STATEMENT ON CORPORATE GOVERNANCE
The Board of Directors (“Board”) of OCB Berhad (“OCB” or “the Company”) continues to uphold its commitment to good corporate governance practices throughout OCB and its group of companies (“the Group”) as part of its duty to enhance stakeholders’ value.
The Board is pleased to report on the manner in which OCB has applied the Principles set out in the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) and the extent of compliance with the recommendations set out in the MCCG 2012 during the financial year ended 31 December (“FYE”) 2016.
A. PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES
I. The Board’s role and responsibilities
The Board has established clear roles and responsibilities in discharging its fiduciary and leadership functions, and are firmly committed to ensuring that good corporate governance and corporate conduct are adhered to, in order to deliver long-term and sustainable value to shareholders. The principal responsibilities of the Board include the following:
- Ensuring that the Group’s goals are clearly established and that a strategic plan, which promotes sustainability, is in place to achieve them;
- Establishing policies for strengthening the performance of the Group including ensuring that management is proactively seeking to build the business through innovation, initiative, technology, new products and the development of its business capital;
- Overseeing the conduct of the Group’s business to evaluate whether the business is being properly managed. This includes ensuring the solvency of the Group and the ability of the Group to meet its contractual obligations and to safeguard its assets;
- Appointing the Chief Operating Officer (“COO”)/Executive Director (“ED”), including setting the relevant terms and objectives and where necessary, terminating his/her employment with the Group;
- Ensuring that the Group has appropriate business risk management process, including adequate control environment be it the internal control systems and management information systems, systems for compliance with applicable laws, regulations, rules, directives and guidelines and controls in areas of significant financial and business risks;
- Appointing board committees to address specific issues, considering recommendations of the various board committees and discussing problems and reservations arising from these committees’ deliberations and reports;
- Ensuring that the statutory accounts of the Company and Group are fairly stated and otherwise conform with the relevant regulations including acceptable accounting policies that result in balanced and understandable financial statements;
- Ensuring that there is in place an appropriate succession plan for members of the Board and senior management;
- Ensuring that the Group adheres to high standards of ethics and corporate behaviour in accordance with the Group’s code of corporate conduct including transparency in the conduct of business. Directors are required to comply with the Directors’ Code of Best Practice;
- Reviewing the Board Charter;
- Ensuring that there is in place an appropriate corporate disclosure policy and procedure, which leverage on information technology for effective dissemination of information, to ensure comprehensive, accurate and timely disclosures; and
- Ensuring that there is in place an appropriate investor relations and communications policy which encourages shareholders’ participation at general meetings and promotes effective communication and proactive engagements with shareholders.
There is a clear division of functions between the Board and the Management to ensure that no one individual is dominating the decision making process. The Board delegates the day-to-day management of the Company to the COO and EDs, but reserves for its consideration, significant matters such as the following:
- Annual budgets
- Approval of financial results
- Declaration of interim dividend
- Business plans and restructuring
- Issuance of new securities
- Disposal or acquisition of undertakings and assets
- Appointment of key management persons
The Board has established the roles and responsibilities of the Independent Non-Executive Chairman which are distinct and separate from the duties and responsibilities of the COO and EDs. This segregation between the duties of the Independent Non-Executive Chairman and the COO and EDs ensures an appropriate balance of role, responsibility and accountability at Board level.
The Independent Non-Executive Chairman is primarily responsible for the orderly conduct and effective running of the Board, whilst the COO and EDs are responsible for the overall performance and profitable operation of the Group. They work together with the other Senior Management of the Group to manage the business of the Group in the manner consistent with all relevant policies, standards, guidelines, procedures and practices of the Group and in accordance with any specific plans, instructions and directions of the Board.
The Independent Non-Executive Directors (“NEDs”) are not employees and they do not participate in the day-to-day management of the Company. In staying clear of any potential conflict of interest situation, the Independent Directors remain in a position to fulfill their responsibility to provide unbiased and independent views, advice and judgement.
II. Board Charter
The Board had in 2013 adopted a Board Charter which clearly sets out the Board’s strategic intent and outline the Board’s role, powers, duties and functions. The Board Charter serves as source reference and primary induction literature, providing insights to prospective Board members and Senior Management.
III. Code of Best Practice for Directors
The Board continues to adhere to the Code of Best Practice for Directors which sets out the standard of conduct expected of Directors with the aim to cultivate good ethical conduct that in turn promotes the values of transparency, integrity, accountability and social responsibility.
IV. Supply of Information to Board members
Board meetings for the ensuing financial year are scheduled in advance before the end of each financial year so that Directors are able to plan ahead their schedule for the year. To facilitate constructive and meaningful deliberations, the proceedings of Board meetings are conducted in accordance with a structured agenda. The agenda together with a comprehensive set of Board papers consisting of reports on the Group’s financial performance, status of major projects, future development, the quarterly or annual financial results, the minutes of preceding meetings of the Board and Board Committees, and relevant proposal papers, if any, are furnished to the Directors a few days in advance to allow them sufficient time to review, consider and deliberate knowledgeably on the matters to be tabled. In order to maintain confidentiality, meeting papers on issues or corporate proposals which are deemed highly confidential, would only be distributed to Directors at the Board meeting itself.
The COO and EDs of the Company update the Board on financial matters and new accounting standards. Advisers and professionals appointed to act for the Company on corporate proposals to be undertaken by the Company are also invited to attend the meeting, if required, to furnish the Board with their views and explanations on relevant agenda item tabled to the Board and to provide clarification on issues that may be raised by any Director.
In between Board meetings, approvals on matters requiring the sanction of the Board are sought by way of circular resolutions enclosing all the relevant information to enable the Board to make informed decisions.
All circular resolutions approved by the Board are tabled for notation at the subsequent Board meeting.
V. Access to Information and Professional Advice
All Directors have direct access to the Company’s Senior Management and access to any information relating to the Company’s businesses and affairs in the discharge of their duties. Individual Director may also obtain independent professional advice in furtherance of his duties as a Director of the Company, subject to approval by the Board, depending on the quantum of the fees involved.
The Directors have ready access to the advice and services of the Company Secretary to enable them to discharge their duties effectively. The Company Secretary briefs the Board on the proposed contents and timing of material announcements to be made to Bursa Malaysia Securities Berhad (“Bursa Securities”) and keeps the Board updated on new directives and statutes issued by the relevant regulatory authorities.
The Company Secretary attends and ensures that all Board and Board Committee meetings are properly convened, and that accurate and proper record of the proceedings and resolutions passed are taken and maintained in the statutory register at the registered office of the Company. The Company Secretary also works closely with the Management to ensure that there are timely and appropriate information flows within and to the Board and Board Committees, and between the NEDs and Management.
B. PRINCIPLE 2: STRENGTHEN COMPOSITION
The Company continues to be led by an experienced and diversified Board that is made up of Directors with appropriate knowledge, skills and experience from diverse sectors and backgrounds and also in the Group’s businesses to enable the Board to carry out its responsibilities in an effective and efficient manner. The Board has six (6) members, comprising three (3) Independent NEDs, one (1) COO cum ED and two (2) EDs. A brief profile of each Director is presented in Board of Directors section of this Website.
I. Board Committees
In discharging its duties, the Board is assisted by four (4) Board Committees. The Board Committees are entrusted with specific responsibilities to oversee the Company’s affairs, with authority to act on behalf of the Board in accordance with their respective Terms of Reference. The Chairman of the respective Board Committees is responsible for informing Directors at the Board Meetings of any salient matters noted by the Committees, and which may require the Board’s direction. The Board is kept abreast of the actions and the decisions of the Board Committees through minutes of these Committees.
- Audit Committee
The Audit Committee comprises wholly of Independent NEDs as set out below:
Tan Sri Dato’ Nik Ibrahim Kamil (Chairman/Independent NED)
Zakaria Merican Bin Osman Merican (Member/Independent NED)
Abd Aziz Bin Attan (Member/Independent NED)
The Terms of Reference of the Audit Committee are set out in this website.
- Nomination Committee
The Nomination Committee (“NC”) comprises wholly of Independent NEDs as set out below:
Tan Sri Dato’ Nik Ibrahim Kamil (Chairman/Independent NED)
Zakaria Merican Bin Osman Merican (Member/Independent NED)
Abd Aziz Bin Attan (Member/Independent NED)
The Terms of Reference of the NC amongst others are to:
- identify, select and recommend to the Board, candidates for directorships of the Company;
- recommend to the Board, Directors to fill the seats on Board Committees;
- evaluate the effectiveness of the Board and the Board Committees (including its size and composition), contributions and performance and the independence of the Independent Directors; and
- ensure an appropriate framework and plan for Board and management succession of the Group.
The Terms of Reference of the NC are set out in this website.
- Remuneration Committee
The Remuneration Committee comprises wholly of Independent NEDs as set out below:
Tan Sri Dato’ Nik Ibrahim Kamil (Chairman/Independent NED)
Zakaria Merican Bin Osman Merican (Member/Independent NED)
Abd Aziz Bin Attan (Member/Independent NED)
The Remuneration Committee’s primary responsibility is to structure and review the remuneration policies for key executives of the Group, with a view to ensure that compensation and other benefits encourage performance that enhances the Group’s long-term profitability and value.
The remuneration package for key executives are subject to the approval of the Board, and in the case of Directors’ fees, the approval of the shareholders at the Annual General Meeting (“AGM”) of the Company.
In carrying out its duties and responsibilities, the Remuneration Committee has full, free and unrestricted access to the Company’s records, properties and personnel.
The Remuneration Committee convened one (1) meeting for the financial year under review which was attended by all its members.
The Terms of Reference of the Remuneration Committee are set out in this website.
- Risk Management Committee
The Risk Management Committee which was established in 2013 comprises of the following:
Mohd Harris Bin Pardi (Chairman/COO cum ED)
Fong Heng Leong (Member/ED)
Sak Swee Sang (Member/ED)
The Terms of Reference of the Risk Management Committee are to:
- oversee the identification and management of all applicable risks such as liquidity risk, credit risk, operational risk and market risk;
- review and approve risk management framework, methodologies in assessing the risk profiles, risk tolerance limits and risk management policies; and
- ensure that infrastructure, resources, processes and systems are in place for risk management.
II. Board Evaluation
The NC reviews annually the size and composition of the Board and the Board Committees in order to ensure the Board has the requisite competencies and capacity to effectively oversee the overall business and carry out its responsibilities. The NC uses the Board and the Board Committee Evaluation Form comprising questionnaires for the assessment. The effectiveness of the Board is assessed in the areas of the Board’s responsibilities and composition, administration and conduct of meetings, communication and interaction with Management, and stakeholders and board engagement. A Board Skills Matrix Form is also used as a general assessment of the composition, knowledge skills and experience of the current Board.
The annual evaluation of the individual Directors/Board Committee members are performed by the NC via the Directors’ Evaluation Form comprising questionnaires pertaining to the Director’s knowledge and skills, participation, contributions to interaction and performance, caliber, personality, and time commitment. In the case of Independent Directors, it includes his exercise of independent judgment and objectivity with integrity.
The NC convened one (1) meeting in November 2016 which was attended by Tan Sri Dato’ Nik Ibrahim Kamil, Zakaria Merican Bin Osman Merican (“Zakaria Merican”) and Abd Aziz Bin Attan. At that meeting, the NC facilitated and carried out the assessment and evaluation of the Board, the Board Committees and individual Directors. Having conducted a detailed evaluation, the NC and the Board were satisfied that each of the members of the Board has the requisite competence to serve on the Board and all of them have discharged their duties and responsibilities effectively during the FYE 2016. There were active participation and contribution by all members at meetings. It was concluded that the current Board comprises a good and diverse mix of individuals with manufacturing, marketing, finance and accounting, shipping and commercial experience, contributing considerable knowledge, judgment and experience to the Group, and is adequate in terms of number.
The Board acknowledges the recommendation of the MCCG 2012 on the establishment of a gender diversity policy for the Board. There is no plan by the Board to implement a gender diversity policy or target, as the Group adheres to the practice of non-discrimination of any form, whether based on age, gender, race or religion, throughout the Group. This includes the selection of Board members. The Company believes in, and provides equal opportunity to candidates with merit. The Group is of the view that the suitability of a candidate for the Board is dependent on the candidate’s skills, expertise, experience, character, time commitment, integrity and other qualities in meeting the needs of the Company, regardless of gender.
III. Appointment of Directors
The NC makes independent recommendations for appointment to the Board. The NC assesses the suitability of the candidate taking into account the required mix of skills, knowledge, expertise, experience, professionalism, integrity, competencies, time commitment and other qualities of the candidate, before recommending the appointment to the Board for approval.
IV. Re-election of Directors
In accordance with the Article 97 of the Company’s Articles of Association (“AA”), all Directors shall retire from office once at least in each two (2) years, but shall be eligible for re-election. The Directors due to retire at the forthcoming Fifty-Eighth AGM are Tan Sri Dato’ Nik Ibrahim Kamil, Mohd Harris Bin Pardi and Fong Heng Leong. They have offered themselves for re-election. The Board, having agreed with the NC, had concluded that they are suitable for re-election.
Article 101 of the Company’s AA also provides that Directors newly appointed by the Board shall hold office until the next following AGM and shall be eligible for re-election.
V. Directors’ Remuneration
The current remuneration of the Non-EDs at Company level is based on a standard fee determined by the Board that reflects their expected roles and responsibilities and is subjected to the approval of shareholders at the AGM. The remuneration packages for the EDs comprise of a combination of basic salary and a variable performance bonus. Meeting allowance is paid to the Directors and the members of the Board Committee for the meetings attended by each of them during a financial year. The Directors are also reimbursed reasonable expenses incurred by them in the course of carrying out their duties on behalf of the Company.
The remuneration of the Directors categorised into appropriate components for the FYE 2016 are as follows:
| Category |
 Group
 |
Company
|
||||
|---|---|---|---|---|---|---|
| EDs | Non-EDs | Total | EDs | Non-EDs | Total | |
| RM | RM | RM | RM | RM | RM | |
| Fees | – | 120,000 | 120,000 | – | 120,000 | 120,000 |
| Salaries | 918,000 | – | 918,000 | 918,000 | – | 918,000 |
| Bonuses | 99,750 | – | 99,750 | 99,750 | – | 99,750 |
| Other remunerations | 150,630 | – | 150,630 | 150,630 | – | 150,630 |
| Total | 1,168,380 | 120,000 | 1,288,380 | 1,168,380 | 120,000 | 1,288,380 |
The number of Directors whose total remuneration for the FYE 2016 falls within the following bands are:
| Number of Directors | ||
| Remuneration range | EDs | Non-EDs |
| Below RM50,000 | – | 3 |
| RM150,001 to RM200,000 | 2 | – |
| RM750,001 to RM800,000 | 1 | – |
C. PRINCIPLE 3: REINFORCE INDEPENDENCE
For FYE 2016, each of the Independent NEDs provided an annual confirmation of his independence to the NC and the Board. The independent assessment criteria used are according to the definition of “independent director” as prescribed by the Main Market Listing Requirements of Bursa Securities (“Listing Requirements”).
One (1) of the recommendations of the MCCG 2012 states that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years (“Limit”). However, the NC and the Board hold the view that a Director’s independence cannot be determined solely with reference to tenure of service and that the Board is in the best position to identify, evaluate and determine whether an Independent Director can continue to act in the best interest of the Company and bring independent and professional judgement to board decisions.
The NC and the Board have also determined that Tan Sri Dato’ Nik Ibrahim Kamil and Zakaria Merican whose tenure as Independent Director have exceeded the Limit remained unbiased, objective and independent in expressing their opinions and in participating in decision making of the Board and Board Committees. The length of their services on the Board has not in any way interfered with the exercise of independent judgment or their ability to act in the interest of the Company. In addition, they have devoted sufficient time and attention to their professional obligations for informed and balanced decision making.
The shareholders had at the Fifty-Seventh AGM of the Company held on 19 May 2016, approved the retaining of the designation of both Tan Sri Dato’ Nik Ibrahim Kamil and Zakaria Merican as Independent NEDs of the Company.
In this respect, the Board had in November 2016 approved the continuation of Tan Sri Dato’ Nik Ibrahim Kamil and Zakaria Merican as Independent Directors of the Company, and had recommended retaining their designation as Independent NED of the Company, subject to shareholders’ approval at the forthcoming Fifty-Eighth AGM of the Company.
The three (3) Independent Directors, Tan Sri Dato’ Nik Ibrahim Kamil, Zakaria Merican and Abd Aziz Bin Attan make up half (½) of the Board which is more than the requisite number prescribed by the Listing Requirements.
D. PRINCIPLE 4: FOSTER COMMITMENT
The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of the Company during the FYE 2016. The Directors’ commitment in carrying out their duties and responsibilities is affirmed by their attendance at the Board meetings held during the FYE 2016, as reflected below:
| Director | Number of meetings attended in FYE 2016 | % of Attendance |
| Tan Sri Dato’ Nik Ibrahim Kamil | 5 of 5 meetings | 100 |
| Mohd Harris Bin Pardi | 5 of 5 meetings | 100 |
| Fong Heng Leong | 5 of 5 meetings | 100 |
| Sak Swee Sang | 5 of 5 meetings | 100 |
| Zakaria Merican Bin Osman Merican | 5 of 5 meetings | 100 |
| Abd Aziz Bin Attan | 5 of 5 meetings | 100 |
All the Directors do not hold directorships more than that prescribed by the Listing Requirements. The Board makes clear at the onset its expectations of its new Directors in terms of their time commitment as recommended by the MCCG 2012.
All the Directors had attended the Mandatory Accreditation Programme conducted by Bursa Securities. During the FYE 2016, the Directors received updates and briefings on the Group’s businesses, operations, risk management, internal controls, corporate governance, finance and new changes to the relevant legislation, rules and regulations.
The Board oversees the training needs of its Directors. Directors are encouraged to attend external professional training programmes relevant and useful in contributing to the effective discharge of their duties as directors. The following are training programmes attended by the Directors during the financial year under review:
| Director | Training Programmes | Organiser | Month |
|---|---|---|---|
| Tan Sri Dato’ Nik Ibrahim Kamil | Container Operations and Terminal Planning Briefing | Westports Malaysia Sdn. Bhd. | July 2016 |
| Shipping and Port Industry Update | Ocen Shipping Consultant | November 2016 | |
| Zakaria Merican | Tax Seminar on Malaysia Budget 2017 | Messrs SJ Grant Thornton | November 2016 |
| Mohd Harris Bin Pardi | Overall Equipment Efficiency (“OEE”) Training | VA Learning Sdn. Bhd. | July 2016 |
| Total Productive Measuring (“TPM”): Measuring the effectiveness with Mean Time To Repair (“MTTR”) and Mean Time Between Failure (“MTBF”) Training | VA Learning Sdn. Bhd. | November 2016 | |
| Fong Heng Leong | OEE Training | VA Learning Sdn. Bhd. | July 2016 |
| TPM : Measuring the effectiveness with MTTR and MTBF Training | VA Learning Sdn. Bhd. | November 2016 | |
| Sak Swee Sang | National Tax Conference 2016 | Chartered Tax Institute of Malaysia in collaboration with Lembaga Hasil Dalam Negeri Malaysia | August 2016 |
| Post 2017 Budget Tax Seminar | Messrs BDO | November 2016 | |
| Abd Aziz Bin Attan | Mandatory Accreditation Programme for Directors of Public Listed Companies | Bursatra Sdn. Bhd. | February 2016 |
| Tax and Business Conference – Highlighting Challenges and Opportunities | Messrs SJ Grant Thornton | November 2016 | |
| Launch of the AGM Guide & Corporate Governance Breakfast Series: How to Leverage on AGMs for Better Engagement with Shareholders | The Malaysian Institute of Chartered Secretaries and Administrators in collaboration with Bursa Securities | November 2016 |
E. PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING
The Board takes responsibility for presenting a balanced and understandable assessment of the Group’s operations and prospects each time it releases its quarterly and annual financial statements to shareholders. The Audit Committee reviews the information to be disclosed to ensure its accuracy and adequacy.
A Statement by Directors of their responsibilities in preparing the financial statements is set out in page 40 of this Annual Report.
The Company through the Audit Committee, has an appropriate and transparent relationship with the External Auditors. In the course of the audit of the Group’s financial statements, the External Auditors will highlight to the Audit Committee, matters that require their attention. At least once a year, the Audit Committee will have a meeting with the External Auditors.
The Audit Committee had reviewed the suitability and independence of External Auditors, Messrs SJ Grant Thornton, and had recommended their re-appointment for the ensuing financial year ending 31 December 2017. Areas of assessment included, among others, the External Auditors’ objectivity and independence, audit fees, size and competency of the audit team, audit strategy, audit reporting and partner involvement. Feedback based on the assessment areas was also obtained from the COO and the EDs. The External Auditors, Messrs SJ Grant Thornton had provided a confirmation of their independence to the Audit Committee that they are and have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. The policies governing the circumstances under which contracts for the provision of non-audit services could be entered into and procedures that must be followed by the External Auditors were submitted to the Audit Committee.
F. PRINCIPLE 6: RECOGNISE AND MANAGE RISKS
The Board recognises the importance of a sound risk management framework and internal control system in order to safeguard the Group’s assets and therefore, shareholders’ investments in the Group.
The Board affirms its overall responsibility for the Group’s system of internal controls. This includes reviewing the adequacy and integrity of financial, operational and compliance controls and risk management procedures within an acceptable risk profile. Since certain risks and threats are externally driven, unforeseen and beyond the Group’s control, the system can only provide reasonable assurance against misstatement or loss.
The Board had put in place an ongoing process for identifying, evaluating and managing significant risks faced by the Group. The implementation and maintenance of the risk management process is carried out by the Risk Management Committee.
A Statement on Risk Management and Internal Control which provides an overview of the state of internal controls within the Group is set out in pages 37 to 39 of this Annual Report.
G. PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE
The Company recognises the importance of effective and timely communication with shareholders and investors to keep them informed of the Group’s latest financial performance and material business/corporate matters affecting the Company. It has put in place Corporate Disclosure Policies and Procedures to ensure communications to the public are timely, factual, accurate, complete, broadly disseminated in accordance with the Listing Requirements and other applicable laws.
The Company maintains a corporate website at www.ocbb.com.my which provides information relating to the Group’s background, products, annual reports, press releases, quarterly results and announcements made to Bursa Securities.
H. PRINCIPLE 8: STRENGTHEN RELATIONSHIP BETWEEN THE COMPANY AND ITS SHAREHOLDERS
The AGM remains the principal platform for dialogue and interactions with the shareholders. At the AGM, shareholders are given the opportunity to raise questions and seek clarifications on the agenda items and on the performance of the Group. The COO, EDs and, where appropriate, the Chairman of the Board, are available to respond to shareholders’ queries during the general meetings. Tan Sri Dato’ Nik Ibrahim Kamil, the Independent Non-Executive Chairman, is the Senior Independent NED to whom concerns relating to the Group may be conveyed by shareholders and other stakeholders.
The Chairman of the Board will announce before the start of all general meetings the right of the shareholders to demand a poll in accordance with the Company’s AA. A full explanation for each resolution proposed at the AGM will usually be provided by the Chairman before the resolution is put to the vote. A press briefing, attended by the COO and EDs is also held after each AGM.