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Corporate Governance
The Board of Directors (the "Board") fully appreciates the importance of adopting high standards of corporate governance within Malaysia Smelting Corporation Berhad (the "Company") and its subsidiary companies (the "Group"), in order to safeguard stakeholders' interests as well as enhancing shareholders' value. The Board views corporate governance to be synonymous with four (4) key concepts, namely transparency, accountability, integrity as well as corporate performance.
The Board believes in inculcating a culture that seeks to balance conformance requirements with the need to deliver long-term strategic success through performance, predicated on entrepreneurship, control and ownership, without compromising personal or corporate ethics and integrity.
As such, the Board strives to adopt the substance behind corporate governance prescriptions and not merely the form. The Board is pleased to provide a narrative statement on the application of the Principles and the extent of compliance with the Best Practices as set out in Part 1 and 2 of the Malaysian Code on Corporate Governance (Revised 2007) (the "Code") as well as the relevant provisions in the Main Market Listing Requirements (the "Listing Requirements") of Bursa Malaysia Securities Berhad ("Bursa Malaysia").
STATEMENT OF PRINCIPLES
The following statement sets out how the Company has applied the Principles as set out in Part 1 of the Code:
DIRECTORS
The Board
The Board plays a pivotal role in the stewardship of the Group's direction and operations, including enhancing long-term shareholders' value. In order to fulfill this role, the Board is responsible for:
- reviewing and adopting a strategi plan for business performance;
- overseeing the proper conduct of the Group's business;
- identifying principal risks and ensuring the implementation of systems to manage risks;
- succession planning;
- developing an investor relations programme; and
- reviewing the adequacy and integrity of the Group's internal control system and management information system.
Whilst the Board is responsible for creating the framework and policies within which the Group should be operating, Management is responsible for instituting compliance with laws, regulations, rules, directives and guidelines, including the achievement of the Group's corporate objectives. This demarcation of roles both complements and reinforces the supervisory role of the Board.
Board Committees
Four (4) committees function as proxies of the Board in carrying out its core functions, namely the Executive Committee, Audit Committee, Remuneration Committee and Nominating Committee. These Board committees, with their own terms of reference, deliberate on matters particular to their functions and the Chairmen of the committees report to the Board the outcome of such deliberations.
Executive Committee ("EXCO")
The EXCO's role is to focus on executive management and optimising operational performance of the Group. However, as the majority of the Board members are new appointees all matters for the year were deliberated at full Board level in order to allow every director to appreciate and better understand the business of the Company. The EXCO would be revived when deemed necessary.
Meetings
The Board meets regularly during the year for scheduled meetings with additional meetings convened when urgent and important decisions need to be taken between the scheduled meetings. Due notice is given of scheduled meetings and matters to be dealt with. All Board meeting proceedings are minuted, including the issues discussed and the conclusions made in discharging its duties and responsibilities.
During the financial year ended 31 December 2010, the Board met on fourteen (14) occasions, where it deliberated upon and considered a variety of matters, including approving the Group's financial results, strategic and investment decisions, appointment and reappointment of Directors as well as financial and operating performance of its subsidiary companies.
Board papers are circulated to the directors prior to each meeting of the Board or its committees. Deliberations are recorded with the minutes thereof confirmed by the Chairman of the meeting.
Details of each Director's meeting attendances are as follows:
| Director | Meetings attended |
|---|---|
| Mr Norman Ip Ka Cheung | 14/14 |
| Mr Choi Siew Hong (retired on 11-05-2010) | 6/6 |
| Dato' Seri Dr Mohd Ajib Anuar | 14/14 |
| En Razman Ariffin | 14/14 |
| Mr Yeo Eng Kwang | 13/14 |
| Madam Ong Lee Keang, Maureen @ Mrs Maureen Leong | 11/14 |
| Mr Lim Sit Chen Lam Pak Ng (appointed on 01-03-2010) | 8/12 |
| Mr Chew Kwee San (appointed on 01-03-2010) | 11/12 |
| Mr Mark Christopher Greaves (appointed on 01-11-2010) | 2/3 |
Board Balance
At the date of this statement, the Board consists of eight (8) members, comprising three (3) Independent and Non-Executive Directors, one (1) Executive Director and four (4) Non-Independent and Non-Executive Directors.
The concept of independence adopted by the Board is in line with the definition of an Independent Director in Section 1.01 of the Listing Requirements of Bursa Malaysia. The key element for fulfilling the criteria is the appointment of an Independent Director who is not a member of the Management (a Non-Executive Director) and who is free of any relationships which could interfere in the exercise of independent judgment or the ability to act in the best interest of the Group. The Board complies with Paragraph 15.02 of the Listing Requirements of Bursa Malaysia which requires that at least two (2) Directors or one third (1/3) of the Board, whichever is the higher, are Independent Directors.
Each Director brings to the Board an area of expertise, e.g. skills in finance, operations, governmental affairs, etc., and the directors collectively provide the Board with the ability to guide the Group on an effective basis.
A brief profile of each Director is presented on pages 10 to 13 of this Annual Report.
A clearly accepted division of responsibility is demonstrated by the separate roles of the Chairman, Mr Norman Ip Ka Cheung and the Group Chief Executive Officer, Dato' Seri Dr Mohd Ajib Anuar. The Company's Board Charter formalises and assigns different responsibilities to both the Chairman and the Group Chief Executive Officer, with the Chairman running the Board and ensuring all Directors are provided with information necessary for decision making and the Group Chief Executive Officer overseeing executive management of the Group's affairs and implementing strategies and policies adopted by the Board.
Pursuant to Best Practice AA VII of the Code, following the retirement of Mr Choi Siew Hong from the Board, the Board has identified and appointed En Razman Ariffin as the replacement Senior Independent Non-Executive Director, to whom concerns of Directors, Shareholders, Management and others may be conveyed.
The Board is satisfied that the current Board composition fairly reflects the investments of the Shareholders in the Group.
Supply of Information
The Board's Chairman undertakes primary responsibility for organising information necessary for the Board to deal with the agenda and in ensuring that all Directors have full and timely access to the information relevant to matters that will be deliberated at the Board meeting. The Directors receive information relating to financial and operational performance through board papers which are furnished to them prior to the meetings. This practice enables the Directors to seek clarification and explanation, if necessary, from the relevant Management personnel or fellow Directors.
All Directors have unrestricted access to the advice and services of the Company Secretary, who ensures that:
- the Board receives appropriate and timely information for its decision making; and
- Board procedures are followd and all the statutory and regulatory requirements are met.
The Company Secretary ensures that all Board meetings are properly convened and that accurate and proper records of the proceedings and resolutions passed are recorded and maintained. The Board believes that the Company Secretary is capable of carrying out her duties to ensure the effective functioning of the Board. The Company's Articles of Association specify that the removal of the Company Secretary is a matter for the Board as a whole.
As for obtaining independent professional advice, the Board as a whole will determine, whether as a full Board or in the Director's individual capacity, to take this measure where necessary and under appropriate circumstances in the advancement of its duties. Such advice, if obtained, will be at the Company's expense. Nevertheless, where necessary and under appropriate circumstances, any Directors may do so with the prior consent and approval of the Board's Chairman.
Appointments to the Board
Nominating Committee
The Nominating Committee, during the financial year ended 31 December 2010, comprised the following members:
| Director | Meetings | ||
|---|---|---|---|
| Mr Choi Siew Hong | Chairman, Independent Non-Executive Director (retired from the Board and thus ceased to be a member of the Committee on 11-05-2010) | 1/1 | |
| En Razman Ariffin | Independent Non-Executive Director | 2/2 | |
| Mr Norman Ip Ka Cheung | Non-Independent Non-Executive Director (Ceased to be a member of the Committee on 30-12-2010) | 2/2 | |
| Mr Chew Kwee San | Non-Independent and Non-Executive Director (Appointed as Chairman of the Committee on 30-12-2010) | 0/0 | |
| Mr Mark Christopher Greaves | Independent and Non-Executive Director (Appointed on 30-12-2010) | 0/0 |
The Nominating Committee is empowered by the Board and its terms of reference to ensure there are appropriate procedures in place for the nomination, selection, training and evaluation of Directors and that succession plans are in place. The Nominating Committee assesses the effectiveness of the Board as a whole and the contribution of each individual Director on an annual basis. The Nominating Committee also analyses the structure, size and composition of the Board vis-a-vis the Company's requirement.
All assessments and evaluations carried out by the Nominating Committee in discharging its duties are documented in the minutes of meeting.
The Board through the Nominating Committee's annual appraisal process, believes that the Board possesses the required mix of skills, experience and other qualities of the Board, including core competencies brought by Independent and Non-Executive Directors to the Board which enables it to discharge its duties in an effective manner.
Appointment Process
The Nominating Committee meets annually with additional meetings convened whenever the need arises. Two (2) meetings were held during the financial year in review. During the year, the Nominating Committee met to deliberate on the retirement by rotation of Directors and their eligibility for re-election at the Company's Annual General Meeting.
The Nominating Committee also recommended for the Board's approval the appointment of new Directors after due evaluation and upon satisfaction of all legal and regulatory obligations. In making its recommendations, the Nominating Committee would consider the candidate's skills, knowledge, expertise, experience, professionalism and level of integrity. For the consideration of Independent and Non-Executive Directors, the Nominating Committee also evaluated their ability to discharge responsibilities or functions as expected of Independent and Non-Executive Directors.
Directors' Training
The Board, through its Nominating Committee, ensures a structured orientation and continuous education programme is in place for new and existing members of the Board. The programme includes, amongst others, briefings and updates on the organisational structure, salient matters covered under the Board Charter, key strategic, operational, financial and compliance aspects of the Group, the Group's performance management system, informal discussions with members of the Board and scheduled site visits. This is geared towards ensuring that all Directors are familiar with and are able to appreciate the Group's operating environment and business dynamics to enable them to contribute effectively during Board's deliberations.
All Directors have successfully completed the Mandatory Accreditation Programme prescribed by Bursa Malaysia.
During the financial year under review, the Directors have pursued relevant courses and attended seminars to keep abreast with industry, regulatory and compliance issues, trends and best practices. Details of seminars and training courses attended by the Directors during the financial year are as follows
| Director | Nature of course |
|---|---|
| Mr Norman Ip Ka Cheung |
|
| Mr Choi Siew Hong (retired on 11-05-2010) |
|
| Dato' Seri Dr Mohd Ajib Anuar |
|
| En Razman Ariffin |
|
| Mr Yeo Eng Kwang |
|
| Madam Ong Lee Keang, Maureen @ Mrs Maureen Leong |
|
| Mr Lim Sit Chen Lam Pak Ng (appointed on 01-03-2010) |
|
| Mr Chew Kwee San (appointed on 01-03-2010) |
|
| Mr Mark Christopher Greaves (appointed on 01-11-2010) |
|
Re-election
The Company's Articles of Association require all Directors of the Company to be subjected to retirement, and at least one third of the Board shall retire by rotation at each Annual General Meeting, providing an avenue to the Shareholders to renew their mandate. The Directors to retire in each year are those who have been longest in office since their appointment or reappointment.
Directors over seventy (70) years of age are required to submit themselves for reappointment annually in accordance with Section 129(6) of the Companies Act, 1965.
DIRECTORS' REMUNERATION
Remuneration Committee
The Remuneration Committee, during the financial year ended 31 December 2010, comprised the following members:
| Director | Meetings | ||
|---|---|---|---|
| Mr Norman Ip Ka Cheung | Chairman, Non-Executive Director and Non-Executive Director | 2/2 | |
| Mr Choi Siew Hong | Independent and Non-Executive Director (Retired from the Board and thus ceased to be a member of the Committee on 11-05-2010) |
2/2 | |
| Dato' Seri Dr Mohd Ajib Anuar | Executive Director | 2/2 | |
| En Razman Ariffin | Independent and Non-Executive Director (Appointed on 30-12-2010) |
0/0 |
The Remuneration Committee is responsible for recommending the remuneration framework and the remuneration packages of Executive Director and Senior Management staff to the Board, so as to ensure that rewards are linked to their performance and contributions to the Group's growth and profitability in order to align the interest of the Directors with those of Shareholders.
In deciding on an appropriate framework and the corresponding levels of remuneration, the Remuneration Committee considered views of consultants and evaluated comparative data from companies in similar industry. The Executive Director, as a member of the Remuneration Committee, did not participate in any way in determining his individual remuneration. The Remuneration Committee is of the view that a remuneration package necessary to attract, retain and motivate Directors of the calibre required to oversee or manage the business of the Group is necessary.
The Company remunerates each Director an annual fee (subject to approval by Shareholders at the Annual General Meeting), and where applicable, attendance fees.
Details of Directors' remuneration
The details of the nature and amount of each major element of the remuneration of Directors of the Company for the financial year ended 31 December 2010 are as follows:
| Category | Fees (RM) | Salaries and other emoluments |
|---|---|---|
| * Executive Director | 30,000* | 1,300,499.38 |
| Non-Executive Directors | 309,750 | - |
The number of Directors and their remuneration categorised within the respective ranges are as follows:
| Range Of Remuneration | Executive Director | Non-Executive Directors |
|---|---|---|
| Above RM1 million | 1 | - |
| RM50,001 to RM100,000 | - | 3 |
| RM50,000 and below | - | 2 |
SHAREHOLDERS
The Company recognises the importance of being accountable to its investors and as such has maintained an active and constructive communication policy that enable the Board and Management to communicate effectively with investors, stakeholders and the public generally.
The primary channels of communication to the Company's stakeholders are the holding of general meetings, announcements to the Bursa Malaysia, publishing of annual report and ad-hoc communication, as necessary.
The quarterly and full financial results and the annual report of the Company are available on the website of Bursa Malaysia.
In addition, the Company's website at www.msmelt.com contains vital information concerning the Group which is updated on a regular basis.
ACCOUNTABILITY AND AUDIT
Financial Reporting
It is the Board's commitment to present a balanced and meaningful assessment of the Group's financial performance and prospects at the end of the financial year, primarily through the annual financial statements and quarterly announcement of results to Bursa Malaysia as well as the Chairman's statement and review of operations in the Annual Report.
The Board is assisted by the Audit Committee to oversee the Group's financial reporting process and the quality of its financial reporting.
Directors' responsibility statement in respect of the preparation of the audited financial statements
The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of their operations results and cash flows for the year then ended. In preparing the financial statements, the Directors have ensured that applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 have been applied.
The Directors also have a responsibility under the Companies Act, 1965 to have in place a system of internal control that will provide reasonable assurance that:
- assets of the Company are safeguarded against loss from unauthorised use or disposition; and
- all transactions are properly authorised and that they are recorded as necessary to enable the preparation of true and fair financial statements and to give a proper account of the assets.
In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgments and estimates.
State of Internal Controls
The Board acknowledges its responsibilities for the Group's system of internal control covering not only financial controls but also operational and compliance controls as well as risk management.
The Statement on Internal Control furnished on pages 60 to 61 of this Annual Report provides an overview about the state of internal controls within the Group during the financial year ended 31 December 2010.
Relationship with the Auditors
Key features underlying the relationship of the Audit Committee with the Internal and External Auditors are included in the Audit Committee's terms of reference as detailed on pages 55 to 56 of this Annual Report.
A summary of activities of the Audit Committee during the financial year ended 31 December 2010, including the evaluation of the audit process, is set out in the Audit Committee Report on pages 57 to 59 of this Annual Report.
Corporate social responsibility
The Group is committed to sustainable development. Social responsibility towards human resource, local community, safety and health as well as environment is integral to the way in which the Group conducts its business. The Group's commitment to corporate social responsibility extends beyond corporate philanthropy as the Group actively seeks the participation of its employees in such programmes. Details of the activities pertaining to corporate social responsibility can be viewed under pages 45 to 48 of this Annual Report.
Compliance statement
The Group has complied throughout the financial year ended 31 December 2010, with all the Best Practices of corporate governance set out in Part 2 of the Code.
This statement was made in accordance with a resolution of the Board dated 16 March 2011.
