The Board’s Conduct of Affairs Principle 1:
Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.
The Company is led by a Board which, except for the President & Group Chief Executive Officer (P&GCEO) who is an executive Director, comprises only non-executive independent Directors. Each Director brings to the Board skills, experience, insights and sound judgement, which together with his or her strategic networking relationships, serve to further the interests of the Group. At all times, the Directors are collectively and individually obliged to act honestly and with diligence, and consider the best interests of the Company.
The Board oversees the affairs of the Company and is collectively responsible for the long-term success of the Company.
The Board appoints the P&GCEO, who, assisted by Management, is responsible for the day-to-day management and overall operation of the Group’s business.
The Board has adopted a Board Charter setting forth the duties and responsibilities of the Board. These include approving the Group’s broad policies, strategies and objectives and approving annual budgets, major funding, including capital management proposals, investment and divestment proposals.
Specific matters which are reserved for the Board’s approval include:
(a) material acquisitions, investments, disposals and divestments;
(b) share issuances, dividends and other returns to shareholders;
(c) approving the targets for and assessing the performance of the P&GCEO and determining the compensation package for the P&GCEO; and
(d) matters which involve a conflict of interest for a substantial shareholder or a Director.
Various Board Committees, namely Audit Committee (AC), Corporate Disclosure Committee (CDC), Executive Resource and Compensation Committee (ERCC), Finance and Budget Committee (FBC), Investment Committee (IC), Nominating Committee (NC) and Risk Committee (RC) have been constituted with clear written Terms of Reference to assist the Board in the discharge of its functions. The composition of the various Board Committees is set out on page 44 of this Annual Report.
Each of these Board Committees operates under delegated authority from the Board. The Board may form other Board Committees as dictated by business imperatives. Membership of the various Board Committees is managed to ensure an equitable distribution of responsibilities among Board members, to maximise the effectiveness of the Board and to foster active participation and contribution from Board members. Diversity of experience and appropriate skills are considered in the composition of the respective Board Committees.
Corporate Governance Report
The Board has adopted a set of internal controls which establishes approval limits for capital expenditure, investments and divestments and debts. Apart from matters that specifically require the Board’s approval, the Board delegates authority for transactions below those limits to Board Committees and Management. Approval sub-limits are also provided at Management levels to optimise operational efficiency.
The Board meets at least once every quarter, and as required by business imperatives. Prior to the start of each Board meeting, the non-executive Directors meet without the presence of Management. Where exigencies prevent a Director from attending a Board meeting in person, the Articles of Association (Articles) of the Company permit the Director to participate via teleconferencing or video conferencing. The Board and Board Committees may also make decisions by way of resolutions in writing.
A total of seven Board meetings were held in FY 2014. This includes an annual offsite meeting with senior management to strategise and plan the Group’s longer term strategy. A table showing the attendance record of Directors at Board and Board Committees meetings during FY 2014 is set out on page 45 of this Annual Report.
The Company believes in the manifest contribution of its directors beyond attendance at formal Board and Board Committees meetings. To judge a director’s contributions based on his attendance at formal meetings alone would not do justice to his overall contributions, which include being accessible by Management for guidance or exchange of views outside the formal environment of Board and Board Committees meetings.
The Company provides suitable training for Directors. Upon appointment, each Director is provided with a formal letter of appointment and will also be given a copy of the Directors’ Manual (which includes information on a broad range of matters relating to the role of a director). All Directors on appointment will be required to undertake an induction programme to familiarise themselves with matters relating to the Company’s strategy and business activities.
The Company also provides training for first-time directors in areas such as accounting, legal and industry-specific knowledge as appropriate.
Following their appointment, Directors are provided with opportunities for continuing education in areas such as directors’
duties and responsibilities, changes to regulations and accounting standards and industry-related matters, so as to be updated on matters that affect or may enhance their performance as Directors or Board Committee members.
Board Composition and Guidance Principle 2:
There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management and 10% shareholders. No individual or small group of individuals should be allowed to dominate the Board’s decision-making.
The Board, through the NC, reviews from time to time the size and composition of the Board. The NC seeks to ensure that the size of the Board is appropriate in facilitating effective decision-making taking into account the scope and nature of the Group’s operations. The NC also aims to maintain a diversity of expertise, skills, experience, gender and knowledge of the industry and other attributes among the Directors.
The Board comprises individuals who are business leaders and professionals with financial, banking, real estate, legal, investment and accounting backgrounds. The varied backgrounds of the Directors enable Management to benefit from their external, diverse and objective perspectives on issues brought before the Board. The NC is of the view that the current composition of the Board provides an appropriate balance and diversity of skills, experience, gender and knowledge of the industry and that the Directors, as a group, have the necessary core competencies in accounting, finance, business, management, industry knowledge and strategic planning. In FY 2014, the Board included two women, Ms Euleen Goh and Mrs Arfat Selvam. Mrs Selvam retired from the Board at the annual general meeting (AGM) on 25 April 2014 and did not seek re-election.
The Board presently comprises 11 Directors, out of whom 10 are non-executive independent Directors. Profiles of the Directors are set out on pages 16 to 22 of this Annual Report.
The Board, taking into account the views of the NC, assesses the independence of each Director in accordance with the guidance in the Code. An independent director is one who has no relationship with the Company, its related corporations, its shareholders who hold 10% or more of the voting shares of the Company or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of his independent business judgement.
The non-executive Directors have provided declarations of their independence which were deliberated upon by the NC and the Board. On the basis set out above and on the basis of the declarations of independence provided by the Directors, Mr Lim Ming Yan, the Company’s P&GCEO, is the only non-independent Director. All other members of the Board are considered to be independent Directors.
The Board has examined the different relationships identified by the Code that might impair the Directors’ independence and objectivity. In particular, the Board noted that Mr Ng Kee Choe and Tan Sri Amirsham served on the board of CapitaMalls Asia Limited (CMA) (a subsidiary of the Company) as, respectively, its independent chairman and director until its delisting on 22 July 2014. Mr Peter Seah and Ms Euleen Goh are, respectively, the chairman of the board of directors and director of DBS Bank and Mr James Koh is a director of United Overseas Bank (UOB). Each of Mr Ng, Mr Seah and Mr Stephen Lee served as member of Temasek Advisory Panel during FY 2014 until 31 December 2014.
Mr Kee Teck Koon also held the appointment of corporate advisor at Temasek International Advisors.
The Board considers that the payments made to DBS Bank and UOB and received from CMA are not significant compared with the revenues of the Group, or the overall payments made by the Group to its banks, in FY 2014.
In addition, the services received by the Group from each of DBS Bank and UOB were not material in the context of all the financial advisory and related services that the Group had received from its banks.
The Board has also considered whether each of Mr Ng, Tan Sri Amirsham, Mr Seah, Ms Goh, Mr Koh, Mr Lee and Mr Kee had demonstrated independence of character and judgement in the discharge of his or her responsibilities as a Director of the Company, and is satisfied that each of Mr Ng, Tan Sri Amirsham, Mr Seah, Ms Goh, Mr Koh, Mr Lee and Mr Kee has acted with independent judgement. Each of them has also recused himself or herself from any transactions that might give rise to the conflict of interest. The Board therefore considers that the relationships and circumstances set out above do not affect their ability and willingness to act independently.
Mr Seah has served on the Board for more than 13 years and Mr Koh more than nine years and the Code recommends that the independence of any director who has served beyond nine years be subject to rigorous review. The Board has determined that each of Mr Seah and Mr Koh has continued to demonstrate strong independence in character and judgement in the manner in which he has discharged his responsibilities as a Director of the Company. Each of them has continued to express his individual viewpoints, debated issues and objectively scrutinised and challenged Management. Each of them has sought clarification and amplification as he considered necessary, including through direct access to the Group’s employees and external advisors.
Chairman and Chief Executive Officer Principle 3:
There should be a clear division of responsibilities between the leadership of the Board and the executives responsible for managing the company’s business. No one individual should represent a considerable concentration of power.
To maintain an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making, the roles and responsibilities of the Chairman and the P&GCEO are held by separate individuals.
The non-executive independent Chairman, Mr Ng Kee Choe, is responsible for leading the Board and ensuring that the Board is effective on all aspects of its role. The P&GCEO, Mr Lim Ming Yan, has full executive responsibilities over the business directions and operational decisions of the Group and is responsible for implementing the Group’s strategies and policies and for conducting the Group’s business. The Chairman and the P&GCEO are not immediate family members. The separation of the roles of the Chairman and the P&GCEO and the resulting clarity of roles provide a healthy professional relationship between the Board and Management and facilitate robust deliberations on the Group’s business activities and the exchange of ideas and views to help shape the strategic process.
The Chairman is responsible for leadership of the Board and for creating the conditions for overall Board, Board Committee and individual Director effectiveness. This includes setting the agenda of the Board in consultation with the P&GCEO and promoting constructive engagement among the Directors as well as between the Board and the P&GCEO on strategic issues.
The Chairman plays a significant leadership role by providing clear oversight, advice and guidance to the P&GCEO and Management on strategies and business operations. He also engages with other members of the senior leadership regularly.
Corporate Governance Report
The scope and extent of the Chairman and the Board’s responsibilities have been expanding due to the increased focus on corporate governance and risk management and rising expectations that board chairmen have a good understanding about their companies and the markets in which they compete. Given the increased demands on the Board and the Chairman, the Chairman in particular has spent and continues to spend time in the Company and is actively involved in leading the Board and engaging with and guiding Management in strategic issues and providing support and advice to the P&GCEO.
Board Membership Principle 4:
There should be a formal and transparent process for the appointment and re-appointment of directors to the Board.
The Board has established the NC which makes recommendations to the Board on all appointments to the Board and Board Committees. The NC seeks to ensure that the Board and Board Committees in the Group comprise individuals who are best able to discharge their responsibilities as Directors or, as the case may be, Board Committee members, having regard to the skills required and the skills represented on the Board or the relevant Board Committee.
All the NC members, including the Chairman of the NC, are non-executive independent Directors.
In performing its role, the NC is guided by its Terms of Reference, in particular, the NC:
(a) recommends candidates for appointments to the Company’s Board and Board Committees;
(b) makes recommendations to the Board on the succession plans for Directors and the appointment of and succession plans for the P&GCEO;
(c) reviews and recommends the development of a process for evaluation of the performance of the Board, Board Committees and Directors;
(d) reviews and recommends the training and professional development programmes for the Board;
(e) considers annually, and as and when circumstances require, if a Director is independent, and provides its views to the Board for consideration; and
(f) reviews and decides if a Director is able to and has been adequately carrying out his duties as a Director, taking into consideration the Director’s number of listed company board representations and other principal commitments.
The NC carries out a proactive review of the Board composition at least annually as well as on each occasion that an existing non-executive Director gives notice of his intention to retire or resign. This is to assess the collective skills of non-executive Directors represented on the Board to determine whether the Board, as a whole, has the skills required to achieve the Group’s strategic and operational objectives. The outcome of that assessment will be reported to the Board. In carrying out this review, the NC will take into account that the Board composition should reflect balance in matters such as skill representation, tenure, experience, age spread and diversity (including gender diversity). The NC identifies suitable candidates for appointment to the Board having regard to the skills required and the skills represented on the Board. External consultants may be used from time to time to access a wide base of potential non-executive Directors. Those considered will be assessed against a range of criteria including background, experience, professional skills and personal qualities. The NC and the Board will also consider whether a candidate’s skills and experience will complement the existing Board and whether the candidate has sufficient time available to commit to his responsibilities as a Director.
The Company believes that Board renewal is a necessary and continual process, for good governance and maintaining relevance to the changing needs of the Group’s business. The Board has established the guideline that a non-executive Director will serve a maximum of two three-year terms and thereafter by exception on the recommendation of the NC.
Renewal or replacement of Board members do not necessarily reflect their contributions to date, but may be driven by the need to position and shape the Board in line with the evolving needs of the Company and its business.
Election of Board members is the prerogative and right of shareholders. The Company’s Articles require one-third of its Directors (prioritised by length of service since previous re-election or appointment and who are not otherwise required to retire) to retire and subject themselves to re-election by shareholders at every AGM of the Company (one-third rotation rule). In addition, any newly appointed Director (whether as an additional Director or to fill a casual vacancy) will submit himself for retirement and re-election at the AGM immediately following his appointment. Thereafter, he is subject to the one-third rotation rule.
In regard to the re-appointment/re-election of existing Directors each year, the NC advises the Board of those Directors who are retiring in accordance with the provisions of the Articles and the Companies Act. The NC makes recommendations to the Board as to whether the Board should support the re-appointment/re-election of a Director who is retiring. In making recommendations, the NC will undertake a process of review of the retiring Director’s performance during the period in which the Director has been a member of the Board.
The P&GCEO, as a Board member, is also subject to the one-third rotation rule. His role as P&GCEO is separate from his position as a Board member, and does not affect the ability of shareholders to exercise their right to select all Board members.
Guideline 4.4 of the Code recommends that the Board determine the maximum number of listed company board representations which any director may hold and disclose this in the annual report. The Board is of the view that, the limit on the number of listed company directorships that an individual may hold should be considered on a case-by-case basis, as a person’s available time and attention may be affected by many different factors such as whether they are in full-time employment and their other responsibilities. A Director with multiple directorships is expected to ensure that sufficient attention is given to the affairs of the Group. The Board believes that each individual Director is best placed to determine and ensure that he is able to devote sufficient time and attention to discharge his duties and responsibilities as a Director of the Company, bearing in mind his other commitments. In considering the nomination of Directors for appointment or re-election, the NC will take into account, amongst other things, the competing time commitments faced by Directors with multiple Board memberships. All Directors had confirmed that notwithstanding the number of their individual listed company board representations and other principal commitments, which the Directors held, they were able to devote sufficient time and attention to the affairs of the Company.
Board Performance Principle 5:
There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.
There should be a formal annual assessment of the effectiveness of the Board as a whole and its board committees and the contribution by each director to the effectiveness of the Board.