STOCK CODE 6874 COMPANY NAME KUB Malaysia Berhad … Report 2018 KUBM.pdf · 2020. 5. 20. · KUB...

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CORPORATE GOVERNANCE REPORT

STOCK CODE : 6874 COMPANY NAME : KUB Malaysia Berhad FINANCIAL YEAR : 31 December 2019

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

PURSUANT TO 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

: The Board is responsible to ensure that the shareholder value and stakeholder interests are enhanced and protected. The Board continuously reviews and adopts various guidelines and processes to enhance corporate governance practices within KUB Group, including the Board Charter, Terms of Reference of its Committees and Management Guidelines.

The Board has, amongst others, the following duties and responsibilities:

together with Senior Management, promote good corporate governance culture which reinforces ethical, prudent and professional behaviour.

review, challenge and decide on the Management’s proposals and monitor their implementation.

ensure the strategic plan supports long term value creation and include strategies on economic, environmental and social considerations underpinning sustainability.

supervise and assess Management performance to determine whether the business is properly managed.

ensure there is a sound framework for internal controls and risk management.

understand the principal risks and recognise that business decisions involve the taking of appropriate risks.

set the risk appetite within which Management operates and ensure that there is an appropriate risk management framework to identify, analyse, evaluate, manage and

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monitor significant financial and non-financial risks.

ensure that Senior Management has the necessary skill and experience, and there are measures in place to provide for the orderly succession of Board and Senior Management.

ensure the integrity of the Company’s financial and non-financial reporting.

The matters reserved for the Board are as follows:

KUB Group strategy, plans and budgets.

acquisitions and disposals and transactions.

review the performance of the Senior Management.

changes of key policies, procedures and delegated authority limits.

The quarterly Board Meetings serve as platforms for the Board and the Management to exchange and formulate ideas in reviewing and adopting strategic plans. The Board plays an active role in the development of strategies, which aim to grow and enhance the core businesses, revive the underperforming subsidiaries and divest non-core assets. At dedicated sessions, the Management presents the proposed strategies, business plans and budgets. The Board discusses the key strategies and challenges the Management's views and assumptions, before giving approvals. Board Activities Strategies, budgets, sustainability, risk management, internal control, operational and financial performance, and corporate governance are deliberated at the Board meetings. Key highlights of the activities in the financial year ended 31 December 2019 (‘FY2019’) are as follows:

Business strategy and budget

In November 2019, the Board approved the Group’s strategic plan and budget for the financial year 2020, taking into account risks and factors affecting the Group.

Nomination and remuneration

The Board, through the Board Nomination Committee (‘BNC’) and Board Remuneration Committee (‘BRC’), ensured that there was an effective succession plan. The BNC formulated the nomination, selection and succession policies for directorship and senior management position, whilst the BRC determined suitable remuneration for these appointments.

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The BNC and BRC took into account various factors such as suitability, professional achievements and personality assessments of the candidates.

Joint venture, proposed development and collaboration, investment, acquisition and disposal of assets The Board reviewed and deliberated on the Group’s rationale, strategies, financial impact and projected returns of the above initiatives.

Quarterly financial results The Board deliberated on the actual financial performance compared to the budget and advised the Management on the next course of action.

Internal control and risk management Through the Board Audit Committee (‘BAC’) and Board Risk Management Committee (‘BRMC’), the Board oversaw the compliance and risk management practices of the Group. The BAC and BRMC advised the Management on significant risks, adequacy of compliance and control procedures.

Sustainability KUB Group strives towards a sustainable future for the employees, customers, shareholders and general community by creating positive social impact through its activities. The Board promotes good corporate governance by striking a balance between short-term performance and long-term sustainability through adherence to the code of conduct, ethical values, sound risk management and effective internal controls. The Sustainability Statement is included in the Annual Report.

Succession Planning The Board has approved the succession plans for the Directors and Senior Management after taking into account the recommendations from the BNC. The Group has implemented the Employees' Development Programme (‘EDP') for Management and Senior Management positions with the objective to identify internal talents and develop effective managers and leaders for critical positions. The EDP includes mentoring, coaching and formal learning. The potential successors are guided by the training provider/mentor. The individual is monitored with structured interventions to improve leadership skill and functional capability.

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The initiatives on organisational alignment and human capital enhancement included:

organisational restructuring.

revision of employee compensation and benefits.

successor’s assessment.

recruitment of key leadership roles.

implementation of the performance management system.

implementation of a new planning cycle.

recruitment of key talents at the Subsidiaries to support growth and turnaround initiatives.

development of a new competency framework.

leadership and functional development programme.

upgrading of Group-wide Accounting and Management Information System.

Explanation for departure

:

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

Measure :

Timeframe :

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Intended Outcome



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.



: Datuk Seri Johari bin Abdul Ghani, a Non-Independent Non-Executive Chairman, provides leadership and guidance to ensure effective performance of the Board. The Chairman works closely with the Board members to formulate policies and strategies for the Group. Responsibilities of the Chairman include, amongst others:

set the Board agenda with the Company Secretaries and the President/Group Managing Director.

with the assistance of the Company Secretaries, ensure that the Board members receive the meeting papers in advance and that minutes of meetings are circulated on timely basis.

lead discussions, encourage debates and seek views from the Directors.

review the draft minutes of meetings before circulation.

chair the general meeting and respond to questions from the shareholders.

lead the promotion of good governance practices within the Group.


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Measure :

Timeframe :

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Intended Outcome



company.

Practice 1.3

The positions of Chairman and CEO are held by different individuals.



: The positions of the Chairman and the President/Group Managing Director/Group Chief Executive Officer are held by different individuals. The latter is responsible to implement the policies and strategies approved by the Board. On 13 December 2019, the position of President/Group Managing Director was abolished and replaced by the Group Chief Executive Officer.

Senior Management supports the President/Group Managing Director/Group Chief Executive Officer to present the updates on key initiatives, business targets and budgets by providing clarifications on the issues raised by the Board.


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Measure :

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Intended Outcome



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.



: The Company Secretaries carry out, amongst others:

ensure compliance with the provisions of the Companies Act, 2016, Bursa Malaysia Securities Berhad Main Market Listing Requirements and Capital Market and Services Act 2007.

facilitate and attend Board Meetings, Board Committee meetings and the General Meeting(s).

assist the Board with the preparation of announcements for release to Bursa Malaysia Securities Berhad.

ensure compliance with the Constitution.

prepare and distribute Board/Board Committee papers.

facilitate the assessment undertaken by the Board and/or the Board Committees and compile the results.

facilitate continuous professional development programmes for the Board.

provide advice and support to the Board and Management.

carry out any other duties as required by the Board. The Company Secretaries keep the Board updated with the latest regulatory provisions and ensure that deliberations at the Board and Board Committee meetings are properly documented.


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Measure :

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Intended Outcome



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.



: The notice for each of the meetings is accompanied by the minutes of the preceding Board meeting, together with the relevant information and supporting documents. The Directors have access to the advice and services of the Company Secretaries and independent professionals. Management and consultants may be invited to attend the Board meetings to provide information and professional advice.

All deliberations and decisions at the Board meetings are recorded (including any dissenting view and abstention). Decisions, policies and follow-up actions approved at Board meetings are communicated to the Management. The Company Secretaries circulate the minutes of meetings to the Board and the Management for review and comment in a timely manner. The finalised minutes are tabled at the next Board meeting for confirmation.

The calendar of meetings for the Board and Board Committees is distributed before the beginning of the new calendar year. Early distribution enables the Directors to properly plan for the meetings. The Company Secretaries issue notices for all scheduled meetings after consulting the Chairman and/or President/Group Managing Director/Group Chief Executive Officer. Unscheduled meetings may be convened when specific decisions are required.

Seven (7) Board meetings were held in the financial year ended 31 December 2019 with all Directors having 50% or more attendance, in compliance to the provisions of the Constitution and Listing Requirements. Attendance of each Director is disclosed in the Profile of Directors in the Annual Report.


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Measure :

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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.



: The Board, assisted by its Committees, is responsible for corporate governance and strategic direction. The demarcation of responsibilities between the Board, Board Committees and Management is provided in the Board Charter (‘the Charter').

The Charter ensures that all Board members understand the relevant duties, regulations, principles and practices of good corporate governance. It is reviewed periodically in order to remain relevant, effective and complies with the latest Code and Listing Requirements. The Charter is available at www.kub.com. It was revised in August 2019 following the separation of the Board nomination and remuneration committees.

KUB Management Guidelines (‘KUBMaG’) specifies the functions and authority limits of the Management in order to facilitate organised dissemination of policies for timely and effective decision-making. It is reviewed by the Board when necessary.


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Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy

corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered

acceptable behaviour and practice in the company.

Practice 3.1

The board establishes a Code of Conduct and Ethics for the company, and together with

management implements its policies and procedures, which include managing conflicts of

interest, preventing the abuse of power, corruption, insider trading and money laundering.

The Code of Conduct and Ethics is published on the company’s website.



: The Company has separate codes of conduct for the Directors and employees. The Directors’ Handbook and Code of Conduct (‘Handbook’) incorporates the relevant provisions of the Companies Act, 2016, the Listing Requirements and the Code. It governs the terms, conditions and benefits for the services rendered by the Directors. The fundamental principles underlying the policies and procedures are equity among all Directors and fairness to KUB. All Directors are expected to adhere to the spirit of these principles. The Handbook is available on KUB’s corporate website. KUB Group communicates the employee Code of Conduct and Ethics (‘Code of Conduct’’) to all staff. The Code of Conduct covers the following six (6) categories: (i) conflict of interest. (ii) misuse of position. (iii) misuse of information. (iv) integrity and accuracy of record/transaction. (v) fair and equitable treatment. (vi) confidentiality. The Code of Conduct strengthens KUB Group’s core value on integrity by providing guidance on moral standards and ethical behaviours expected from employees. It is part of the Employee Handbook, accessible in the Group’s intranet.

The BAC, through the Group Risk and Audit Division, monitors compliance with the Code of Conduct. Board members and employees are expected to act responsibly, promote open communication and treat the stakeholders professionally.

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Employees must safeguard the Group’s information, avoid conflicts of interest and exercise sound judgment in all dealings with external parties such as customers, suppliers and regulators. The Group practises good governance, sets clear expectations and adheres strictly to its policies such as the Gift Policy.

KUB Group observes the laws, rules and regulations that safeguard against money laundering, terrorism financing, bribery and corruption. Conflicts of Interest Policy Directors with any direct or indirect interest in a proposal or transaction must declare that interest and abstain from deliberation and decision. The Conflict of Interest Policy aims to protect the Directors and the Company. It enhances Corporate Governance practices and addresses situations where personal interests may conflict or are perceived to conflict with the discharge of duties. The Policy is included in the Directors' Handbook.


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Measure :

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Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy

corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered

acceptable behaviour and practice in the company.

Practice 3.2

The board establishes, reviews and together with management implements policies and

procedures on whistleblowing.



: KUB Group conducts its business in an ethical manner. In 2016, the Group implemented the Corporate Integrity Pledge (‘CIP’) that practises zero tolerance towards all forms of bribery and corruption. The objective of CIP has been further strengthened with the establishment of KUB Gift Policy. The CIP covers all employees as part of the initiative to enhance the Code of Ethics.

The Board approved KUB Integrity Framework in November 2017. It illustrates the pivotal role of integrity in achieving the vision and mission of the Group. KUB Group continuously improves the governance policies and practices in line with the requirements of ISO 37001:2016 ‘Anti-Bribery Management System’ in order to ensure the achievement of CIP objectives. The Company has implemented a Whistleblowing Policy since 2017 providing the employees with communication channels for reporting illegal and immoral conduct to the appropriate parties within KUB Group and protects these employees against reprisals. It is an avenue for independent investigations. The Whistleblowing Policy is available on the Company’s website. In November 2019, the Board took cognisance of the implementation of S17A of the Malaysian Anti-Corruption Commission Act 2009 effective 1 June 2020. S17A creates a corporate liability offence in respect of corruption when a person associated with an organisation corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person with the intent to obtain/retain business or an advantage for the organisation. In this regard, the policies and procedures implemented within the Group may be used as defences under S17A.


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Measure :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into

account diverse perspectives and insights.

Practice 4.1

At least half of the board comprises independent directors. For Large Companies, the board

comprises majority independent directors.



: The Board comprises the Chairman (who is a Non-Independent Non-Executive Director), the President/Group Managing Director (who resigned on 13 December 2019), the Senior Independent Non-Executive Director, four (4) Independent Non-Executive Directors (‘INEDs’) and two (2) Non-Independent Non-Executive Directors. The Independent Directors make up fifty-six per cent (56%) of the Board membership in compliance with Paragraph 15.02(1) of the Listing Requirements and Practice 4.1 of the Code. No individual or group dominates the decision-making process. INEDs are independent of management and free from any business relationship which could materially interfere with the exercise of their judgment so as to safeguard the interests of minority shareholders and ensure that the highest standards of conduct and integrity are maintained. The assessment criteria for the independence of Directors embedded in the Directors’ Handbook formalise the process to determine the Non-Executive Directors’ (‘NEDs’) independence. Each year, the NEDs must complete the Declaration Form of Independence. The Board is satisfied that each INED is independent in character and judgment and free from relationships or circumstances which are likely to affect or could appear to affect the Director’s judgment. In reaching this conclusion, the Board has considered all relevant facts and circumstances, including whether the Director:

is a major shareholder of KUB or an officer of, or associated directly with a major shareholder of KUB.

is employed, or has previously been employed within the

last two (2) years in an executive capacity by KUB.

has been engaged as an adviser to KUB or is presently a partner, Director (except an Independent Director) or major shareholder, as the case may be, of a firm or corporation which provides professional advisory services to KUB.

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is involved in any transaction with KUB or is presently a partner, Director or major shareholder, as the case may be, of a firm or corporation which is engaged in any transaction with KUB.


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Measure :

Timeframe : Please specify number of years.

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Intended Outcome



Practice 4.2

The tenure of an independent director does not exceed a cumulative term limit of nine years.

Upon completion of the nine years, an independent director may continue to serve on the

board as a non-independent director.

If the board intends to retain an independent director beyond nine years, it should justify and

seek annual shareholders’ approval. If the board continues to retain the independent director

after the twelfth year, the board should seek annual shareholders’ approval through a two-

tier voting process.



: On 29 March 2018, the Board limited the tenure of an Independent Director (inclusive of re-designation) to nine (9) years only as recommended under Practice 4.2 and Step up 4.3 of the Code. The Independent Director is to relinquish Directorship once the nine (9) year limit is reached. Directors are assessed on their ability to provide valuable contributions without interference and act in the best interests of KUB. The criteria include independence from the Management and the absence of any business relationship which could materially interfere with or could reasonably be perceived to materially interfere with an independent judgment.


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Intended Outcome



Practice 4.3- Step Up

The board has a policy which limits the tenure of its independent directors to nine years.


Explanation on adoption of the practice

: Kindly refer to the explanation on Practice 4.2 above.

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Intended Outcome



Practice 4.4

Appointment of board and senior management are based on objective criteria, merit and with

due regard for diversity in skills, experience, age, cultural background and gender.



: The Company sees diversity as an essential component of effective decision-making. In any appointment, a number of aspects such as gender, age, education, experience, skills and knowledge are taken into consideration to form a diversified Board and Senior Management.


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Intended Outcome



Practice 4.5

The board discloses in its annual report the company’s policies on gender diversity, its

targets and measures to meet those targets. For Large Companies, the board must have at

least 30% women directors.



: The Board encourages women to take up board positions and has established the Board Diversity Policy as explained below. This policy is published on the Company’s website. BOARD DIVERSITY POLICY The Board Diversity Policy is to ensure that the mix and profiles of the Board members in terms of gender and age, provides different perspectives, experience and expertise required to achieve effective stewardship and management. The objective of the Board Diversity Policy is to achieve at least ten per cent (10%) women representation on the Board. The BNC is responsible to review and assess the composition and performance of the Board and identify qualified persons. In reviewing the composition of the Board, the BNC will consider a mix of skills, knowledge and experience in order to benefit from diversity. The BNC recommends new appointments to the Board based on merits, the skills and experience of the candidates. The BNC will:

ensure that the recruitment process achieves Board diversity.

assess and recommend the appropriate mix of diversity such as gender, age, skills, experience and expertise.

review the diversity requirements periodically.


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Measure :

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21

Intended Outcome



Practice 4.6

In identifying candidates for appointment of directors, the board does not solely rely on

recommendations from existing board members, management or major shareholders. The

board utilises independent sources to identify suitably qualified candidates.



: The BNC recommends the appointment of new Directors, reviews succession plans, determines the training needs and identifies relevant training programmes for Directors in collaboration with the Company Secretaries. The appointment policies and procedures are included in the Charter and the Directors’ Handbook. Using various sources, the BNC identify suitable candidates with the required skills by assessing the following criteria:

range of skills, experience and perspectives represented, including an understanding of the industry, the regulatory environment, the markets and the communities related to KUB’s operations;

particular skills, experience and perspective that can improve the corporate culture at the Board level;

time commitment available to discharge Directors' duties;

nature of existing positions, directorships, other relationships and the impact that each factor has on the exercise of an independent judgment;

extent to which the candidate is able to work constructively with the existing Directors and contributes to the effectiveness of the Board;

advantages of broadening the membership of the Board in terms of experience, skills, values, perspectives and backgrounds; and

extent to which the candidate meets the independence criteria outlined in the Listing Requirements and the Code.

The information on potential candidates may be obtained from,

amongst others, the existing Directors, Management, substantial

shareholders and the registries maintained by third parties such

as the Minority Shareholder Watch Group.

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The BNC evaluates the candidates with the assistance of the

Company Secretary. A BNC member, with the consent of the

BNC’s Chairman, will meet the short-listed candidates for initial

evaluation in order to advise BNC on their suitability. The BNC

may make any other enquiries regarding the short-listed

candidates and submit its recommendation to the Board.

Once the appointment is approved by the Board, the Company

Secretary will invite the candidate to join the Board meeting. All

new Directors will be required to attend induction programmes.

Protocol for Accepting New Directorship A Director must allocate sufficient time to carry out the duties, declare the details of all other significant interests and indicate the time required for such other commitments. The Director must advise the Board of any subsequent change to these commitments. A Director must notify the Chairman in writing, before accepting new Directorship in other companies, providing indication of time that will be spent on the new appointment. The Chairman will notify the other Board members for information.


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Measure :

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Intended Outcome



Practice 4.7

The Nominating Committee is chaired by an Independent Director or the Senior Independent

Director.

Application : Departure


: The Board Nomination and Remuneration Committee (‘BNRC’) had been chaired by Tunku Alizan bin Raja Muhammad Alias, who was a Non-Independent Non-Executive Director, until 4 March 2019. Effective 1 April 2019, the BNRC was dissolved and separated into Board Nomination Committee (‘BNC’) and Board Remuneration Committee (‘BRC’).

The BNC comprises exclusively Non-Executive Directors, a majority of whom are Independent Directors, in accordance with the Listing Requirements. Effective 1 April 2019, the Chairman of BNC is Datuk Seri Johari bin Abdul Ghani, a Non-Independent Non-Executive Director who represents a substantial shareholder, to ensure that the Board Members and Senior Management personnel are properly selected and appointed. No individual or group dominates the decision-making process. Independent views are taken into consideration in each discussion.

The BNC has established a procedure for appointing Directors and Senior Management and assessing the effectiveness of the Board, the Directors and the Committees. The Terms of Reference (‘TOR’) for the BNC is available on the Company’s website. During the financial year 2019, the BNRC/BNC had approved the following resolutions:

• appointment of new Directors. • revision of the Board Charter. • establishment of the Terms of Reference of the BNC. • retirement and re-election of Directors. • Annual Board Evaluation. • evaluation on the performance of the BAC. • Independent Directors’ Assessment. • re-composition of Board Committees. • Directors’ Fees for the financial year ended 2019.

The Board consistently reviews the size and composition of BNC to ensure it remains effective.

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: The presence of the representative of a substantial shareholder

as Chairman is to ensure that the Board and Senior

Management are properly selected and appointed.


Measure :

Timeframe :

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Intended Outcome

Stakeholders are able to form an opinion on the overall effectiveness of the board and

individual directors.

Practice 5.1

The board should undertake a formal and objective annual evaluation to determine the

effectiveness of the board, its committees and each individual director. The board should

disclose how the assessment was carried out and its outcome.

For Large Companies, the board engages independent experts periodically to facilitate

objective and candid board evaluations.



: The Annual Board Evaluation covering the Board and Board Committees Effectiveness and Directors’ Self and Peer Assessment (‘the Exercise’) is undertaken to assess performance and identify areas for improvement. The Exercise is intended to accomplish the following:

improve the overall performance of KUB and its Board.

assess individual and collective success.

improve working relationship.

reinforce individual relationship.

improve the support given to the Board members. The feedback is collated and analysed by the Company Secretary who then brief the Chairman of the BNC on the results. A report will be presented to the BNC and the Board for deliberation on the strengths and areas for improvement. The assessments cover the roles and responsibilities, composition, ways to foster commitment, meeting process, administration and conduct, interaction and communication with Management, Stakeholders and Board engagement, and the effectiveness of the Chairman. Self and Peer Evaluations assess each Director’s professional competency, performance, leadership and integrity, Board contribution, commitment and strategic thinking. Review of Directors Proposed for Re-election Procedures for the appointment and re-election of Directors are stipulated in the Constitution and the Directors’ Handbook. Directors are re-elected at every Annual General Meeting (‘AGM’), where one-third (1/3) of the Directors who have been longest in office since their last election should retire. The names of Directors who are due for re-election at the forthcoming AGM and have consented in writing for re-election, are set out in the Notice of AGM.

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Based on the rotation schedule, the BNC recommends to the Board the names of Directors eligible for re-election. This recommendation is based on formal reviews of their performance, Annual Board Evaluation results, contribution, commitment, level of independence and the ability to act in the best interest of KUB.


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Intended Outcome

The level and composition of remuneration of directors and senior management take into

account the company’s desire to attract and retain the right talent in the board and senior

management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent

process.

Practice 6.1

The board has in place policies and procedures to determine the remuneration of directors

and senior management, which takes into account the demands, complexities and

performance of the company as well as skills and experience required. The policies and

procedures are periodically reviewed and made available on the company’s website.



: The BRC reviews the Compensation Policy (‘Policy’), aligns the Policy to corporate performance and ensures the compensation offered is competitive. Objectives of the Policy are:

encourage a merit-based performance-driven culture to generate business growth and foster teamwork.

provide a clear focus on key objectives and measure achievement with a meaningful link to reward.

provide competitive compensation to retain performers. The above objectives are supported by the following three (3) components:

Performance alignment: align compensation to business achievement.

align reward to the Key Performance Indicators

(‘KPI’). recognise and reward cross-companies/divisions

collaboration.

award and differentiate compensation based on individual performance and contributions.

Individual compensation determination: facilitate competitiveness through market positioning

and comparable compensation for similar jobs.

promote meritocracy and fairness in rewarding individual performance.

equitable compensation opportunity.

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Compensation structure and instruments: maintain an appropriate balance of Fixed

Compensation and Variable Compensation.

a significant portion of variable pool is allocated and aligned with business performance.

the administration of the benefits is subject to proper control and governance.

promote sound human resource management practices.

An Automated Balance Scorecard System has been implemented to improve the existing KPI by focusing on performance-based remuneration and improved performance management system. The remuneration of NEDs should be adequate to attract, retain and motivate individuals with the necessary attributes. Various factors are considered to determine remuneration such as the Group’s requirement, the expertise and the experience of the candidates.

The performance of President / Group Managing Director / Group Chief Executive Officer is measured by his individual performance as well as the corporate performance based on the KPIs approved by the Board.


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Measure :

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Intended Outcome

The level and composition of remuneration of directors and senior management take into

account the company’s desire to attract and retain the right talent in the board and senior

management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent

process.

Practice 6.2

The board has a Remuneration Committee to implement its policies and procedures on

remuneration including reviewing and recommending matters relating to the remuneration of

board and senior management.

The Committee has written Terms of Reference which deals with its authority and duties and

these Terms are disclosed on the company’s website.



: The BRC comprises exclusively Non-Executive Directors, a majority of whom are Independent Directors. Effective 1 April 2019, the Chairman of BRC is Datuk Seri Johari bin Abdul Ghani, a Non-Independent Non-Executive Director who represents the substantial shareholder, to ensure that the Board Members and Senior Management personnel are properly remunerated in discharging their responsibilities. No individual or group dominates the BRC’s decision-making process. Independent views are taken into consideration in each discussion. The BRC is responsible for the following: • review and approve incentive strategy, performance targets

and bonus payments. • recommend the appointment of remuneration consultants. • oversee the disclosures of remuneration in the annual report

and Notice of General Meetings. • provide clarification on remuneration issues to shareholders

at General Meetings. The Terms of Reference of the BRC has been approved by the Board and published on the Company’s website.


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Measure :

Timeframe :

31

Intended Outcome

Stakeholders are able to assess whether the remuneration of directors and senior

management is commensurate with their individual performance, taking into consideration

the company’s performance.

Practice 7.1

There is detailed disclosure on named basis for the remuneration of individual directors. The

remuneration breakdown of individual directors includes fees, salary, bonus, benefits in-kind

and other emoluments.



: Details of Directors’ remuneration received from the Company and Subsidiaries for the financial year are disclosed in the Annual Report.


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Measure :

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32

Intended Outcome




Practice 7.2

The board discloses on a named basis the top five senior management’s remuneration

component including salary, bonus, benefits in-kind and other emoluments in bands of

RM50,000.



:


: The existing disclosure of Senior Management’s remuneration that include the five (5) key management personnel in the Audited Financial Statements are adequate since it complies with the requirement of Paragraph 17 of Malaysian Financial Reporting Standards ‘Related Party Disclosures’. KUB endeavours to hire the best talents and relies on its robust systems and processes and oversights to ensure remuneration is competitively managed and strongly linked to performance. Disclosing the remuneration on a named basis would affect the competitiveness of KUB.


Measure : Not disclosed.

Timeframe :

33

Intended Outcome




Practice 7.3 - Step Up

Companies are encouraged to fully disclose the detailed remuneration of each member of

senior management on a named basis.



:


: The existing disclosure of Senior Management’s remuneration that include the five (5) key management personnel in the Audited Financial Statements are adequate since it complies with the requirement of Paragraph 17 of Malaysian Financial Reporting Standards ‘Related Party Disclosures’. KUB endeavours to hire the best talents and relies on its robust systems and processes and oversights to ensure remuneration is competitively managed and strongly linked to performance. Disclosing the remuneration on a named basis would affect the competitiveness of KUB.


Measure : Not disclosed.

Timeframe :

34

Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and

recommendations. The company’s financial statement is a reliable source of information.

Practice 8.1

The Chairman of the Audit Committee is not the Chairman of the board.



: The Chairman of the BAC is not the Chairman of the Board to ensure objectivity in its findings and recommendations. Details of the composition and activities of the BAC are set out in the BAC Report. The BAC met five (5) times in the financial year ended 2019. The President/Group Managing Director, Group Chief Financial Officer and the Head, Group Risk and Audit Division attended those meetings whilst representatives of the External Auditors, the Heads of Division and the Heads of Company attended by invitation. The BAC reviews and recommends the quarterly financial statements for approvals by the Board prior to their releases to Bursa Malaysia. The Board is responsible to ensure that financial statements give a true and fair view of KUB Group’s state of affairs. The Board takes reasonable steps to ensure full compliance with the accounting standards.


:


Measure :

Timeframe :

35

Intended Outcome




Practice 8.2

The Audit Committee has a policy that requires a former key audit partner to observe a

cooling-off period of at least two years before being appointed as a member of the Audit

Committee.



: The BAC is governed by its Terms of Reference, which was revised in 2018 to reflect the changes in the new Code. The Terms of Reference requires the former key audit partner to observe a cooling-off period of at least two (2) years before being appointed as a member of the BAC. None of the member of the BAC was a former key audit partners within the cooling-off period of two (2) years.


:


Measure :

Timeframe :

36

Intended Outcome




Practice 8.3

The Audit Committee has policies and procedures to assess the suitability, objectivity and

independence of the external auditor.



: The BAC has a transparent relationship with the External Auditors and meets them without the presence of the Management at least twice (2) a year.

The BAC undertakes an annual assessment of the performance, suitability, objectivity, professionalism and independence of the External Auditors in order to recommend their re-appointment. The assessment considers the openness in communication with the lead audit engagement partner and engagement team. The performance and independence checklist for the External Auditors is provided in the Charter.

In the financial year under review, Deloitte PLT as the External Auditors have given assurance that they had maintained their objectivity and independence in accordance with the provisions of the By-Laws on Professional Independence of the Malaysian Institute of Accountants. The BAC is satisfied with the performance, suitability and independence of the External Auditors based on the quality of services and sufficiency of resources provided to KUB Group, in terms of the firm and the employees assigned to the audit exercise. The role of the BAC in relation to the External Auditors is described in the Annual Report.


:


Measure :

Timeframe :

37

Intended Outcome





The Audit Committee should comprise solely of Independent Directors.

Application : Not Adopted


:

38

Intended Outcome




Practice 8.5

Collectively, the Audit Committee should possess a wide range of necessary skills to

discharge its duties. All members should be financially literate and are able to understand

matters under the purview of the Audit Committee including the financial reporting process.

All members of the Audit Committee should undertake continuous professional development

to keep themselves abreast of relevant developments in accounting and auditing standards,

practices and rules.



: The BAC comprises two (2) Independent Non-Executive Directors and a Non-Independent Non-Executive Director, who possess the financial expertise and commercial acumen to discharge their responsibilities. The trainings attended by Directors for the year 2019 were (i) Preparation for Corporate Liability on Corruption, (ii) International Directors’ Summit 2019 and (iii) Introduction to Corporate Directorship. The Company ensures that all Directors attend continuous professional development programme to keep abreast with the latest development and improve their skills, experience and knowledge.


:


Measure :

Timeframe :

39

Intended Outcome

Companies make informed decisions about the level of risk they want to take and implement

necessary controls to pursue their objectives.

The board is provided with reasonable assurance that adverse impact arising from a

foreseeable future event or situation on the company’s objectives is mitigated and managed.

Practice 9.1

The board should establish an effective risk management and internal control framework.



: The Board has established sound risk management practices to safeguard KUB Group’s business interests from risk events that may impede the achievement of business strategies and growth opportunities. The following governance framework and guidelines provide a structured approach to risk management and enable the resumption of key business functions in the event of crisis:

KUB Group Enterprise Risk Management Framework

Business Continuity Management Framework

Business Impact Analysis Guidelines

Business Continuity Plan Guidelines


:


Measure :

Timeframe :

40

Intended Outcome





Practice 9.2

The board should disclose the features of its risk management and internal control

framework, and the adequacy and effectiveness of this framework.



: The Board Risk Management Committee (‘BRMC’) oversees the risk management activities of KUB Group. It comprises one (1) Senior Independent Non-Executive Director, one (1) Independent Non-Executive Director and one (1) Non-Independent Non-Executive Director. The BRMC reviews the Enterprise Risk Management Framework (‘Framework’) and processes to ensure their continued relevance. The BRMC also monitors the effectiveness of risk mitigation action plans and control of significant risk exposures. The design of this Framework is guided by the principles and processes outlined in MS ISO 31000: 2010 Risk Management - Principles and Guidelines.

The Framework establishes formal processes for the following:

foundations for the application of risk management processes throughout the Group.

understanding of the implication of risk exposures, opportunities and risk management in daily work and in strategic and operational planning activities.

development and implementation of procedures to ensure that risks are identified and assessed against accepted criteria and appropriate measures.

communication on the responsibility of each individual with respect to risk management.

integration of risk management in all aspects of the business, including governance, strategic and operational planning, management and reporting.

risk management governance structure which outlines the roles and responsibilities of individuals involved in the risk management processes.

41

The Framework is developed to ensure KUB Group has the capabilities to face the challenging business environment with the continuous implementation, review and improvement of the overall risk management activities. The Board has established a Business Continuity Management (‘BCM’) programme providing guidance on the resumption of key business functions during crisis that has severe impact on business. The BRMC is committed to enhance service reliability and resilience via an improved BCM programme, which serves to identify potential adversities and their impact on business operations. A framework has been established to develop organisational resilience with an effective response mechanism to safeguard KUB Group’s reputation, brand and the interests of its key stakeholders. In December 2018, the BCM Programme for KUB Malaysia Berhad and Solar Gas Sdn Bhd (formerly known as KUB Gaz Sdn Bhd) was strengthened with the continuity of ISO 22301: 2012 Certification by Cybersecurity Malaysia. Other subsidiaries within KUB Group including KUB Telekomunikasi Sdn Bhd, KUB Power Sdn Bhd and KUB Agro Holdings Sdn Bhd group obtained the Certification in January 2019. The Board acknowledges risk management as an integral part of KUB Group business operations. It is an ongoing process involving different levels of management to identify, evaluate, monitor, manage and mitigate the risks that may affect the achievement of its objectives.

Risk management and internal control systems are regularly

reviewed by the Management and appropriate recommendations are presented to the Board for approvals. KUB continues to maintain and review its internal control procedures to ensure that its assets and its shareholders' investments are protected as well as to provide assurance to all stakeholders. The full report on KUB’s Statement on Risk Management and Internal Control is included in the Annual Report. Health, Safety and Environment In recognition of employees as its most valuable assets, KUB Group is committed to provide a safe, healthy and secure workplace that is free from hazard and inappropriate behaviours. KUB Group adopts the international standards and controls to continuously improve the safety management systems to ensure a safe working environment because it is fundamental for the business operations and its success. As part of the initiative, KUB Group continues to observe the requirements of OHSAS 18001: 2007. The Company incorporates safety and health practice into its work culture.

42

All subsidiaries have developed their own Hazard Identification, Risk Assessment and Risk Control (‘HIRARC’) for routine and non-routine activities as the platform to manage risk at source. The subsidiaries have also formed audit teams and Emergency Response teams in compliance with HSE requirements and to meet zero-accident target. The teams ensure HSE principles and requirements are implemented in the daily operations.


:


Measure :

Timeframe :

43

Intended Outcome






The board establishes a Risk Management Committee, which comprises a majority of

independent directors, to oversee the company’s risk management framework and policies.



: In the financial year under review, the BRMC comprised one (1) Senior Independent Non-Executive Director, one (1) Independent Non-Executive Director and one (1) Non-Independent Non-Executive Director.


:


Measure :

Timeframe :

44

Intended Outcome

Companies have an effective governance, risk management and internal control framework

and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.1

The Audit Committee should ensure that the internal audit function is effective and able to

function independently.



: Internal audit is independent from the management and the activities under its review. KUB Group Risk and Audit Division assists the BAC in discharging its duties and responsibilities. The Terms of Reference of the internal audit function is spelt out in the Internal Audit Charter. The principal role of internal audit is to undertake independent, regular and systematic reviews of the internal control systems in order to provide a reasonable assurance on the adequacy, integrity and effectiveness of the system of internal control, risk management and governance processes. Further details of the internal audit activities are included in the BAC Report and in the Statement on Risk Management and Internal Control (‘SORMIC’). Both the BAC Report and SORMIC are included in the Annual Report.


:


Measure :

Timeframe :

45

Intended Outcome

Companies have an effective governance, risk management and internal control framework

and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.2

The board should disclose–

whether internal audit personnel are free from any relationships or conflicts of

interest, which could impair their objectivity and independence;

the number of resources in the internal audit department;

name and qualification of the person responsible for internal audit; and

whether the internal audit function is carried out in accordance with a recognised

framework.



: Internal audit function has no operational responsibility and authority over the audited activities and adopts a risk-based approach in preparing its Internal Audit Annual Plan. The audit plan, budget, key performance indicators and manpower requirement are submitted to the BAC for its approval. None of the internal auditors has any relationship or conflict of interest that could impair their objectivity and independence in conducting their internal audit function. To support the BAC in discharging their responsibilities, the Head, Group Risk and Audit Division reports directly to the BAC. The Division is headed by Azizan bin Ariffin whose profile is included in the BAC Report. The internal auditors, who are members of the Institute of Internal Auditors of Malaysia, have access to the internal audit information, networking and training, enabling them to meet the standards set by the Institute of Internal Auditors International Professional Practices Framework. The details of the internal audit function are set out in the Annual Report.


:


Measure :

Timeframe :

46

Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the

company, its policies on governance, the environment and social responsibility.

Practice 11.1

The board ensures there is effective, transparent and regular communication with its

stakeholders.



: The Board recognises the importance of transparency and accountability to its shareholders and stakeholders. The shareholders are informed on the performance and major corporate activities through timely dissemination of quarterly financial results, circulars, annual reports, corporate announcements and press releases. The Management also meets the institutional shareholders, analysts and media to clarify information on KUB Group’s performance and strategic direction. The shareholders may contact the Company at [email protected] under the ‘Contact Us’ or the ‘Investor Relation’ sections of KUB Group website for further information. KUB website contains ‘About KUB’ and ‘Investor Relations’ sections. The former includes the corporate and governance structure of KUB, whereas the latter includes announcements released to Bursa Malaysia Securities Berhad, share price information, quarterly financial results, annual reports, notices of general meetings and minutes of general meetings. KUB Annual Report contains a review of its financial performance and management analysis. KUB adheres to corporate disclosure requirements under Chapters 9 and 10 of the Listing Requirements. KUB has in place KUB Group’s Communication Guidelines to ensure compliance with the regulations. These Guidelines provide the Directors, Management and employees with clear roles, responsibilities and levels of authority on disclosure of information. All official communication must be approved by the relevant authority to ensure consistency with KUB Group’s corporate image.


:

mailto:[email protected]

47


Measure :

Timeframe :

48

Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the

company, its policies on governance, the environment and social responsibility.

Practice 11.2

Large companies are encouraged to adopt integrated reporting based on a globally

recognised framework.



:


: KUB Group has not adopted the integrated reporting framework. However, it acknowledges that integrated reporting enhances the quality of information and promotes greater transparency and accountability.

Currently, these qualities are incorporated into the Group’s Annual Report, which provides an overview of financial and non-financial information including strategic performance. Components such as Management Discussion Analysis, Corporate Governance Overview Statement, Sustainability Statement and Statement of Risk Management and Internal Control are integral parts of the non-financial information.


Measure :

Timeframe : Please specify number of years.

49

Intended Outcome

Shareholders are able to participate, engage the board and senior management effectively

and make informed voting decisions at General Meetings.

Practice 12.1

Notice for an Annual General Meeting should be given to the shareholders at least 28 days

prior to the meeting.



: The Company’s General Meeting allows the shareholders to engage with the Board. The Board provides the shareholders with adequate time to discuss the resolutions to be tabled at the Annual General Meeting (‘AGM’). The Notice of the AGM is issued twenty-eight (28) days before the AGM as recommended under the Code, instead of twenty-one (21) days under the Companies Act, 2016 and Listing Requirements The Notice outlines the resolutions to be tabled, accompanied by explanatory notes and background information, where applicable. An Administrative Notes is attached to the notice providing relevant information and the shareholders’ entitlement (if any) to attend the AGM. The Board provides an opportunity for the Shareholders to raise questions. During the ‘Question and Answer’ session, the shareholders are invited to post their questions and receive feedback. The Chairman, the President/Group Managing Director/Group Chief Executive Officer and the Chairman of the respective Board Committee facilitate discussions with the shareholders. The President/Group Managing Director/Group Chief Executive Officer presents the financial performance and the responses to questions submitted by the Minority Shareholders Watch Group.


:


Measure :

Timeframe :

50

Intended Outcome



Practice 12.2

All directors attend General Meetings. The Chair of the Audit, Nominating, Risk Management

and other committees provide meaningful response to questions addressed to them.



: The Directors, Chairman of the Committees and the Senior Management attend and participate in the AGM. The External Auditors also attend to provide independent clarifications on matters raised by the shareholders.


:


Measure :

Timeframe :

51

Intended Outcome



Practice 12.3

Listed companies with a large number of shareholders or which have meetings in remote

locations should leverage technology to facilitate–

including voting in absentia; and

remote shareholders’ participation at General Meetings.



:


: The General Meetings have been convened in the Klang Valley at locations accessible by public transport.


Measure :

Timeframe :

STOCK CODE 6874 COMPANY NAME KUB Malaysia Berhad … Report 2018 KUBM.pdf · 2020. 5. 20. · KUB...

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