corporate governance in many developed markets now incorporate board diversity as a consideration in board composition

The company has to clearly disclose the policy for a 'Y' to be given. Just stating that they have a board diversity policy should not be taken as 'Y'. Diversity can refer to diversity in ethnicity, age or gender.


E.6 Board Chairman

E.6.1 Do different persons assume the roles of chairman and CEO?

OECD PRINCIPLE VI (E) The board should be able to exercise objective independent judgement on corporate affairs. In a number of countries with single tier board systems, the objectivity of the board and its independence from management may be strengthened by the separation of the role of chief executive and chairman, or, if these roles are combined, by designating a lead non-executive director to convene or chair sessions of the outside directors. Separation of the two posts may be regarded as good practice, as it can help to achieve an appropriate balance of power, increase accountability and improve the board’s capacity for decision making independent of management. UK Code (June 2010) A.3.1 The chairman should on appointment meet the independence criteria set out in B.1.1 below. A chief executive should not go on to be chairman of the same company. If, exceptionally, a board decides that a chief executive should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next Annual Report. ASX Code Recommendation 3.2 The chief executive officer should not go on

If the chairman is an executive chairman, assign a "N"


E.6.2 Is the chairman a non-executive director/commissioner?


E.6.3 Is the chairman an independent director/commissioner?

Please note that while all independent directors are non-executive, not all non-executive directors are independent. If the Annual Report/website only states that the chairman is non-executive and no other information is given, this should be 'N'.


E.6.4 Is the chairman the current or immediate past CEO?


to become chair of the same company. A former chief executive officer will not qualify as an “independent” director unless there has been a period of at least three years between ceasing employment with the company and serving on the board.

E.6.5 Are the role and responsibilities of the chairman disclosed?

ICGN: 2.5 Role of the Chair The chair has the crucial function of setting the right context in terms of board agenda, the provision of information to directors, and open boardroom discussions, to enable the directors to generate the effective board debate and discussion and to provide the constructive challenge which the company needs. The chair should work to create and maintain the culture of openness and constructive challenge which allows a diversity of views to be expressed...The chair should be available to shareholders for dialogue on key matters of the company’s governance and where shareholders have particular concerns.

The company should give detailed information regarding the role and responsibilities of the chairman instead of one or two statements. For example, stating that the chairman is responsible for board proceedings without disclosing any other information should not be taken as 'Y'.


E.7 Board meetings and attendance

E.7.1 Are the board of directors/commissioners meetings scheduled before or at the beginning of the year?

Scheduling board meetings before or at the beginning of the year would allow directors to plan ahead to attend such meetings, thereby helping to maximise participation, especially as non-executive directors often have other commitments. Additional ad hoc meetings can always be scheduled if and when necessary. It is common practice for boards in developed markets to schedule

Companies which merely state that they held a certain number of scheduled meetings should be scored as 'N', as they may not be scheduled well in advance.

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meetings in this way.

E.7.2 Does the board of directors/commissioners meet at least six times per year?

WORLDBANK PRINCIPLE 6 (VI.I.24) Does the board meet at least six times per year? New GN: INDO SCORECARD E.10. How many meetings were held in the past year? If the board met more than six times, the firm earns a 'Y' score. If four to six meetings, the firm was scored as ’fair’, while less than four times was scored as ‘N’

This refers to meetings held during the financial year. Any meetings held after the financial year should not be taken into account. For example, if the financial year end is 31 December 2010 and the company held a meeting in January 2011, the meeting in January should not be included in the total. A company which merely discloses a policy of meeting six or more times a year should be scored a "N" unless it is clear that the board did meet at least 6 times.

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E.7.3 Has each of the directors/commissioners attended at least 75% of all the board meetings held during the year?

OECD PRINCIPLE VI (E) (3) Board members should be able to commit themselves effectively to their responsibilities. Specific limitations may be less important than ensuring that members of the board enjoy legitimacy and confidence in the eyes of shareholders. Achieving legitimacy would also be facilitated by the publication of attendance records for individual board members (e.g. whether they have missed a significant number of meetings) and any other work undertaken on behalf of the board and the associated remuneration.

Attendance by alternate directors should be disregarded.

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E.7.4 Does the company require a minimum quorum of at least 2/3 for board decisions?

WORLDBANK PRINCIPLE 6 (VI.I.28) Is there a minimum quorum of at least 2/3 for board decisions to be valid?

Self-explanatory Annual Report/website (In board charter/articles)

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E.7.5 Did the non-executive directors/commissioners of the company meet separately at least once during the year without any executives present?

WORLDBANK PRINCIPLE 6 (VI.E.1.6) Does the corporate governance framework require or encourage boards to conduct executive sessions?

The company has to specifically state that the non-executive directors/commissioners met at least once during the year without the presence of executive directors. Statements containing "expected to meet" should not be taken as Y. Companies which have a totally non-executive board should be scored a "Y".

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E.8 Orientation Programme for New Directors

E.8.1 Does the company have orientation programmes for new directors/commissioners?

This item is in most codes of corporate governance.

Just disclosing that the company has an orientation programme is not sufficient. Details on what the programme contains should be disclosed.

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E.9 Director Training

E.9.1 Does the company have a policy that encourages directors/commissioners to attend on-going or continuous professional education programmes?

OECD PRINCIPLE VI (E) (3) Board members should be able to commit themselves effectively to their responsibilities. In order to improve board practices and the performance of its members, an increasing number of jurisdictions are now encouraging companies to engage in board training and voluntary self-evaluation that meets the needs of the individual company. This might include that board members acquire appropriate skills upon appointment, and thereafter remain abreast of relevant new laws, regulations, and changing commercial risks through in-house training and external courses.

Stating that the company has a training budget should be accorded a 'Y'.

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E.10 Access to information

E.10.1

Are board papers for board of directors/commissioners meetings provided to the board at least five business days in advance of the board meeting?

OECD PRINCIPLE VI (F) In order to fulfil their responsibilities, board members should have access to accurate, relevant and timely information. Board members require relevant information on a timely basis in order to support their decision-making. Non-executive board members do not typically have the same access to information as key managers within the company. The contributions of non-executive board members to the company can be enhanced by providing access to certain key managers within the company such as, for example, the company secretary and the internal auditor, and recourse to independent external advice at the expense of the company. In order to fulfill their responsibilities, board members should ensure that they obtain accurate, relevant and timely information. WORLDBANK PRINCIPLE 6 (VI.F.2) Does such information need to be provided to the board at least five business days in advance of the board meeting?

The company should clearly disclose that board papers are provided to board members at least five business days before the board meeting. If the company states "on average" or only 5 days, without specifying it is 5 business or clear days, this should be N.

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E.10.2

Does the company secretary play a significant role in supporting the board in discharging its responsibilities?

OECD PRINCIPLE VI (F) ICSA Guidance on the Corporate Governance Role of the Company Secretary

The company should clearly disclose the duties of the company secretary such as assisting the Chairman in setting the board agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory and regulatory changes, etc.

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E.10.3

Is the company secretary trained in legal, accountancy or company secretarial practices?

WORLDBANK PRINCIPLE 6 (VI.D.2.12) Do company boards have a professional and qualified company secretary?

The company has to disclose the educational/professional qualifications and work experience of the company secretary for this to be Y. The qualifications and experience need not be related to secretarial duties. Company Secretary must have either: i. degree/professional qualification in legal or accountancy; ii. chartered secretary qualification; or iii. basic degree coupled with corporate secretarial training.

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E.11 Nominating Committee

E.11.1 Does the company have a Nominating Committee (NC)?

OECD PRINCIPLE II (C) (3) Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. Shareholders should be able to make their views known on the remuneration policy for board members and key executives. The equity component of compensation schemes for board members and employees should be subject to shareholder approval.

Some companies may not have a separate committee handling nomination matters. For such companies, Q E.11.2 - 11.7 should be taken as N/A = Not Applicable. However, points should still be given for nomination matters such as election or re-election of directors, performance assessment of board, directors and committees, etc. regardless of whether a committee or the board is handling them. Note: Some companies may have a combined

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With respect to nomination of candidates, boards in many companies have established Nominating Committees to ensure proper compliance with established nomination procedures and to facilitate and coordinate the search for a balanced and qualified board. It is increasingly regarded as good practice in many countries for independent board members to have a key role on this committee. To further improve the selection process, the Principles also call for full disclosure of the experience and background of candidates for the board and the nomination process, which will allow an informed assessment of the abilities and suitability of each candidate. OECD PRINCIPLE VI (E) (1) Boards should consider assigning a sufficient number of non-executive board members capable of exercising independent judgement to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are ensuring the integrity of financial and non-financial reporting, the review of related party transactions, nomination of board members and key executives, and board remuneration.

nominating and governance committee or a combined nominating and Remuneration Committee. If the duties of the committee in handling nomination matters such as board appointments, re-election and evaluation are disclosed, the questions should be answered as if there are two separate nominating and Remuneration Committees. In this instance, Q E.11.2 - 11.7 should be answered using the composition and meetings of the combined committee.

E.11.2 Does the Nominating Committee comprise of a majority of independent directors/commissioners?

The Annual Report should identify who the members of the Nominating Committee are and of these, who the independent directors are. If more than 50% of the committee comprises of independent directors, this is Y.

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E.11.3 Is the chairman of the Nominating Committee an independent director/commissioner?

This item is in most codes of corporate governance.

The Annual Report should clearly indicate that the chairman of the Nominating Committee is independent.

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E.11.4 Does the company disclose the terms of reference/ governance structure/charter of the Nominating Committee?

OECD PRINCIPLE VI (E) (2) When committees of the board are established, their mandate, composition and working procedures should be well defined and disclosed by the board. While the use of committees may improve the work of the board they may also raise questions about the collective responsibility of the board and of individual board members. In order to evaluate the merits of board committees it is therefore important that the market receives a full and clear picture of their purpose, duties and composition. Such information is particularly important in an increasing number of jurisdictions where boards are establishing independent Audit Committees with powers to oversee the relationship with the external auditor and to act in many cases independently. Other such committees include those dealing with nomination and compensation. The accountability of the rest of the board and the board as a whole should be clear. Disclosure should not extend to committees set up to deal with, for example, confidential commercial transactions

This refers to the responsibilities of the Nominating Committee. The company should clearly list these out.


E.11.5 Does the Annual Report disclose the number of Nominating Committee meetings held?

This refers to meetings held during the financial year. Any meetings held after the financial year should not be taken into account. For example, if the financial year end is 31 December 2010 and the company held a meeting in January 2011, the meeting in January should not be included in the total.

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E.11.6 Did the Nominating Committee meet at least twice during the year?


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E.11.7 Is the attendance of members at Nominating Committee meetings disclosed?

Given the responsibilities of the NC spelt out in codes of corporate governance, the NC is unlikely to be fulfilling these responsibilities effectively if it is only meeting once a year. Globally, the NC of large companies would meet several times a year.

This would normally be in tabular form showing the attendance by each Nominating Committee member. However, if the company states there was 100% attendance, this can still be taken as Y.

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E.12 Board Appointments and Re-Election

E.12.1 (switch with E.12.2)

Does the company disclose the criteria used in selecting new directors/commissioners?

OECD PRINCIPLE II (C) (3) To further improve the selection process, the Principles also call for full disclosure of the experience and background of candidates for the board and the nomination process, which will allow an informed assessment of the abilities and suitability of each candidate. OECD Principle VI (D) (5) Ensuring a formal and transparent board nomination and election process. These Principles promote an active role for shareholders in the nomination and election of board members. The board has an essential role to play in ensuring that this and other aspects of the nominations and election process are respected. First, while actual procedures for nomination may differ among countries, the board or a nomination committee has a special responsibility to make sure that established procedures are transparent and respected. Second, the board has a key role in identifying potential members for the board with the appropriate knowledge, competencies and expertise to

The company should clearly list out the criteria being used to select new directors such as integrity, core competencies, ability to commit time to the company, past track record, etc.


E.12.2 (switch with E.12.1)

Does the company disclose the process followed in appointing new directors/commissioners?

This refers to how the search for new directors and assessment of suitability of directors are conducted. If the company only discloses that the Nominating Committee is responsible for assessing candidates and nominating them to the board, this should not be taken as Y.


complement the existing skills of the board and thereby improve its value-adding potential for the company. In several countries there are calls for an open search process extending to a broad range of people.

E.12.3 Are all the directors/commissioners subject to re-election at least once every three years?

ICGN: 2.9.1 Election of directors: Directors should be conscious of their accountability to shareholders, and many jurisdictions have mechanisms to ensure that this is in place on an ongoing basis. There are some markets however where such accountability is less apparent and in these each director should stand for election on an annual basis. Elsewhere directors should stand for election at least once every three years, though they should face evaluation more frequently. WORLDBANK PRINCIPLE 6 (VI.I.18) Can the re-election of board members be staggered over time? (Staggered boards are those where only a part of the board is re-elected at each election, e.g. only 1/3 of directors are re-elected every year.)

All directors, including the company CEO or managing director if he/she is a member of the board, should be subject to re-election at least once every three years. If any of the executive directors are excluded from this requirement, this should be 'N'.


E.13 EO/Executive Management Appointments and Performance

E.13.1 Does the company disclose how the board of directors/commissioners plans for the succession of the CEO/Managing Director/President and key management?

OECD PRINCIPLE VI (D) (3) Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning. In two tier board systems the supervisory board is also responsible for appointing the management board which will normally comprise most of the key executives.

Succession planning refers to the process by which a company has to identify and develop employees with the potential to fill key positions in the company. The company has to disclose the process that is followed or disclose its succession planning policy for it to be given a Y. Simply stating they have a succession planning policy should not be accorded as 'Y'.


E.13.2 Does the board of directors/commissioners conduct an annual performance assessment of the CEO/Managing Director/President?

OECD PRINCIPLE VI (D) (2). Monitoring the effectiveness of the company’s governance practices and making changes as needed. Monitoring of governance by the board also includes continuous review of the internal structure of the company to ensure that there are clear lines of accountability for management throughout the organisation. In addition to requiring the monitoring and disclosure of corporate governance practices on a regular basis, a number of countries have moved to recommend or indeed mandate self-assessment by boards of their performance as well as performance reviews of individual board members and the CEO/Chairman.

The company should clearly state that the performance of the CEO has been assessed. If the company only states that an assessment of individual board members has been conducted, this is a 'N'.

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E.14 Board Appraisal

E.14.1 Is an annual performance assessment conducted of the board of directors/commissioners?

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E.14.2 Does the company disclose the process followed in conducting the board assessment?

This should involve disclosure of the key steps involved in undertaking the board assessment. If the company only states that the NC is responsible for conducting the assessment, this is 'N'.


E.14.3 Does the company disclose the criteria used in the board assessment?

The company has to clearly disclose the criteria that is used to assess the board's performance such as board composition and independence, board processes, financial targets, etc.


E.15 Director Appraisal

E.15.1 Is an annual performance assessment conducted of individual director/commissioner?

OECD PRINCIPLE VI (D) (2) The company has to disclose that the directors' performance assessment in the capacity as a board member was conducted during the financial year.

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E.15.2 Does the company disclose the process followed in conducting the director/commissioner assessment?

This should involve disclosure of the key steps involved in undertaking the individual director assessment. If the company only states that the NC is responsible for conducting the assessment, this is 'N'.


E.15.3 Does the company disclose the criteria used in the director/commissioner assessment?

The company has to clearly disclose the criteria that is used to assess individual director performance such as attendance and active participation at meetings, knowledge and competencies, etc.


E.16 Committee Appraisal

E.16.1 Is an annual performance assessment conducted of the board of directors/commissioners committees?

UK CODE (JUNE 2010) B.6 Evaluation: The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.


E.17 Remuneration Committee/ Compensation Committee

E.17.1 Does the company have a Remuneration Committee?

OECD PRINCIPLE VI (D) (4) Aligning key executive and board remuneration with the longer term interests of the company and its shareholders. It is considered good practice in an increasing number of countries that remuneration policy and employment

Some companies may not have a separate committee handling remuneration matters. For such companies, Q E.17.2 - 17.7 should be taken as N/A = Not Applicable. However, points should still be given for remuneration matters (covered under E.18) regardless of whether a committee or the board is handling them.

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contracts for board members and key executives be handled by a special committee of the board comprising either wholly or a majority of independent directors. There are also calls for a Remuneration Committee that excludes executives that serve on each others’ Remuneration Committees, which could lead to conflicts of interest.

Note: Some companies will have a combined nominating and Remuneration Committee. If the duties of the committee in handling remuneration matters is disclosed, the questions should be answered as if there are two separate nominating and Remuneration Committees. In this instance, Q E.17.2 - 17.7 should be answered using the composition and meetings of the combined committee.

E.17.2 Does the Remuneration Committee comprise of a majority of independent directors/commissioners?

The Annual Report should identify who the members of the Remuneration Committee are and of these, who the independent directors are. If more than 50% of the committee comprises of independent directors, this is Y.

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E.17.3 Is the chairman of the Remuneration Committee an independent director/commissioner?

The Annual Report should clearly indicate that the chairman of the Remuneration Committee is independent.

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E.17.4 Does the company disclose the terms of reference/ governance structure/ charter of the Remuneration Committee?

OECD PRINCIPLE VI (E) (2) When committees of the board are established, their mandate, composition and working procedures should be well defined and disclosed by the board. While the use of committees may improve the work of the board they may also raise questions about the collective responsibility

This refers to the responsibilities of the Remuneration Committee. The company should clearly list these out.


E.17.5 Does the Annual Report disclose the number of Remuneration Committee meetings held?

of the board and of individual board members. In order to evaluate the merits of board committees it is therefore important that the market receives a full and clear picture of their purpose, duties and composition. Such information is particularly important in an increasing number of jurisdictions where boards are establishing independent Audit Committees with powers to oversee the relationship with the external auditor and to act in many cases independently. Other such committees include those dealing with nomination and compensation. The accountability of the rest of the board and the board as a whole should be clear. Disclosure should not extend to committees set up to deal with, for example, confidential commercial transactions Given the responsibilities of the Remuneration Committee (RC) which are spelt out in codes of corporate governance, the RC is unlikely to be fulfilling these responsibilities effectively if it only meets once a year. Globally, the RC of large companies would meet several times a year.


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E.17.6 Did the Remuneration Committee meet at least twice during the year?


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E.17.7 Is the attendance of members at Remuneration Committee meetings disclosed?

This would normally be in tabular form showing the attendance by each Remuneration Committee member. However, if the company states there was 100% attendance, this can still be taken as Y.

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E.18 Remuneration Matters

E.18.1 Does the company disclose its remuneration (fees, allowances, benefit-in-kind and other emoluments) policy (i.e. the use of short term and long term incentives and performance measures) for its executive directors and CEO?

OECD PRINCIPLE VI (D) (4) Aligning key executive and board remuneration with the longer term interests of the company and its shareholders. In an increasing number of countries it is regarded as good practice for boards to develop and disclose a remuneration policy statement covering board members and key executives. Such policy statements specify the relationship between remuneration and performance, and include measurable standards that emphasize the longer run interests of the company over short term considerations. Policy statements generally tend to set conditions for payments to board members for extra-board activities, such as consulting. They also often specify terms to be observed by board members and key executives about holding and trading the stock of the company, and the procedures to be followed in granting and re-pricing of options. In some countries, policy also covers the payments to be made when terminating the contract of an executive.

The company should disclose all three (i.e., short-term incentives, long-term incentives and the performance measures) for this to be Y.


E.18.2 Is there disclosure of the fee structure for non-executive directors/commissioners?

UK CODE (JUNE 2010) D.1.3 Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role. Disclosure of fee structure for non-executive directors allows shareholders to assess if these directors are remunerated in an appropriate manner, for example, whether

This refers to the amount being paid to non-executive directors for being a committee chairman, committee member, attendance, etc. The breakdown in fees should be disclosed but it need not be the fees of each director by name.

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they are paid for taking on additional responsibilities and contributions, such as chairing committees.

E.18.3 Do the shareholders or the Board of Directors approve the remuneration of the executive directors and/or the senior executives?

Previous GN: OECD Principle II (C) (3) Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. Shareholders should be able to make their views known on the remuneration policy for board members and key executives. The equity component of compensation schemes for board members and employees should be subject to shareholder approval. UK CG Code (June 2010) (D.2.3) The board itself or, where required by the Articles of Association, the shareholders should determine the remuneration of the non-executive directors within the limits set in the Articles of Association. Where permitted by the Articles, the board may however delegate this responsibility to a committee, which might include the chief executive. Current: OECD PRINCIPLE VI. (D.4) The Board should fulfill certain key functions including aligning key executive and board remuneration with the longer term interests

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of the company and its shareholders. ICGN 2.3 (D) and (E) D. Selecting, remunerating, monitoring and where necessary replacing key executives and overseeing succession planning. E. Aligning key executives and Board remuneration with the longer term interest of the company and its shareholders.

E.18.4 Do independent non-executive directors/commissioners receive options, performance shares or bonuses?

UK CODE (JUNE 2010) (D.1.3) Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role. Remuneration for non-executive directors should not include share options or other performance-related elements. If, by exception, options are granted, shareholder approval should be sought in advance and any shares acquired by exercise of the options should be held until at least one year after the non-executive director leaves the board. Holding of share options could be relevant to the determination of a non-executive director’s independence (as set out in provision B.1.1). ASX CODE Box 8.2: Guidelines for non-executive director remuneration Companies may find it useful to consider the following when considering non-executive director remuneration: 1. Non-executive directors should normally

Note that the use of options, performance shares or bonuses for non-executive directors is not considered to be good practice. The annual report should clearly indicate that the independent directors receive options, performance shares or bonuses. In the absence of any such disclosure, this should be taken as N.

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be remunerated by way of fees, in the form of cash, noncash benefits, superannuation contributions or salary sacrifice into equity; they should not normally participate in schemes designed for the remuneration of executives. 2. Non-executive directors should not receive options or bonus payments. 3. Non-executive directors should not be provided with retirement benefits other than superannuation.

E.19 Audit Committee

E.19.1 Does the company have an Audit Committee?

OECD PRINCIPLE VI (E) (1) Boards should consider assigning a sufficient number of non-executive board members capable of exercising independent judgement to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are ensuring the integrity of financial and non-financial reporting, the review of related party transactions, nomination of board members and key executives, and board remuneration.


E.19.2 Does the Audit Committee comprise entirely of non-executive directors/commissioners with a majority of independent directors/commissioners?

OECD PRINCIPLE VI (E) (2) When committees of the board are established, their mandate, composition and working procedures should be well defined and disclosed by the board. While the use of committees may improve the work of the board they may also raise questions about the collective responsibility of the board and of individual board members. In order to evaluate the merits of board committees it is therefore important that the market receives a full and clear picture of their purpose, duties and composition. Such information is particularly important in the increasing number of jurisdictions where boards are establishing independent Audit Committees with powers to oversee the relationship with the external auditor and to act in many cases independently. Other such committees include those dealing with nomination and compensation. The accountability of the rest of the board and the board as a whole should be clear. Disclosure should not extend to committees set up to deal with, for example, confidential commercial transactions.

The Annual Report should clearly identify who the members of the Audit Committee are and of these, who the non-executive and independent directors are. If the committee contains no executive directors and more than 50% of the committee comprises of independent directors, this is Y. External members who satisfy the independence criteria can be considered as an independent member of the Audit Committee.

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E.19.3 Is the chairman of the Audit Committee an independent director/commissioner?

The Annual Report should clearly indicate that the chairman of the Audit Committee is independent.

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E.19.4 Does the company disclose the terms of reference/governance structure/charter of the Audit Committee?

This refers to the responsibilities of the Audit Committee. The company should clearly list these out.


E.19.5 Does the Annual Report disclose the profile or qualifications of the Audit Committee members?

Most codes specify the need for accounting/finance expertise or experience.

The Annual Report should disclose information such as education qualifications and/or work experience of each Audit Committee member for this to be Y.

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E.19.6 Does at least one of the independent directors/commissioners of the committee have accounting expertise (accounting qualification or experience)?

UK CODE (JUNE 2010) C.3.1. The board should satisfy itself that at least one member of the Audit Committee has recent and relevant financial experience. As many of the key responsibilities of the Audit Committee are accounting-related, such as oversight of financial reporting and audits, it is important to have someone specifically with accounting expertise, not just general financial expertise.

Accounting expertise refers to having an accounting qualification such as a degree in accountancy or a professional qualification such as CPA or ACCA and/or having accounting experience such as working as an accountant, auditor, etc.

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E.19.7 Does the Annual Report disclose the number of Audit Committee meetings held?

OECD PRINCIPLE VI (E) (2) This refers to meetings held during the financial year. Any meetings held after the financial year should not be taken into account. For example, if the financial year end is 31 December 2010 and the company held a meeting in January 2011, the meeting in January should not be included in the total.

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E.19.8 Did the Audit Committee meet at least four times during the year?


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E.19.9 Is the attendance of members at Audit Committee meetings disclosed?

This would normally be in tabular form showing the attendance by each Audit Committee member. However, if the company states there was 100% attendance, this can still be taken as Y.

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E.19.10

Does the Audit Committee have primary responsibility for recommendation on the appointment, re-appointment and removal of the external auditor?

UK CODE (JUNE 2010) C.3.6 The Audit Committee should have primary responsibility for making a recommendation on the appointment, reappointment and removal of the external auditor. If the board does not accept the Audit Committee’s recommendation, it should include in the Annual Report, and in any papers recommending appointment or re-appointment, a statement from the Audit Committee explaining the recommendation and should set out reasons why the board has taken a different position.

The company should clearly disclose that the Audit Committee is responsible for all three, i.e., appointment, re-appointment and removal of the external auditor. If even one of them is missing, this should be 'N'.


E.20 Internal Audit

E.20.1 Does the company have a separate internal audit function?

OECD PRINCIPLE VI (D) (7) Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. Ensuring the integrity of the essential reporting and monitoring systems will require the board to set and enforce clear lines of responsibility and accountability throughout the organisation. The board will also need to ensure that there is appropriate oversight by senior management. One way of doing this is through an internal audit

The company should clearly disclose that it has a separate internal auditor. The internal auditor could be an internal person or an external firm. If however the internal audit is being handled under an existing designation such as the financial controller, this should be 'N'.

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system directly reporting to the board.

E.20.2 Is the head of internal audit identified or, if outsourced, is the name of the external firm disclosed?

Companies often disclose that they have an internal audit but, in practice, it is not uncommon for it to exist more in form than in substance. For example, the in-house internal audit may be assigned to someone with other operational responsibilities. As internal audit is unregulated, unlike external audit, there are firms providing outsourced internal audit services which are not properly qualified to do so. Making the identity of the head of internal audit or the external service provider public would provide some level of safeguard that the internal audit is substantive.

The company should disclose the name of the head of internal audit (if in-house, including by parent company) or the name of the external firm providing internal audit services. If there is no separate internal audit function, this should be scored as a N.

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E.20.3 Does the appointment and removal of the internal auditor require the approval of the Audit Committee?

OECD PRINCIPLE VI (D) (7) In some jurisdictions it is considered good practice for the internal auditors to report to an independent Audit Committee of the board or an equivalent body which is also responsible for managing the relationship with the external auditor, thereby allowing a coordinated response by the board. WORLDBANK PRINCIPLE 6 (VI.D.7.9) Does the internal auditor have direct and unfettered access to the board of directors and its independent Audit Committee? ASX Principles on CG “…companies should consider a second

A company which does not have an internal audit function would score an 'NA' for this. The emphasis here is the reporting relationship of the internal auditor and the unfettered access of the internal auditor to the board of directors and its independent Audit Committee. The structure and reporting lines adopted for the internal audit function should promote independence, objectivity, consistency and business understanding. This can be achieved by combining the concept of a clear reporting line to the board/Audit Committee with an organizational structure that allows internal audit to operate independently of other functions within the organization.

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reporting line from the internal audit function to the board or relevant committee.” Under the ASX Principles it is also recommended that the Audit Committee have access to internal audit without the presence of management, and that “the audit committee should recommend to the board the appointment and dismissal of a chief internal audit executive."

Where the approval is by the board of commissioners, the majority of the board of commissioners has to be independent to earn a ';Y'.

E.21 Risk Oversight

E.21.1 Does the company disclose the internal control procedures/risk management systems it has in place?

OECD PRINCIPLE 6 (VI) (D) (7) Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.

This should include a description of key internal controls and assignment of responsibilities and accountabilities


E.21.2 Does the Annual Report disclose that the board of directors/commissioners has conducted a review of the company's material controls (including operational, financial and compliance controls) and risk management systems?

UK CODE (JUNE 2010) C.2.1 The board should, at least annually, conduct a review of the effectiveness of the company’s risk management and internal control systems and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls.

The Annual Report should state that a review was conducted this year.

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E.21.3 Does the company disclose how key risks are managed?

OECD PRINCIPLE V (A) (6) Foreseeable risk factors. Disclosure of risk is most effective when it is tailored to the particular industry in question. Disclosure about the system for monitoring and managing risk is increasingly regarded as good practice.

This refers to key risks such as operational, compliance and financial risks. The company should explain what each risk is in the company's context, instead of simply stating a list of risks the company faces. If the company only discloses how financial risks are managed, this should be scored 'N'.


BONUS QUESTIONS

Guiding Reference Assessment Guidance / Notes to Assessors Source Document/ Location of

Information Point

Y N A - Rights of shareholders

A.1 Right to participate effectively in and vote in general shareholders meeting and should be informed of the rules, including voting procedures, that govern general shareholders meeting.

A.1.1(B) Does the company allow the use of secure electronic voting in absentia at the general meetings of shareholders?

OECD Principle II (C) (4) Shareholders should be able to vote in person or in absentia, and equal effect should be given to votes whether cast in person or in absentia.

The objective of facilitating shareholder participation suggests that companies consider favourably the enlarged use of information technology in voting, including secure electronic voting in absentia.

Source: Annual Report/Company website/Articles of Association/announcement of AGM/Minutes of Meeting.

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B - Equitable treatment of shareholders

B.1 Notice of AGM B.1.1(B) Does the company release its notice of

AGM (with detailed agendas and explanatory circulars), as announced to the Exchange, at least 28 days before the date of the meeting?

OECD Principle II (C) (1) Shareholders should be furnished with sufficient and timely information concerning the date, location and agenda of general meetings, as well as full and timely information regarding the issues to be decided at the meeting. (3) Effective shareholder participation in key corporate governance decisions, such as the nomination and election of board members, should be facilitated. OECD Principle III (A) ICGN 8.3.2 Shareholder participation in governance Shareholders should have the right to participate in key corporate governance

Foreign-based institutional investors/fund managers advocate 28 day as the minimum notice period for general meeting of shareholders (AGM/EGM) to enable sufficient preparations. The 28-days period applies to not only the notice to AGM/EGM, but also to accompanying explanatory notes, meeting handbooks and/or circular to shareholders.

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decisions, such as the right to nominate, appoint and remove directors on an individual basis and also the right to appoint external auditors. ICGN 8.4.1 Shareholder ownership rights The exercise of ownership rights by all shareholders should be facilitated, including giving shareholders timely and adequate notice of all matters proposed for shareholder vote. CLSA-ACGA (2010) CG Watch 2010 - Appendix 2. (I) CG rules and practices (25) Do companies release their AGM notices (with detailed agendas and explanatory circulars) at least 28 days before the date of the meeting?

B.2 Insider trading and abusive self-dealing should be prohibited.

B.2.1(B) Does the company have a policy requiring directors / Commissioners and key officers to notify the Board or its delegate at least one day before they deal in the company shares?

OECD Principle III (B) Insider trading and abusive dealing should be prohibited ICGN 3.5 Employee share dealing Companies should have clear rules regarding any trading by directors and employees in the company's own securities. Among other issues, these must seek to ensure individuals do not benefit from knowledge which is not generally available to the market. ICGN 8.5 Shareholder rights of action ... Minority shareholders should be afforded protection and remedies against abusive or oppressive conduct.

This policy of requiring directors and key officers (one-level below the Board) to notify the Board before they deal in company shares must be explicitly stated in the corporate annual report and/or website. This policy, if adhered to, would enable the board and the company to be aware of the said transactions before the fact.

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D - Disclosure and transparency D.1 Quality of Annual Report D.1.1(B) Does the company disclose the Identity of

advisers/consultants to the remuneration/compensation committee appointed by the board and whether they are deemed independent or they have declared any conflicts of interests?

OECD Principle V (F): The corporate governance framework should be complemented by an effective approach that addresses and promotes the provision of analysis or advice by analysts, brokers, rating agencies and others, that is relevant to decisions by investors, free from material conflicts of interest that might compromise the integrity of their analysis and advice.

An example of adviser/consultant to the remuneration/compensation committee would be a firm/entity that was engaged to undertake remuneration benchmarking survey at the industry, country or international-levels. The findings of such surveys would help the remuneration/compensation committee to assess the fairness and/or attractiveness of the company remuneration package for directors, senior management and/or other levels of employees.

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E - Responsibilities of the Board E.1 Board Competencies and Diversity

E.1.1(B) Does the company have at least one female independent director/commissioner?

ICGN 2.4.1 Skills and experience The board should consist of directors with the requisite range of skills, competence, knowledge, experience and approach, as well as a diversity of perspectives, to set the context for appropriate board behaviours and to enable it to discharge its duties and responsibilities effectively.


E.2 Nominating Committee E.2.1(B) Does the Nominating Committee comprise

entirely of independent directors/commissioners?

ICGN 2.4.4 Composition of board committees The members of these key board committees should be solely non-executive directors, and in the case of the audit and remuneration committees, solely independent directors. All members of the nominations committee should be independent from management and at least a majority should be independent from dominant owners.

In some jurisdiction this function may be carried out by a Corporate Governance Committee. For purposes of assessment the primary objective is to capture the critical functionality of such a committee and that such committee comprises independent members who can objectively deliberate on such critical matters

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E.3 Board Appointments and Re-Election E.3.1(B) Does the company compile a board profile

when considering candidates to the board (i.e., identify the professional skills and personal characteristics present on the current board; identify the missing skills and characteristics; and nominate individuals who could fill possible gaps)?

ASX Code Selection and appointment process and re-election of directors • Disclosure of board selection processes - companies are encouraged to provide greater transparency of the processes which the board adopts in searching for and selecting new directors to the board and to report to shareholders on the processes. Such reporting could include the following: − details as to whether the company

The emphasis here is on whether the processes are in place. The assessor must be satisfied that the information is sufficient to convey an appreciation that adequate processes are in place.


develops a board skills matrix and uses this matrix to identify any ‘gaps’ in the skills and experience of the directors on the board − the process by which candidates are identified and selected including whether professional intermediaries are used to identify and/or assess candidates − the steps taken to ensure that a diverse range of candidates is considered − the factors taken into account in the selection process.

E.3.2(B) Does the company use professional search firms or other external sources of candidates (such as director databases set up by director or shareholder bodies) when searching for candidates to the board of directors/commissioners?

WORLDBANK PRINCIPLE 6 (VI.I.21) Are boards known to hire professional search firms when proposing candidates to the board?

The company should clearly disclose that it uses external sources when searching for candidates to the board. If the company states they search for possible candidates based on recommendations from existing directors, this would be N.


E.4 Board Structure & Composition

E.4.1(B) Has the company set a limit of five board seats in PLCs including its unlisted subsidiaries?

Previous: Annotation to OECD Principle VI.E.3Service on too many boards can interfere with the performance ofboard members. Companies may wish to consider whether multipleboard memberships by the same person are compatible witheffective board performance and disclose the information toshareholders. Some countries have limited the number of boardpositions that can be held. Current: Pls include a guiding reference

The company should clearly disclose that it uses external sources when searching for candidates to the board. If the company states they search for possible candidates based on recommendations from existing directors, this would be a "N".

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E.5 Board Appraisal

E.5.1(B) Does the company appoint an external consultant to facilitate the board assessment at least once every three years?

UK CODE (JUNE 2010) B.6.2 Evaluation of the board of FTSE 350 companies should be externally facilitated at least every three years. A statement should be made available of whether an external facilitator has any other connection with the company

The company should clearly state that they appoint an external consultant to conduct/facilitate the board evaluation. The external consultant need not be appointed annually for this to be Y. For example, if the company discloses that an external consultant was appointed in 2009, this can still be taken as Y.


E.6 Risk Oversight

E.6.1 (B) Does the Annual Report contain a statement from the board of directors/commissioners or Audit Committee commenting on the adequacy of the company's internal controls/risk management systems?

OECD PRINCIPLE 6 (VI) (D) (7) Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. In some jurisdictions it is considered good practice for the internal auditors to report to an independent audit committee of the board or an equivalent body which is also responsible for managing the relationship with the external auditor, thereby allowing a coordinated response by the board. It should also be regarded as good practice for this committee, or equivalent body, to review and report to the board the most critical accounting policies which are the basis for financial reports. However, the board should retain final responsibility for ensuring the integrity of the reporting systems. Some countries have provided for the chair of the board to report on the internal control process.

The board or audit committee should state the internal controls/risk management systems are adequate.

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PENALTY QUESTIONS

Guiding Reference Assessment guidance / Notes to Assessors Source Document/ Location of Information

Point

Y N A - Rights of shareholders

A.1 Basic shareholder right A.1.1(P) Did the company fail or neglect to offer

equal treatment for share repurchases to all shareholders?

OECD Principle II (A) If a company conducts a repurchase program and treats the shareholders unequally in the program (for example, giving privilege to certain types of shareholders to sell at the premium price), then the company will get deduction of five points)

Repurchase Notice/announcement, Annual Report

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A.2 Shareholders, including institutional shareholders, should be allowed to consult with each other on issues concerning their basic shareholder rights as defined in the Principles, subject to exceptions to prevent abuse. A.2.1(P) Is there evidence of barriers that prevent

shareholders from communicating or consulting with other shareholders?

OECD Principle II (G) Shareholders, including institutional shareholders, should be allowed to consult with each other on issues concerning their basic shareholder rights as defined in the Principles, subject to exceptions to prevent abuse.

An example of a barrier is when the company refuses to provide the list of shareholders when requested.

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A.3 Right to participate effectively in and vote in general shareholders meeting and should be informed of the rules, including voting procedures, that govern general shareholders meeting.

A.3.1(P) Did the company include any additional and unannounced agenda item into the notice of AGM/EGM?

OECD Principle II (C) 2 All agenda items should be announced weeks before the meeting so shareholders will be able to make well-informed decisions. Thus, additional agenda is not consistent with good governance practice.

Minutes of Meeting, Meeting results notice

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A.4 Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed.

Did the company fail to disclose the existence of:

A.4.1(P) Shareholders agreement? OECD Principle II (D) These mechanisms potentially violate the one share-one vote policy.

Annual Report/Company website/articles of association/Company announcement/Media

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A.4.2(P) Voting cap? -1 0

A.4.3(P) Multiple voting rights? -1 0 A.5 Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed.

A.5.1(P) Is a pyramid ownership structure and/ or cross holding structure apparent?

OECD Principle II (D): Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed. Some capital structures allow a shareholder to exercise a degree of control over the corporation disproportionate to the shareholders’ equity ownership in the company. Pyramid structures, cross shareholdings and shares with limited or multiple voting rights can be used to diminish the capability of noncontrolling shareholders to influence corporate policy.

A pyramid ownership structure occurs when the controlling shareholder (CS) or ultimate owner indirectly controls the listed company through several layers/chains of ownership. At least in one layer, the ownership of the CS is less than 100%. The result is the controlling right of the CS exceeds its cash-flow right. Assign 'Y' if a pyramid ownership structure exists. Cross-holding occurs when two companies own each other. Assign 'Y' if there exists cross-holding..

To check for the existence of pyramid & cross holding structure(s): Disclosure in Annual Report/website of the company. It may be directly reported by the company or it may be disclosed in the form of Group Structure that reveals the ownership of the controlling shareholder(s) in companies belonging to the group. Other sources: Check on ownership structures of chains of entities that directly/indirectly owns the listed company.

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B - Equitable treatment of shareholders B.1 Insider trading and abusive self-dealing should be prohibited.

B.1.1(P) Has there been any conviction of insider trading involving directors/commissioners, management and employees in the past three years?

OECD Principle III: The Equitable Treatment of Shareholders (B) Insider trading and abusive dealing should be prohibited. ICGN 3.5 Employee share dealing Companies should have clear rules regarding any trading by directors and employees in the company's own securities. Among other issues, these must seek to ensure individuals do not benefit from knowledge which is not generally available to the market. ICGN 8.5 Shareholder rights of action ... Minority shareholders should be afforded protection and remedies against abusive or oppressive conduct.

The findings must be based on proven cases in the current year. It involves board members or key offices of the company who are convicted of insider dealing.


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B.2 Protecting minority shareholders from abusive action

B.2.1(P) Has there been any cases of non compliance with the laws, rules and regulations pertaining to significant or material related party transactions in the past three years?

OECD Principle III (B) Insider trading and abusive dealing should be prohibited ICGN 2.11.1 Related party transactions Companies should have a process for reviewing and monitoring any related party transaction. A committee of independent directors should review significant related party transactions to determine whether they are in the best interests of the company and if so to determine what terms are fair.

The findings must be based on proven cases in the current year. It involves board members or key offices of the company who have breached RPT rules.


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ICGN 2.11.2 Director conflicts of interest Companies should have a process for identifying and managing any conflicts of interest directors may have. If a director has an interest in a matter under consideration by the board, then the director should not participate in those discussions and the board should follow any further appropriate processes. Individual directors should be conscious of shareholder and public perceptions and seek to avoid situations where there might be an appearance of a conflict of interest. ICGN 8.5 Shareholder rights of action Shareholders should be afforded rights of action and remedies which are readily accessible in order to redress conduct of company which treats them inequitably. Minority shareholders should be afforded protection and remedies against abusive or oppressive conduct.

C - Role of stakeholders

C.1 The rights of stakeholders that are established by law or through mutual agreements are to be respected. C.1.1(P) Has there been any violations of any laws

pertaining to labour/employment/ consumer/insolvency/ commercial/competition or environmental issues?

OECD Principle IV (A) The rights of stakeholders that are established by law or through mutual agreements are to be respected.

A violation is considered material if (a) it triggers any relevant regulator/authority to investigate the possible violation and to provide sanction and (b) it is covered by Media.

Sanction(s) from Regulator(s)/Media coverage/Company announcement/Annual Report/Company website

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C.2 Where stakeholders participate in the corporate governance process, they should have access to relevant, sufficient and reliable information on a timely and regular basis.

C.2.1(P) Has the company faced any sanctions by regulators for failure to make announcements within the requisite time period for material events?

OECD Principle IV (B) Where stakeholders participate in the corporate governance process, they should have access to relevant, sufficient and reliable information on a timely and regular basis.

Essentially looking at sanctions for late disclosure of material events.

Sanction(s) from Regulator(s)/Media/Company announcement/Annual Report/Company website

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D - Disclosure and transparency D.1 Sanctions from regulator on financial reports

D.1.1(P) Did the company receive a "qualified opinion" in its external audit report?

OECD Principle V: Disclosure and Transparency (B) Information should be prepared and disclosed in accordance with high quality standards of accounting and financial and non-financial disclosures. (C) An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects. (D) External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit. ICGN 6.2 Annual audit The annual audit carried out on behalf of shareholders is an essential part of the checks and balances required at a company. It should provide an independent and objective opinion that the financial statements fairly represent the financial position and performance of the company in all material respects, give a true and fair view of the affairs of the company and are in compliance with applicable laws and regulations.

A "qualified" audit opinion is one where the financial statements give a true and fair view (or present fairly), except for certain matter(s).

Annual Report - see Independent Auditor's Report accompanying the company's financial statements.

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D.1.2(P) Did the company receive a "adverse opinion" in its external audit report?

An "adverse" audit opinion is one where the financial statements do not give a true and fair view (or do not present fairly).


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D.1.3(P) Did the company receive a "disclaimer opinion" in its external audit report?

ICGN 7.3 Affirmation of financial statements The board of directors and the appropriate officers of the company should affirm at least annually the accuracy of the company's financial statements or financial accounts. International Auditing Standard (ISA) No. 705 "Modifications to the Opinion in the Independent Auditor's Report" (2009). Paras. 7, 8 and 9 specify the three types of modifications to the auditor's opinion; that is, Qualified opinion, Adverse opinion, and Disclaimer opinion respectively.

A "disclaimer" audit opinion is one where the independent external auditor does not express an opinion on the financial statements.


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D.1.4(P) Has the company in the past year revised its financial statements for reasons other than changes in accounting policies?

Mis-statements in financial statements is a major concern. Hence, when a company has to revise its financial statements or had been instructed by any of the domestic regulators (normally the securities commission and/or the stock exchange) to re-state or revise its financial statement, a penalty should be applied. The higher penalty is imposed for restatement ordered by the regulator(s)

Media / announcement (REgulator) -5

(0thers) -3

0

E - Responsibilities of the Board E.1 Compliance with listing rules, regulations and applicable laws E.1.1(P) Is there any evidence that the company

has not complied with any listing rules and regulations over the past year apart from disclosure rules?

OECD Principle VI (D) (7) Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. Companies are also well advised to set up internal programmes and procedures to promote compliance with applicable laws, regulations and standards, including statutes to criminalise bribery of foreign officials that

This information would be available in the company announcements or media reports.

Company announcements to the exchange/Media

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are required to be enacted by the OECD Anti-bribery Convention and measures designed to control other forms of bribery and corruption. Moreover, compliance must also relate to other laws and regulations such as those covering securities, competition and work and safety conditions. Such compliance programmes will also underpin the company’s ethical code.

E.1.2(P) Have there been any instances where non-executive directors/commissioner have resigned and raised any issues of governance-related concerns?

UK CODE (JUNE 2010) A.4.3 Where directors have concerns which cannot be resolved about the running of the company or a proposed action, they should ensure that their concerns are recorded in the board minutes. On resignation, a non-executive director should provide a written statement to the chairman, for circulation to the board, if they have any such concerns.

This information would be available in the company announcements or media reports. For example, a non-executive director may resign citing that he/she is unable to carry out the duties effectively due to not receiving timely information from management. Another example would be a non-executive director citing that he/she is being replaced due to disagreeing with certain courses of action to be taken by management that may not be in the best interests of the company.

Company announcements to the exchange/Media

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E.1.3(P) Have there been major corporate scandals that point to weak board of directors/commissioners oversight?

OECD PRINCIPLE VI.D.7. Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards. Ensuring the integrity of the essential reporting and monitoring systems will require the board to set and enforce clear lines of responsibility and accountability throughout

Corporate scandals are those arising from corrupt practices or poor governance practices. Corrupt practices include bribery, fraud, extortion, collusion, conflict of interest, and money laundering. In this context, it includes an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do something that is dishonest, illegal, or a breach of trust in the conduct of the enterprise’s business

Company announcements to the exchange/Media reports

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the organisation. The board will also need to ensure that there is appropriate oversight by senior management.

(Transparency International in GRI). The findings must be based on proven cases.

E.2 Board A

E2.1(P) Does the Company have any independent directors/commissioners who have served for more than nine years?

OECD Principle V (C) An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects. Examples of other provisions to underpin auditor independence include, a total ban or severe limitation on the nature of non-audit work which can be undertaken by an auditor for their audit client, mandatory rotation of auditors (either partners or in some cases the audit partnership), a temporary ban on the employment of an ex-auditor by the audited company and prohibiting auditors or their dependents from having a financial stake or management role in the companies they audit.

The nine years can either be a consecutive service of nine years or a cumulative service of nine years with intervals. Hence, it is important that companies disclose the date of first appointment for every independent director/commissioner. Assign 'N' when either (i) none of the independent directors/commissioners have served for more than nine years, or (ii) the date of first appointment is not disclosed. The latter is dealt with in the penalty item E2.3(P).

Annual report/Company website -1 for

every

director who serves for

more

than 9

years

0

E2.2(P) Did the company fail to provide justification and obtain shareholder's approval for retaining the independent director(s)/commissioner(s) beyond nine years?

Malaysian Code on Corporate Governance Recommendation 3.3: The board must justify and seek shareholders' approval in the event it retains as an independent director, a person who has served in that capacity for more than nine years. Singapore Code of Corporate Governance Paragraph 2.4: The independence of any director who has served on the Board beyond nine years from the date of his first appointment should be subject to particularly rigorous review. In doing so, the Board should also take into account the need for progressive refreshing of the Board. The Board should also explain why any such director should be considered independent.

Self-explanatory. Annual report/Company website/Notice of AGM/Announcement of outcome of AGM/Minutes of AGM

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E2.3(P) Did the company fail to disclose the date of first appointment of each independent directors(s)/commissioner(s)?

Self-explanatory. Annual report/Company website/Notice of AGM

-1 for every director not disclosed

0

E2.4(P) Did the company fail to disclose the identity of the independent director(s)/commissioner(s)?

ICGN 2.4 Composition and structure of the board ICGN 2.4.1 Skills and experience ICGN 2.4.3 Independence

The Annual Report must clearly identify whom amongst the directors are independent directors.

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E.3 External Audit

E.3.1(P) Is any of the directors or senior management a former employee or partner of the current external auditor (in the past 2 years)?

OECD Principle V (C) An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects. Examples of other provisions to underpin auditor independence include, a total ban or severe limitation on the nature of non-audit work which can be undertaken by an auditor for their audit client, mandatory rotation of auditors (either partners or in some cases the audit partnership), a temporary ban on the employment of an ex-auditor by the audited company and prohibiting auditors or their dependents from having a financial stake or management role in the companies they audit.

The profiles of the board members and senior management (which are usually disclosed in the Annual Reports) need to be checked to determine this. There is greater familiarity risk and threat to independence and quality of audit if there is a recent employment relationship between a director/senior management and the present external auditor. A two year cooling off period is considered reasonable and comparable to countries such as Australia.

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