KLK 2020 Corporate Governance Report PDF

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Summary

Corporate governance report - disclosures,
Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures)
of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is
only applicable for financial institutions or ...

Description

CORPORATE GOVERNANCE REPORT STOCK CODE COMPANY NAME FINANCIAL YEAR

: 2445 : KUALA LUMPUR KEPONG BERHAD : September 30, 2020

OUTLINE: SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing Requirements. SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES PERSUANT CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA MALAYSIA Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures) of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is only applicable for financial institutions or any other institutions that are listed on the Exchange that are required to comply with the above Guidelines.

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SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing Requirements. Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1.1 The board should set the company’s strategic aims, ensure that the necessary resources are in place for the company to meet its objectives and review management performance. The board should set the company’s values and standards, and ensure that its obligations to its shareholders and other stakeholders are understood and met. Application

: Applied

Explanation on application of the practice

: Kuala Lumpur Kepong Berhad is led by an experienced, competent and diversified Board that is made up of Directors with appropriate competencies, knowledge, skills and experience from diverse sectors and backgrounds and also in the Group’s core businesses. The Directors collectively, set the Company’s strategic objectives and ensure that the necessary resources are in place for the Company to meet its objectives and review management performance. The Board is responsible for leading the Group and playing a strategic role to oversee the conduct of the Group’s affairs and overall activities of the Management. The principal functions and responsibilities of the Board of Directors include the following: (a)

Providing leadership to the Company by: • Guiding the development of appropriate standards and values for the Company. • Acting in a manner consistent with the Directors’ Code of Conduct.

(b)

Overseeing the development and implementation of corporate strategies by: • Working with the Senior Management to ensure that an appropriate strategic direction and set of goals are in place. • Regularly reviewing and amending or updating the Company’s strategic direction and goals developed by the Senior Management. • Providing gui dance and leadership to the Senior Management and ensuring that adequate resources are available to meet its objectives. • Overseeing planning activities including the development and approval of strategic plans, major funding proposals, 2

investment and divestment proposals, annual corporate budgets and long-term budgets including operating budgets, capital expenditure budgets and cash flow budgets. • Reviewing the progress and performance of the Company in meeting these plans and corporate objectives, including reporting the outcome of such reviews. (c)

Ensuring corporate accountability to the shareholders primarily through adopting an effective shareholder communications strategy, encouraging effective participation at general meetings and, through its Chairman, being the key interface between the Company and its shareholders. The Board subscribes to high standards of transparency and accountability in the disclosure of information to its shareholders as well as to potential investors and the public. The Company uses various channels for effective communication with the shareholders and other stakeholders including releasing timely announcements and disclosures to Bursa Malaysia Securities Berhad, conduct of general meetings and update information available at the Company’s website at www.klk.com.my.

(d)

Overseeing the control and accountability systems that seek to ensure the Company is progressing towards the goals set by the Board and which are in line with the Company’s purpose, the agreed corporate strategy, legislative requirements and community expectations.

(e)

Promoting good corporate governance culture within the Company based on the principles of transparency, objectivity and integrity. The Board has in place policies and procedures to promote a culture of integrity and ethics within the Group as a whole, such as Board Charter, Code of Conduct for Directors, Code of Conduct for Employees, Code of Conduct and Ethics for the Company, Group Whistleblowing Policy, Group Donations and Sponsorship Policy, Policy on Related Party Transactions and Corporate Disclosure Policy and Procedures. During the year, the Group has formalised the Group Anti-Corruption Policy to reiterate the Group’s stand against all forms of corruption and bribery, while providing clarity on the parameters and controls instituted.

(f)

Ensuring effective risk management, compliance and control systems (including legal compliance) are in place. The Board affirms its overall responsibility for maintaining a sound risk management and internal control system to safeguard the interests of stake holders and the Group’s assets. Through the Group Risk Management Committee (“GRMC”), the Board oversees the risk management framework of the Group. The GRMC advises the ARC and the Board on areas of high risk and the adequacy and 3

effectiveness of the Group’s risk management and internal control system which is embedded in all aspects of the Group’s activities. (g)

Ensuring the integrity of the financial and non-financial reporting of the Company and its subsidiaries.

(h)

Delegating appropriate powers to the Chief Executive Officer (“CEO”), Executive Committees and Management to ensure the effective day-to- day management of the business, and monitoring the exercise of these powers.

(i)

Reviewing potential candidates for the Board and Senior Management positions across the Group through the Nomination Committee to ensure effic ient succession planning and continuity of the vision and mission of the Group.

(j)

Embedding sustainability and corporate practices as part of Group strategy.

responsibility

The Board is guided by its Board Charter and Code of Conduct for Directors which clearly sets out the Board’s strategic intent, roles and responsibilities in discharging its fiduciary and leadership functions, and the standard of conduct expected of Directors respectively. Board Committees, which operate within its res pective defined Terms of Reference, have been constituted to assist the Board in the discharge of its specific duties and responsibilities. These Committees comprise the Audit and Risk Committee, Nomination Committee and Remuneration Committee. The Chairman of the respective Committees report to the Board the outcome of deliberations at each Committee meeting. The Board is regularly updated on the Group’s businesses and the competitive and regulatory environment in which they operate. Additionally, in-house briefings by external auditors, solicitors and/or Management are organised from time to time to update Directors on relevant and new statutory and regulatory requirements and the Group’s business and operational practices. All Directors are also encouraged to visit the Group’s operating centres to have an insight into the Group’s various operations which would assist the Board to make effective decisions relating to the Group. For the financial year under review, Directors have attended various program mes to keep abreast with general economic, industry and technical developments as well as changes in legislation and regulations affecting the Group’s operations. Explanation for departure

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Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1.2 A Chairman of the board who is responsible for instilling good corporate governance practices, leadership and effectiveness of the board is appointed. Application

: Applied

Explanation on application of the practice

: The Chairman of the Company, who was appointed by the Board, is responsible for leading the Board in discharging its duties effectively, and enhancing the Group’s standards of corporate governance. The roles and responsibilities of the Chairman of the Board are set out in the Company’s Board Charter, which is available on the Company’s website at www.klk.com.my. The key roles and responsibilities of the Chairman include, amongst others: (a) Providing effective leadership to the Board, i.e. to see that the Board gets its job done. (b) Setting the agenda for Board meetings together with the Chief Executive Officer and ensuring the provision of complete and accurate information to all Directors in a timely manner. (c) Leading Board meetings and discussions, and ensuring the effective and efficient conduct of the Board meetings. (d) Encouraging active participation and allowing dissenting views to be freely expressed to ensure that the key issues facing the Group are addressed. (e) Promoting consultative and respectful relations between Board members and between the Board and Management. (f) Chairing shareholders’ meetings and ensuring appropriate steps are taken to provide effective communication with stakeholders to ensure their views are commu nicated to the Board as a whole. (g) Leading the Board in establishing and monitoring good corporate governance practices in the Company.

Explanation for departure

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Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1.3 The positions of Chairman and CEO are held by different individuals. Application

: Applied

Explanation on application of the practice

: The Board believes that the separation of the roles and responsibilities of the Chairman and the Chief Executive Officer (“CEO”) ensures an appropriate balance of power and authority. Hence, there is a clear division of responsibilities and accountabilitie s between the Chairman and the CEO under the present hierarchical structure to facilitate efficiency and expedite decision-making. The division of responsibilities and accountabilities between the Chairman and the CEO is clearly defined in the Board Charter. The Chairman is responsible for leading the Board in discharging its duties effectively, and enhancing the Group’s standards of corporate governance. He promotes an open environment for debate, and ensures that all Directors are able to speak freely and contribute effectively at Board meetings. The Chairman also provides clear leadership to the Board with regards to the Group’s long-term growth and strategy, while respecting executive responsibility. The CEO focuses on the business, organisational effectiveness and day-to-day management of the Group. He also executes the Board’s decisions and strategic policies, and chairs the Executive Committee, which comprises Senior Management executives to oversee the operations of the KLK Group. As such, the CEO is responsible for proposing strategy to the Board, and for delivering the strategy as agreed.

Explanation for departure

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Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1.4 The board is supported by a suitably qualified and competent Company Secretary to provide sound governance advice, ensure adherence to rules and procedures, and advocate adoption of corporate governance best practices. Application

: Applied

Explanation on application of the practice

: The Board is supported by an in-house Company Secretary, who is suitably qualified, experienced and competent. The Company Secretary constantly undertakes continuous professional development to keep abreast of relevant statutory and regulatory requirements. The Company Secretary is responsible to provide clear and professional advice to the Board on all governance matters and assist the Board on the implementation of an effective corporate governance system. The Company Secretary also periodically reviews the Group’s governance processes for fitness of purpose, and considers any improvements or initiatives that may strengthen the governance of the Group. Apart from playing an active role in advising the Board on governance and regulatory matters, the Company Secretary also organises and attends all Board meetings and ensures that Directors receive timely, clear and concise information in advance prior to the scheduled meetings. In order to ensure uniformity of Board conduct, the Company Secretary also has oversight of the overall corporate secretarial functions of the Group, both locally and in the countries where its subsidiaries are operating, and serves as an adviser on matters pertaining to governance. The Company Secretary also reports to the Chairman on all Board governance matters, and reports to the CEO in relation to her other executive management responsibilities.

Explanation for departure

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Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure

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Timeframe

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Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1.5 Directors receive meeting materials, which are complete and accurate within a reasonable period prior to the meeting. Upon conclusion of the meeting, the minutes are circulated in a timely manner. Application

: Applied

Explanation on application of the practice

: The annual meeting calendar is prepared and circulated in advance of each new year in order to facilitate the Directors’ time planning. The calendar provides Directors with scheduled dates for meetings of the Board and Board Committees, and the Annual General Meeting of the Company for the upcoming year. All Directors are provided with sufficient information and time to prepare for meetings of the Board and Board Committees. The Agenda which sets out the matters to be discussed is furnished to all Directors not less than seven (7) days prior to the meetings. Detailed board papers that contain relevant qualitative and/or quantitative information for the Agenda are also circulated to the Directors simultaneously to give Directors time to review the reports, obtain further clarification if necessary and enable focused and constructive deliberation at Board meetings. Monthly reports on the financial performance of the Company and the Group are also circulated to the Directors for their views and comments. As the Company encourages a paperless environment, Directors have the choice to access meeting documents in digital form via a secured web-based link. All proceedings of Board meetings (which include all material deliberations and recommendations) are minuted and signed by the Chairman of the meeting in accordance with the provisions of the Companies Act 2016. All minutes of meetings would be circulated to Directors in a timely manner. Minutes of meetings of each Committee are also tabled to the Board for perusal and the Directors may request clarification or raise comments on the minutes as they deem fit. Every Director has the opportunity to review and make corrections to the minutes. Board decisions or action items are also communicated to the relevant members of Management for their follow-up. Key decisions are always made at Board meetings, with Directors’ Circular Resolutions confined to formalising matters that have been discussed at Board meetings. Such Directors’ Circular Resolutions are also accompanied by Board papers to keep the 11

Directors informed of the matter concerned. All Directors’ Circular Resolutions are then tabled for noting and confirmation at the subsequent Board meeting. Explanation for departure

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Intended Outcome There is demarcation of responsibilities between the board, board committees and management. There is clarity in the authority of the board, its committees and individual directors. Practice 2.1 The board has a board charter which is periodically reviewed and published on the company’s website. The board charter clearly identifies–  the respective roles and responsibilities of the board, board committees, individual directors and management; and  issues and decisions reserved for the board. Application

: Applied

Explanation on application of the practice

: The Board is guided by its Board Charter which clearly sets out the Board’s strategic intent, roles and responsibilities in discharging its fiduciary and leadership functions. The Board Charter serves as a source reference and primary induction literature, providing insights to prospective Board members and Senior Management. It clearly explains the relationship and interaction between the Board, Board Committees, individual Directors and Chief Executive Director. Hence, the Board Charter is reviewed periodically and updated in accordance with the needs of the Company to ensure its effectiveness and consistency with the Board’s objectives and corporate vision. The Board Charter was adopted by the Board on 20 February 2013, and the last review was carried out in August 2020 to incorporate the latest corporate governance best practices, and amendments to relevant legal requirements, as well as changes in the Group’s internal governance practises. The changes include addressing the implications of the new Section 17A of the Malaysian Anti-Corruption Commission Act 2009, amendments to Bursa Malaysia’s Main Market Listing Requirements and Malaysian Code on Corporate Governance relating to anticorruption measures, facilitation of communication via electronic meetings, and the new “Guidelines on Conduct of Directors of Listed Issuers and their Subsidiaries” issued by Securities Commission on 30 July 2020. The current Board Charter is accessible for reference on the Company’s website, www.klk.com.my.

Explanation for departure

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Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. 13

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Intended O...