1. Board of Directors
Effective Board to lead and effect controls
The key responsibilities of the Board include:
 |
Providing entrepreneurial leadership
and strategic directions to the Group, including
approvals for major investments, divestments,
restructurings, material contracts and matters
of significance; |
|
Overseeing the businesses and affairs of
the Group and monitoring the performance of
the management against pre-agreed targets; |
|
Assuming full responsibility for the corporate
governance framework of the Group and providing
oversight in the proper conduct of the Group’s
businesses; and |
|
Being responsible to shareholders for the
performance of the Group and ensuring adequate
returns to shareholders. |
|
| |
| The Board meets to review the business strategies
and activities of the Group. Regular board meetings
are held quarterly to deliberate on various matters
of the Group, including significant acquisitions
and disposals, significant transactions, contracts
and projects, the annual budget, review the performance
of the businesses and endorse the release of the
quarterly results. Where necessary, additional board
meetings are also held to deal with ad-hoc matters
of significance. A total of six board meetings were
held in the year and we achieved an average of 71.2%
board attendances in the year. |
| |
| The Board has adopted a set of internal controls
which sets out approval limits for capital expenditure,
investments and divestments, bank borrowings and
cheque signatories arrangements at board level.
Approval sub-limits are also provided at management
levels to facilitate operational efficiency. |
| |
| To give effect to the efficient discharge of its
responsibilities and to provide independent oversight
of Management, the Board has established a number
of Board Committees, including an Executive Committee,
Audit Committee, Executive Resource & Compensation
Committee, Nominating Committee, Budget Committee
and Risk Committee. These key committees are made
up of independent or non-executive directors. Other
ad-hoc committees can be formed from time to time
to look into specific areas as and when the need
arises. |
| |
| Membership in the different committees are carefully
managed to ensure that there is equitable distribution
of responsibilities among board members, to maximise
the effectiveness of the Board and foster active
participation and contribution from board members.
Diversity of experiences and appropriate skills
are also considered. There is a need to also ensure
that there are appropriate checks and balances between
the different committees. Hence, membership of Budget
and Executive Committees, with more involvement
in key businesses or executive decisions, and the
membership of the Audit and Risk Committees with
their respective oversight roles, are mutually exclusive. |
| |
Strong and independent Board exercising
objective judgement
The Board comprises 11 directors of whom ten are
non-executive Directors. The Board’s Chairman
is Peter Seah Lim Huat. The executive Director is
Wong Kok Siew who is the Board’s Deputy Chairman
and Chief Executive Officer. |
| |
| The Board comprises business leaders, professionals
with financial backgrounds, a practising lawyer
and members of the public sector. Profiles of the
Directors are found on page 8 of this Annual Report.
The Board is favourably composed by a majority of
non-executive directors, independent of management
and independent in terms of character and judgement.
This enables the Management to benefit from an external
and objective perspective on issues that are brought
before the Board. |
| |
| The Board considers non-executive director, K
Shanmugam, an independent non-executive director,
although he has a relationship with the Company
by virtue of his position as a senior partner of
Allen & Gledhill rendering professional services
to the Company. Notwithstanding this relationship,
the Board assesses him as an independent director
due to his manifest ability to exercise strong independent
judgement in his deliberations in the interests
of the Company. |
| |
Formal and transparent appointment
and re-election of Directors
SembCorp believes that all directors should be submitted
for re-election at regular intervals, subject to
continued satisfactory performance. The CEO, while
he is also a board member, is also subject to retirement
and re-election by shareholders as part of board
renewal. Nominations and election of board members
are the prerogatives and proper rights of all shareholders
and the Board ensures the planned and progressive
refreshing of its members. |
| |
| The Company’s Articles of Association require
one-third of directors to retire and subject themselves
to re-election by shareholders at every Annual General
Meeting (AGM) (one-third rotation rule). In other
words, no director stays in office for more than
three years without being re-elected by shareholders. |
| |
| In addition, a newly-appointed director will submit
himself for retirement and election at the AGM immediately
following his appointment. Thereafter, he is subject
to the “one-third rotation rule”. |
| |
| The Board, through the delegation of its authority
to the Nominating Committee, has used its best efforts
to ensure that directors appointed to the Board
possess the background, experience and knowledge
in technology, business, finance and management
skills critical to the Company’s businesses
and that each director with his special contribution
brings to the Board an independent and objective
perspective to enable balanced and well-considered
decisions to be made. |
| |
| Our Boards are periodically renewed to ensure
strong and sound leadership at the board level to
enable a refreshing of talent as well as encourage
dynamics of an independent and balanced board composition. |
| |
Clear division of responsibilities
at the top
There is a clear separation of the roles and responsibilities
between the Chairman and the CEO of the Company.
The Chairman, who is a non-executive, is responsible
for the leadership of the Board, ensuring its effectiveness
on all aspects of its role and setting its agenda.
He acts independently in the best interests of the
Company and shareholders. The CEO is charged with
the executive responsibility of the running of the
Company’s business. The Chairman facilitates
the contribution of non-executive directors in particular
and ensures constructive relations between executive
and non-executive directors. He also ensures that
the members of the board work together with the
Management in constructive debate on various matters,
including strategic and operational issues. |
| |
| Board performance and conduct of its
affairs |
| |
Active participation and valuable
contributions key to overall effectiveness of the
Board
To ensure that our directors are
well-equipped and trained, directors’ training
needs are addressed by Management. Newly-appointed
directors are given briefings by the Management
on the business activities of the Group and its
strategic directions, and these may include facility
visits, where necessary. |
| |
| Changes to regulations and accounting standards
are monitored closely by Management. To keep pace
with regulatory changes, where these changes have
an important bearing on the company’s or directors’
disclosure obligations, directors are briefed either
during board meetings, or at specially-convened
sessions, including trainings and seminars conducted
by external professionals. |
| |
| Where necessary, further external advice and consultations
are made available to directors to ensure that full
information and advice are available before important
decisions are made by the Board. All the issues
are actively debated by the Board and properly recorded.
|
| |
| Informal reviews of a board’s performance
are undertaken on a continual basis by the Nominating
Committee with inputs from the other board members
and CEO. The Boards are constantly renewed to ensure
strong, independent and sound leadership at the
board level for the continued success of the business
and the Company. |
| |
| Full access to information and resources
|
| |
Directors have complete, adequate
and timely information and resources
Management provides adequate and
timely information to the Board on board affairs
and business issues that require the Board’s
decision as well as on-going reports relating to
operational and financial performance of the Group.
Where a physical board meeting is not possible,
timely communication with members of the Board is
effected through electronic means which include
electronic mail, teleconferencing and videoconferencing.
Alternatively, Management will arrange to personally
meet and brief each director before seeking the
Board’s approval. |
| |
| The Board has separate and independent access
to the CEO, members of senior management and the
Group Company Secretary at all times. The Board
also has access to independent professional advice
where appropriate. |
| |
| Likewise, the Audit Committee must also meet the
external and internal auditors separately at least
once a year, without the presence of the CEO and
other senior management members, in order to have
free and unfiltered access to information that it
may require. |
| |
| The Group Company Secretary assists the Chairman
with the preparation of meeting agenda, attends
and prepares minutes of board proceedings, ensuring
good information flow within the Board and its Committees.
She assists the Board on the compliance by the Company
with its Memorandum and Articles of Association,
laws and regulations, including requirements of
the Companies Act, Securities Futures Act and the
Singapore Exchange Securities Trading Limited (SGX-ST).
She is also the primary channel of communication
between the Company and the SGX-ST, the Registry
of Companies and Businesses and shareholders. The
Group Company Secretary actively assists the Board
to upkeep and implement corporate governance best
practices across the Group. |
| |
2. Board Committees
The Company has six board committees:-
(a) Executive Committee;
(b) Audit Committee;
(c) Budget Committee;
(d) Executive Resource & Compensation Committee;
(e) Nominating Committee; and
(f) Risk Committee |
| |
The Executive Committee (ExCo)
The ExCo provides overall strategic
direction to the management and approves policies
and detailed strategies for the Group. It reviews
and approves major investments recommended by Management
and recommends larger investments to the Board in
accordance with the internal financial authority
limits stipulated by the Board. The Committee also
reviews and monitors the financial performance and
progress of the Group. |
| |
| The ExCo is chaired by Peter Seah Lim Huat and
its members are Wong Kok Siew, Goh Geok Ling and
S Iswaran. It generally meets once a month with
full attendances of the Committee Members. |
| |
The Audit Committee (AC)
The AC consists of all independent
directors, comprising Lua Cheng Eng as Chairman,
K Shanmugam and Richard Hale OBE as members. During
the year under review, the Committee held six meetings.
All members of the AC participated actively at all
the meetings either by attendances or through teleconferencing. |
| |
| The main responsibility of the AC is to review
with the external auditor, internal auditor and
Management, the Company’s general policies
and control procedures, interested persons transactions,
as well as any matters or issue that affect the
performance of the Group. The AC reviews the quarterly,
half-yearly and annual results announcements as
well as the financial statements of the Group and
Company before they are submitted to the Board for
approval. The AC may direct matters to be included
for special review by the external and internal
auditors. |
| |
| It may, as necessary, discuss other matters that
the Committee or auditors wish to bring up. The
Committee also recommends the appointment or re-appointment
of the company’s external auditors. |
| |
| The AC meets with the external and internal auditors,
without the presence of Management, at least once
a year to review the co-operation and assistance
given by Management to them. |
| |
| The AC has reviewed the non-audit services provided
by its external auditors to the Group, excluding
its listed subsidiaries SembCorp Logistics and SembCorp
Marine, who have their respective audit committees
and is satisfied with the independence and objectivity
regarding the provision of non-audit services by
the external auditors. |
| |
The Executive Resource & Compensation
Committee (ERCC)
The ERCC is chaired by Peter Seah
Lim Huat and its members are Goh Geok Ling, K Shanmugam
and S Iswaran. The ERCC oversees executive compensation
and development with the aim of building capable
and committed senior management through focused
management and progressive policies which can attract,
motivate and retain talented executives to meet
the current and future needs of the Company. |
| |
| The ERCC reviews and approves remuneration and
promotion of key executives as well as to decide
on issues pertaining to their development and succession.
The Committee also establishes guidelines on share
options and other long-term incentive plans and
approves the grant of such incentives to key executives.
The underlying philosophy is to motivate executives
to maximise operating and financial performance
and shareholder value. |
| |
| The ERCC conducts, on an annual basis, a succession
planning review of the CEO, all his direct reports,
and selected key positions in the Company. Potential
internal and external candidates for succession
are reviewed for different time horizons of immediate,
medium-term and long term needs. |
| |
| The ERCC reviews the remuneration of its non-executive
directors, executive director and senior executives,
as well as major human resource management and compensation
policies and practices for the rest of the Group. |
| |
| While the Chairman of the ERCC is not regarded
as independent within the context of the definition
of “independence” in the Code, he is
a non-executive director independent of Management
with a clear separation of his role from Management
in deliberations of the ERCC. The ERCC has access
to expert professional advice on human resource
matters whenever there is a need to consult externally.
In its deliberations, the ERCC takes into consideration
industry practices and norms in compensation. The
CEO is not present during the discussions relating
to his own compensation, terms and conditions of
service, and the review of his performance. |
| |
| The ERCC meets among its members without the presence
of Management, at least once a year. The ERCC held
three meetings in the year and achieved an average
of 75% attendance. |
| |
Nominating Committee (NC)
The NC is chaired by Peter Seah
Lim Huat and its members are Goh Geok Ling, K Shanmugam
and S Iswaran. |
| |
| The primary purpose of the NC is to support and
advise the Company, its major subsidiaries and,
where applicable, associated companies by nominating
suitable candidates who are best able to discharge
their responsibilities as directors having regard
to the law and the high standards of governance
practised by the Group and evaluating the balance
of skills, knowledge and experience of these Boards.
Appointments to these boards are made on merit and
against objective criteria. The NC takes care to
ensure that appointees have enough time available
to devote to their directorship roles. |
| |
Budget Committee (BC)
The BC comprises Yong Ying-I as
Chairman, Tay Siew Choon as Deputy Chairman and
Wong Kok Siew as a member. |
| |
| The Budget Committee implemented a planning cycle
focusing on different initiatives in each quarter.
Activities involved the quarterly and half-yearly
review of financial results in relation to the budget,
strategic initiatives and a five-year outlook of
each main subsidiary, as well as the annual budget
plans and initiatives. |
| |
Risk Committee (RC)
The RC was formed in August 2003
as part of SembCorp’s effort to formalise
and strengthen its risk management framework and
processes. Prior to the RC being formed, its role
and functions were carried out by the AC. |
| |
| The RC comprises three members, namely Lua Cheng
Eng as the Chairman, and Richard Hale OBE and K
Shanmugam as members. |
| |
| The primary role and function of the RC is to
assist the Board of Directors in fulfilling its
oversight responsibilities by reviewing:- |
| |
|
The adequacy and effectiveness
of the risk management plans, systems, processes
and procedures of the Group; |
|
Group-wide risk policies, guidelines and
limits; and |
|
The risk portfolio and risk levels including
the treatment of identified risks. |
|
| |
| The RC held its first meeting in December 2003. |
| |
| Board Composition and Committee |
 |
|
|
|
|
|
|
Board
Members
|
Executive
Committee
|
Audit
Committee
|
Executive
Resource &
Compensation Committee
|
Nominating
Committee
|
Budget
Committee
|
Risk
Committee
|
 |
| Peter Seah Lim Huat |
Chairman |
|
Chairman |
Chairman |
|
|
|
| Wong Kok Siew |
Member |
|
|
|
Member |
|
|
| Tay Siew Choon |
|
|
|
|
Deputy Chairman |
|
|
| Lua Cheng Eng |
|
Chairman |
|
|
|
Chairman |
|
| K Shanmugam |
|
Member |
Member |
Member |
|
Member |
|
| Tetsuro Kawakami |
|
|
|
|
|
|
|
| Goh Geok Ling |
Member |
|
Member |
Member |
|
|
|
| Richard Hale OBE |
|
Member |
|
|
|
Member |
|
| S Iswaran |
Member |
|
Member |
Member |
|
|
|
| Yong Ying-I |
|
|
|
|
Chairman |
|
|
| Dr Vichit Suraphongchai |
|
|
|
|
|
|
|
| |
3. Senior Management Committee
The Deputy Chairman and CEO, Wong Kok
Siew chairs a monthly Management Committee Meeting
comprising all the CEOs and senior management executives
in the Group. At these meetings, the CEO reviews
the operating and financial performance of each
of the businesses and gives direction to the relevant
management for follow up action. Such forums provide
the discussive platform to gather feedback and discuss
market trends, specific developments in the competitive
landscape affecting the Group’s businesses,
including areas of synergies and collaborations
and dissemination of new policy matters. |
| |
| The respective functional Divisional Heads in
the Company also chair regular discussion forums
for their respective key functional staff across
the Group. The Chief Financial Officers Forum by
the Group Chief Financial Officer, the Group Legal
Counsel Forum by the General Counsel, the Group
Human Resource Forum by the Director, Group Human
Resource and the Chief Risk Officers Forum by the
Group Chief Risk Officer are examples of such discussion
groups aimed at ensuring consistency of policies
and sharing of developments in the relevant areas
of discipline across the Group. |
| |
4. Communication with
Shareholders
Regular, effective and equal treatment
of shareholders
We believe that our shareholders must be given a
fair and accurate view on the affairs of our company
on an ongoing basis. They should be entitled to
timely and complete information on financial data,
material developments as well as an understanding
of our business directions and prospects. |
| |
| All SembCorp Industries’ price-sensitive
information is disseminated publicly so as to be
available to all shareholders at the same time and
not on a selective basis. Financial and other performance
data is given for the Group as well by business
unit or division where appropriate. This allows
our shareholders better insight into the earnings
drivers within SembCorp Industries. |
| |
| During the release of earnings results, the press
release on the results announcement is first released
by MASNET onto the SGX website. Thereafter a briefing
or teleconference by Management is held jointly
for the media and analysts. All materials used at
the briefing, including the presentation slides,
are made available on MASNET as well as the Company
website at www.sembcorp.com.sg. |
| |
| Following any release of earnings or price-sensitive
developments, our Investor Relations staff are available
by email or telephone to the answer questions from
shareholders and the media as long as the information
requested does not conflict with the SGX’s
rules of fair disclosure. |
| |
Greater shareholder participation
at General Meetings
We encourage shareholder participation
at company meetings. Information on meetings of
shareholders are made through notices published
in the newspaper and reports or circulars sent to
all shareholders. If any shareholder is unable to
attend, he is allowed to appoint up to two proxies
to vote on his behalf at the meeting through proxy
forms sent in advance. |
| |
| The Chairman, CEO as well as the chairman of Audit
Committee are also present together with the Group
COO, Group CFO, the Group Company Secretary and
our external auditors and legal advisor to answer
questions raised by shareholders. Minutes of shareholder
meetings are available on request by registered
shareholders. |
| |
| For further details on SembCorp Industries communications
with its shareholders, see the “Investor Relations”
section of the Annual Report. |
| |
5. Dealings in Securities
The Company has adopted a Code of Compliance
on Dealing in Securities, which prohibit dealings
in the Company’s securities by its officers
during the period commencing two weeks prior to
the announcement of the Company’s quarterly
results. Directors and executives are also expected
to observe insider trading laws at all times even
when dealing in securities within the permitted
trading period. |
| |
6. Interested person transactions
Shareholders have adopted a shareholders
mandate (Mandate) in respect of interest person
transactions of the Company. The Mandate sets out
the levels and procedures to obtain approval for
such transactions. Information regarding the Mandate
are available on the Company’s website, www.sembcorp.com.sg.
All SBUs are required to be familiar with the Mandate
and report any such transactions to the Company’s
Group Finance. Group Finance keeps a register of
the Company’s interested person transactions.
Information on interested person transactions for
2003 is found on page 175. |
| |
7. Independent Internal
Audit
Independent Internal Audit function
The internal audit function of the Group is supported
by the Group Internal Audit Department (GIA). GIA
directly reports to the AC Chairman on audit matters
and administratively to the CEO. GIA plans its internal
audit schedules in consultation with, but independent
of Management and its plan is submitted to the AC
for approval at the beginning of each year. |
| |
| To ensure that the internal audits are performed
by competent professionals, GIA recruits and employs
suitably qualified staff. In order that their technical
knowledge remains current and relevant, GIA identifies
and provides training and development opportunities
to the staff. In summary, the internal audit function
provided by GIA meets with the standards set by
the Institute of Internal Auditors. |
| |
8. Effective Internal
Control and Risk Management
A sound system of internal controls
and a robust enterprise risk management framework
The Company’s external and internal auditors
review the effectiveness of the Company’s
material internal controls, including financial,
operational and compliance controls and risk management. |
| |
| An ERM framework was developed and rolled out
to the Group. The key business units aligned to
this common ERM framework are in their various stages
of implementation. ERM workshops were conducted
at SembCorp Industries and the key business units
to raise awareness and embed the risk management
culture throughout the group. Significant risks
were identified and treatment plans were drawn up
to manage such risks. The Group Risk Management
Oversight and Reporting structure were formalised
and the various Committees established to oversee
group risk management matters and implementation
of ERM group-wide. A formal communication channel
or risk forum was kicked off at Group level. This
is to enable regular review and discussion of risk
management matters with the Chief Risk Officers
of the business units and to drive the development
of ERM group-wide. For details on SembCorp Industries'
ERM, see the "Enterprise Risk Management"
section of the Annual Report. |
| |
9. Competitive Remuneration
System
Remuneration of Directors
adequate and not excessive
|
| |
| Competitive reward system to ensure
highest performance and retention of best talents
and key executives |
| |
| The Deputy Chairman & CEO, as executive director,
does not receive director’s fees. He is a
lead member of Management. His compensation consists
of his salary, allowances, bonuses, restricted stocks,
performance share awards conditional upon his meeting
certain performance targets (details are available
on page 84 of the Annual Report) and share options.
Details on share options granted and its fair value
are available on pages 83 to 85 and page 95 of the
Annual Report, respectively. |
| |
| Non-executive Directors have remuneration packages
which consist of a directors’ fee component
pursuant to the Company’s Directors’
Fee policy, an attendance fee component and a share
options component pursuant to the Company’s
Employee Share Option Plan. The Directors’
Fee policy is based on a scale of fees divided into
basic retainer fees as director and additional fees
for attendance and serving on board committees (details
are available on page 174 of the Annual Report).
Details on share options granted and its fair value
are available on pages 82 to 93 and page 95 of the
Annual Report, respectively. |
| |
| The basis of allocation of the number of share
options takes into account a director’s contributions
and additional responsibilities at board committees.
The report on Directors’ Remuneration is found
on page 174 of the Annual Report. We believe that
our directors are adequately compensated and in
line with market norms. |
| |
| As for the key executives, they are rewarded based
on actual performance achieved relative to the pre-agreed
performance targets which include financial and
non-financial performance indicators. We believe
that the current reward systems in the Group are
in line with market norms formulated to motivate
executives to give their best to the company. Rewards
include both short-term and long-term share-based
awards which will further ensure the retention of
the best talents and high performing executives
in the Group. |
| |
| The Company adopts an incentive compensation plan
which ties to the creation of economic value add
(EVA), as well as to attainment of individual performance
goals for its key executives. Individual’s
incentive compensation is linked to the EVA created
by the Group and its subsidiaries. |
| |
| A “bonus bank” is used to hold incentive
compensation credited in any year. Typically, one-third
of the available balance is paid out in cash each
year, with the balance being carried forward to
the following year. Such carried-forward balances
of the bonus bank may either be reduced or increased
in future, based on the yearly EVA performance of
the Group and subsidiary. |
| |
| The Board has decided not to prepare a separate
Remuneration Report as most of the information is
found in the Directors’ Report. We have indicated
in this Report where the information required to
be disclosed can be found. |
| |
| Rather than set out the names of the top key executives
who are not also directors of the Company, we have
shown the number of key employees in remuneration
bands of S$250,000 from S$100,000 onwards, of the
CEO of the Company, five Key Businesses’ CEOs,
CEO of Singapore Precision Industries, the Company’s
Group COO and Group CFO. This should give a macro
perspective of the remuneration pattern in the Group,
while maintaining the confidentiality of staff remuneration
matters. |
| |
| Remuneration Band for Key Executives |
| |
| Remuneration Band (S$) |
No. of employees
|
|
| 1,500,000 to 1,749,999 |
– |
|
| 1,250,000 to 1,499,999 |
– |
|
| 1,000,000 to 1,249,999 |
2 |
|
| 750,000 to 999,999 |
1 |
|
| 500,000 to 749,999 |
5 |
|
| 250,000 to 499,999 |
– |
|
| 100,000 to 249,999 |
– |
|
| |
