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The board and management of Sembcorp
recognise that well-defined corporate governance
processes are essential in enhancing corporate
accountability and long-term sustainability and
remain committed to ensuring high standards of
corporate governance to preserve and maximise
shareholder value.
This report sets out the company’s corporate
governance processes and activities for the financial
year with reference to the principles set out in the
revised Singapore Code of Corporate Governance
2012 (2012 Code). Although the 2012 Code only
takes effect in respect of annual reports relating
to financial years commencing from November 1,
2012, the company is committed to high standards
of corporate governance and believes in the early
adoption of best practices. The board is pleased
to report that the company has complied in all
material aspects with the principles and guidelines
set out in the 2012 Code. Deviations from the 2012
Code, if any, are explained under the respective
sections. The company continually reviews and
refines its processes in light of the best practice,
consistent with the needs and circumstances
of the Group.
Board’s Conduct of Affairs (Principle 1)
Effective board to lead and effect controls
Sembcorp is led by an effective board comprising
mainly independent non-executive directors.
The board is headed by Ang Kong Hua. He is
joined on the board by Tang Kin Fei, Goh Geok
Ling, Evert Henkes, Bobby Chin Yoke Choong,
Margaret Lui, Tan Sri Mohd Hassan Marican,
Tham Kui Seng and Dr Teh Kok Peng, who joined
the board on October 15, 2012.
Role of the board
The board is collectively responsible for the
long-term success of the company. Each director
exercises his independent judgement to act in good
faith and in the best interest of the company for
the creation of long-term value for shareholders.
The board oversees the business affairs of
the Group. It provides leadership and guidance
to management on the Group’s overall strategy,
taking into consideration sustainability issues
and ensuring that the necessary financial and
human resources are in place, and also reviews
management performance. As part of its role, the
board also ensures the adequacy of the Group’s
control and risk framework and standards including
ethical standards, and that obligations to its
shareholders and other identified key stakeholders
are understood and met.
The board is responsible for the Group’s
overall performance objectives, key operational
initiatives, financial plans and annual budget, major
investments, divestment and funding proposals,
quarterly and full year financial performance
reviews, risk management and corporate
governance practices. It also provides guidance
on sustainability issues such as environmental and
social factors, as part of its overall business strategy.
To assist the board in the efficient discharge of its
responsibilities and provide independent oversight of
management, several board committees, including
the Executive Committee, Audit Committee,
Executive Resource & Compensation Committee,
Nominating Committee and Risk Committee, have
been established with written Terms of Reference
(TOR). The committees’ respective composition,
roles and responsibilities are further explained in this
report. Minutes of board committee meetings are
circulated to the board to keep directors updated
on the activities of each committee. Special purpose
committees are also established as dictated by
business imperatives. For instance, the Technology
Advisory Panel formed in early 2013 is chaired by Mr
Ang to lead the Group in setting up a framework to
better manage existing and new technologies and
research and development activities relating to the
businesses of the Group. More details are explained
in the Technology Advisory Panel section of this
annual report.
The composition of the board committees is
structured to ensure an equitable distribution of
responsibilities among board members, maximise
the effectiveness of the board and foster active
participation and contribution. Diversity of
experience and appropriate skills are considered
along with the need to maintain appropriate checks
and balances between the different committees.
Hence, membership of the Executive Committee,
with its greater involvement in key businesses
and executive decisions, and membership of the
Audit and Risk Committees, with their respective
oversight roles, are mutually exclusive.
The Group has adopted a set of internal controls
and guidelines that set out financial authorisation
and approval limits for borrowings, including
off-balance sheet commitments, investments,
acquisitions, disposals, capital and operating
expenditures, requisitions and expenses. The board
approves transactions exceeding certain threshold
limits, while delegating authority for transactions
below those limits to the Executive Committee and
management to facilitate operational efficiency.
Executive Committee
The Executive Committee (ExCo) is chaired
by Mr Ang and its members include Mr Goh,
Mr Tang and Mrs Lui.
Within the limits of authority delegated by the
board, the ExCo reviews and approves business
opportunities, strategic investments, divestments,
and major capital and operating expenditures.
The ExCo also evaluates and recommends larger
investments, capital and operating expenditures,
as well as divestments to the board for approval.
Meetings and attendance
The schedule of all board and board committee
meetings as well as the Annual General Meeting
(AGM) for the next calendar year is planned
in advance, and telephonic attendance and
conference via audio-visual communication
are allowed under the company’s Articles of
Association. Board meetings are scheduled on a
quarterly basis to review and approve the release
of the quarterly results and discuss reports prepared
by management on the Group’s performance,
business development plans and prospects. A
board meeting is also held at the end of each
financial year to review the Group’s strategy going
forward and to consider and approve the Group’s
budget for the following year. Further board
meetings may also be held to specifically consider
other issues arising. The board also sets aside
time during its scheduled meetings without the
presence of management to discuss, among other
matters, management’s performance. Decisions
of the board and board committees may also be
obtained via circular resolutions. A full day board
and management strategy meeting was organised
in November 2012 to review in depth the strategic
direction of the Group. The directors’ attendance
at board and committee meetings held during the
financial year is set out below.
Board orientation and training
A formal letter of appointment is sent to newly-appointed
directors upon their appointment
explaining the Group’s governance policies and
practices, as well as their duties and obligations
as directors. The newly-appointed director also
receives an information pack which contains
the Group’s organisation structure, senior
management’s contact details, the company’s
Memorandum & Articles of Association, respective
committees’ TORs, Group Policy relating to
disclosure of interests in securities and prohibition
on dealings in Sembcorp securities, and guidelines
on directors’ fees.
The company conducts orientation programmes
for newly-appointed directors where comprehensive
presentations on Sembcorp’s strategic plans and
direction, financial performance as well as business
activities in the various geographical markets are
given by senior management. In addition, the
Group President & CEO briefs the board at each
meeting on the business and project developments.
As part of the training and professional
development programmes for the board, the
company ensures that directors are briefed on
changes to regulations, guidelines and accounting
standards from time to time. These are done either
during board meetings or at specially convened
sessions, including sponsored training sessions
and seminars conducted by external professionals.
Articles and reports relevant to the Group’s
businesses are also circulated to the directors
for information. Facility visits to our subsidiaries’
operation sites are also arranged to provide
directors with an understanding of the Group’s
business operations. In 2012, briefing sessions by
external lawyers were organised for the board to
have an in-depth understanding of the 2012 Code
and directors’ obligations and responsibilities.
Board Composition and Guidance (Principle 2)
Strong and independent board exercising
objective judgement
Board composition
The current board comprises nine directors, of
whom seven are independent directors. Excluding
the Group President & CEO, all the directors are
non-executive. The board members comprise
business leaders and professionals with strong
relevant experience in the Group’s businesses. Best
efforts have been made to ensure that, in addition
to contributing their valuable expertise and insight
to board deliberations, each director brings to the
board an independent and objective perspective to
enable balanced and well-considered decisions to
be made. The board is of the view that, given that
the majority of the board comprises non-executive
directors who are independent of management and
independent in terms of character and judgement,
objectivity on issues deliberated is assured. Profiles
of the directors may be found here.
Review of directors’ independence
The independence of each non-executive director is
assessed annually. This year, each director is required
to complete a Director’s Independence Checklist
drawn up based on the guidelines provided in the
2012 Code. The checklist further requires each
director to assess whether he considers himself
independent despite not being involved in any
of the relationships identified in the 2012 Code.
Thereafter, the Nominating Committee reviews the
completed checklists, assesses the independence of
the directors and recommends its assessment to the
board. Particular scrutiny is applied when assessing
the continued independence of directors who have
served more than nine years.
The board, after taking into account the views
of the Nominating Committee, determined that
with the exception of Mr Tang, Group President &
CEO and an executive director, and Mrs Lui, Chief
Operating Officer of Pavilion Capital International,
a related company of Temasek Holdings who holds
more than 10% interest in the Group, all the other
non-executive directors are independent.
Mr Goh and Tan Sri Mohd Hassan Marican sit
on the board of Sembcorp Marine, a listed
subsidiary of the company from which the company
has received payment in excess of S$200,000 in
aggregate for consultancy services and provision
of utilities services to Sembcorp Marine.
The board has assessed and is of the view that
the payment received from Sembcorp Marine is
insignificant in the context of the Group’s earnings.
The board believes that Mr Goh and Tan Sri Mohd
Hassan Marican’s directorships on Sembcorp Marine
will not interfere, or be reasonably perceived to
interfere, with their ability to exercise independent
judgement and act in the best interests of
Sembcorp Industries.
Mr Goh has served on the board of the company
since his appointment in 2000. The board established
that despite serving as a director for more than
nine years, Mr Goh continues to demonstrate the
essential characteristics of independence expected
by the board. His length of service and in-depth
knowledge of Group’s businesses are viewed by the
board as especially valuable, particularly given the
changes to the board in the recent years.
The board also determined that Tan Sri Mohd
Hassan Marican, who is appointed a Senior
International Advisor of Temasek International
Advisors, a subsidiary of Temasek Holdings, is
independent. The board believes that Tan Sri
Mohd Hassan Marican is able to exercise strong
independent judgement in his deliberations and
act in the best interest of the company as his
appointment is non-executive in nature and does
not entail involvement in the day-to-day conduct
of Temasek Holdings’ businesses.
Chairman and Chief Executive Officer
(Principle 3)
Clear division of responsibilities between
the board and management
The Chairman and the Group President & CEO
are not related to each other. The roles of Chairman
and the Group President & CEO are kept separate
to ensure an appropriate balance of power,
increased accountability and greater capacity of
the board for independent decision making.
The Chairman, who is non-executive, leads
and ensures effective and comprehensive board
discussion on matters brought to the board
including strategic issues as well as business
planning. The Chairman monitors that the
board’s decisions are translated into executive
action. The Group President & CEO manages the
operations of the Group in accordance with the
Group’s strategies and policies and provides close
oversight, guidance, advice and leadership to
senior management.
Board Membership (Principle 4)
Formal and transparent process for the
appointment and re-appointment of directors
Nominating Committee
The Nominating Committee (NC) comprises
non-executive directors, namely Mr Ang, Mr Goh
and Mrs Lui. Two out of three directors in the NC
(including the Chairman) are independent.
The NC is charged with the responsibility of
ensuring that Sembcorp’s board is reviewed to
ensure strong, independent and sound leadership
for the continuous success of the company and its
businesses. It ensures that the board has a balance
of skills, attributes, background, knowledge
and experience in business, finance and related
industries, as well as management skills critical to the company’s businesses.
The NC reviews and makes recommendations
to the board on independence of the directors,
new appointments, re-appointments and
re-elections to the board and board committees
to ensure the board maintains at an appropriate
size. The NC is also responsible for reviewing
the succession plans for the board, developing a
process for performance evaluation of the board
and board committees, and reviewing training
and professional development programmes for
the board.
Appointment & re-appointment of directors
All appointments to the board are made on
merit and against objective criteria. Candidates
must be able to discharge their responsibilities as
directors while upholding the highest standards of
governance practised by the Group. The board also
recognises the contribution of directors who, over
time, have developed deep insights into the Group’s
businesses and exercises its discretion to retain the
services of such directors where appropriate.
When the need for a new director is
identified, the NC will prepare a shortlist of
candidates with the appropriate profile and
qualities for nomination. The board reviews the
recommendation of the NC and appoints the new
director. In accordance with the company’s Articles
of Association, the new director will hold office
until the next AGM, and if eligible, the director can
stand for re-appointment.
The company subscribes to the principle that
all directors including the Group President & CEO
should retire and submit themselves for re-election
at regular intervals, subject to their continued
satisfactory performance. The company’s Articles
of Association require a third of its directors to
retire and subject themselves to re-election by
shareholders at every AGM (one-third rotation rule).
In addition, a newly-appointed director submits
himself for retirement and re-election at the
AGM immediately following his appointment.
Thereafter, he is subject to the one-third rotation
rule. Directors who are above the age of 70 are
also statutorily required to seek re-appointment
at each AGM.
Pursuant to the one-third rotation rule, Mr
Ang, Mr Tang and Mrs Lui will retire and submit
themselves for re-election at the forthcoming AGM.
Dr Teh, who was newly appointed to the board
on October 15, 2012, will also submit himself for
retirement and re-election by shareholders at the
forthcoming AGM.
Mr Goh, who is above the age of 70, will
also submit his retirement and offer himself for
re-appointment pursuant to the Companies Act.
Review of directors’ time commitments
While reviewing the re-appointment and
re-election of directors, the NC also considers the
directors’ other board directorship representations
and principal commitments to ensure they have
sufficient time to discharge their responsibilities
adequately. Taking into consideration the total time
commitment required at the board and committee
level of Sembcorp and the other directorships and
committee duties of all its board members, the
board has determined that the maximum number
of listed company board representations which any
director may hold should not exceed six.
Board Performance (Principle 5)
Active participation and valuable contributions
are key to overall effectiveness of the board
Board evaluation process and performance criteria
The board believes that board performance is
ultimately reflected in the long-term performance
of the Group. In consultation with the NC, the
board assesses its performance annually to identify
key areas for improvement and requisite follow-up
actions. To provide feedback to aid in this
assessment, each director is required to complete
a questionnaire on the effectiveness of the board,
board committees and directors’ contribution and
performance. The evaluation considers factors such
as the size and composition of the board and board
committees, directors’ access to information, board
processes, communication with senior management
and accountability. The evaluation and feedback
are then consolidated and presented to the board
for discussion on areas of strengths and
weaknesses to improve the effectiveness of the
board and its committees.
Access to Information (Principle 6)
Directors have complete, adequate and
timely information and resources
Complete, adequate and timely information
The company recognises that directors should
be provided with complete, adequate and timely
information on an on-going basis and prior to
board meetings. This is to enable the board to
make informed decisions to discharge its duties
and to keep abreast of the Group’s operational and
financial performance, key issues, challenges and
opportunities. Sembcorp’s management furnishes
adequate management and operation reports as well
as financial statements to the board on a regular
basis. Financial highlights of the Group’s performance
and key developments are presented on a quarterly
basis at board meetings. The Group President & CEO,
Group Chief Financial Officer and members of senior
management are present at these board meetings to
address any queries which the board may have.
As a general rule, board and board committee
papers are submitted to directors at least three
working days before each meeting so that they may
better understand the matters prior to the meeting
and discussions may be focused on questions that
the directors have on these matters. Members of
senior management who may provide insight into
the matters to be discussed are also called on to
be present during the relevant discussions.
The board has ready and independent
access to the Group President & CEO, senior
management, the Company Secretary and internal
and external auditors at all times to request for
additional information.
Company Secretary
The Company Secretary facilitates good
information flow between the board and its
committees and senior management, in addition
to attending to corporate secretarial matters such
as arranging orientation for newly-appointed
directors. In consultation with the Chairman
and the Group President & CEO, the Company
Secretary assists the board with the preparation
of meeting agendas, and administers, attends
and prepares minutes of board proceedings. She
also assists the board on the compliance of the
Group with the Memorandum and Articles of
Association and regulations, including requirements
of the Companies Act, Securities & Futures Act
and the SGX-ST. She liaises with the SGX-ST, the
Accounting and Corporate Regulatory Authority
and, when necessary, shareholders.
Independent professional advice
In the furtherance of its duties, the board exercises
its discretion to seek independent professional advice
at the company’s expense, if deemed necessary.
Procedures for Developing Remuneration
Policies (Principle 7)
Remuneration of directors adequate and
not excessive
With the assistance of the Executive Resource
& Compensation Committee (ERCC), the board
ensures that a formal and transparent procedure
for developing a policy on remuneration of
executives and directors is in place.
Executive Resource & Compensation Committee
The ERCC is chaired by Mr Ang, an independent
non-executive director, and is joined on the committee by Mr Goh and Mrs Lui.
The ERCC is responsible for developing,
reviewing and recommending to the board the
framework of remuneration for the board and
key management personnel. It assists the board
to ensure that competitive remuneration policies
and practices are in place. The ERCC also reviews
and recommends to the board the specific
remuneration packages for each director as well
as for key management personnel. The ERCC’s
recommendations are submitted to the entire board
for endorsement. In its deliberations, the ERCC
takes into consideration industry practices and
norms of compensation. The Group President &
CEO does not attend discussions relating to his own
compensation, terms and conditions of service,
or the review of his performance. In addition,
no ERCC member or any director is involved in
deliberations in respect of any remuneration,
compensation, share-based incentives or any form
of benefits to be granted to himself.
The ERCC also establishes guidelines on share-based
incentives and other long-term incentive
plans and approves the grant of such incentives
to key management personnel. These incentives
serve to motivate executives to maximise operating
and financial performance and shareholder value,
and are aimed at aligning the interests of the key
management personnel with those of shareholders.
The ERCC has access to expert professional
advice on human resource matters whenever
there is a need for such external consultations.
In 2012, external consultants Carrots Consulting
and Mercer were engaged to provide such advice.
In engaging external consultants, the company
ensures that the relationship, if any, between
the company and its external consultants will not
affect the independence and objectivity of the
external consultants.
The ERCC reviews succession planning for key
management personnel in the Group and the
leadership pipeline for the organisation. It reviews
the development of senior staff and assesses their strengths and development needs based on the
Group’s leadership competencies framework, with
the aim of building talent and maintaining strong
and sound leadership for the Group. The ERCC
conducts a succession planning review of the
Group President & CEO, officers reporting directly
to him, as well as selected key positions in the
company on an annual basis. Potential internal and
external candidates for succession are reviewed for
different time horizons according to immediate,
medium-term and long-term needs. In addition, the
ERCC also reviews the company’s obligation arising
in the event of termination of the Group President
& CEO and key management personnel’s contracts
of service to ensure that such contracts contain fair
and reasonable termination clauses.
Level and Mix of Remuneration (Principle 8)
Competitive reward system to ensure highest
performance and retention of directors and
key management personnel
Sembcorp believes that its remuneration and
reward system is aligned with the long-term
interest and risk policies of the company and that a
competitive remuneration and reward system based
on individual performance is important to attract,
retain and incentivise the best talents.
The Group President & CEO, as an executive
director, does not receive director’s fees from
Sembcorp. As a lead member of management, his
compensation consists of his salary, allowances,
bonuses and share-based incentives conditional
upon meeting certain performance targets. Details
on the share-based incentives and the performance
targets are available in the Directors’ Report and
Note 36 in the Notes to the Financial Statements.
Non-executive directors’ fees
The directors’ fees payable to non-executive
directors are paid in cash and in the form of share
awards under the Sembcorp Industries Restricted
Share Plan 2010. The ERCC has determined that up
to 30% of the aggregate directors’ fees approved by shareholders for a particular financial year may
be paid out in the form of restricted share awards.
The directors’ cash fees and share awards will
only be paid and granted upon approval by
shareholders at the AGM of the company.
The following Directors’ Compensation
Framework is based on a scale of fees divided into
basic retainer fees, attendance fees, fees for service
on board committees and travel allowance:
For the year 2012, the share awards granted
under the Sembcorp Industries Restricted
Share Plan 2010 to all directors as part of their
directors’ fees (except for Mr Tang, who is the
Group President & CEO and does not receive
any directors’ fees) will consist of the grant of
fully paid shares outright with no performance
and vesting conditions attached, but with a selling
moratorium. Non-executive directors are required
to hold shares (including shares obtained by
other means) worth at least one-time the annual
base retainer (currently S$65,000); any excess
may be sold as desired. A non-executive director
can dispose of all of his shares one year after
leaving the board.
The actual number of shares to be awarded to
each non-executive director will be determined by
reference to the volume-weighted average price
of a share on the SGX-ST over the 14 trading days
immediately following the date of the AGM. The
number of shares to be awarded will be rounded
down to the nearest hundred and any residual
balance will be settled in cash.
The company does not have a retirement
remuneration plan for non-executive directors.
Key management personnel’s remuneration
Key management personnel are rewarded based
on actual performance relative to pre-agreed
performance targets, which include financial and
non-financial performance indicators such as
economic value added (EVA), total shareholder
return and promoting and maintaining health,
safety and environmental standards. The Group
believes that the current reward systems are in line
with market norms and formulated to motivate
executives to give their best to the Group. Rewards
include long-term share-based incentives, which
would further ensure the retention of the most
talented and high-performing executives in the
Group. For further details on the share-based
incentives and performance targets, please refer
to the Directors’ Report and Note 36 in the Notes to the Financial Statements.
The Group has an incentive compensation
plan for key management personnel that is tied
to the creation of EVA, as well as to the
achievement of individual and Group performance
goals. A “bonus bank” is used to hold incentive
compensation credited in any year. Typically, one-third
of the available balance in the bonus bank
is paid out in cash each year and the balance
two-thirds 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 its subsidiaries. There are provisions
in the EVA incentive plan to allow for forfeiture
of the outstanding bonus bank in exceptional
circumstances of misstatement of financial
results or misconduct resulting in financial loss
to the company.
In 2012, a pay-for-performance alignment
study was commissioned to review if the Group’s
executive pay programme is aligned with actual
business results and shareholder returns on
a relative basis against a pre-selected set of
comparator companies. The study shows that
there is strong alignment between the Group’s
executive pay programme and business results
and shareholder returns.
Disclosure on Remuneration (Principle 9)
The computation of non-executive directors’
fees totalled S$1,198,842 in 2012, (2011:
S$1,280,613) comprising S$839,189 in cash
derived using the compensation structure above
and S$359,653 to be paid in the form of restricted
share awards under the Sembcorp Industries
Restricted Share Plan 2010. More information
on directors and key management personnel’s
remuneration may be found under the related
item in the Supplementary Information section
of the Financial Statements.
Accountability (Principle 10)
The board is accountable to the shareholders
Sembcorp is committed to open and honest
communication with shareholders at all times.
The company presents a balanced and clear
assessment of the Group’s performance, position
and prospects to shareholders through the timely
release of its quarterly and annual financial
reports. The company believes that prompt
compliance with statutory reporting requirements
is imperative to maintaining shareholders’
confidence and trust in the company. In line
with stock exchange requirements, negative
assurance statements were issued by the board
to accompany the company’s quarterly financial
results announcements, confirming that to the
best of its knowledge, nothing had come to its
attention which would render the company’s
quarterly results false or misleading.
Risk Management and Internal Controls
(Principle 11)
The board has overall responsibility for the
governance of risk of the Group. The board and
management of the company are fully committed
to maintaining sound risk management and
internal control systems to safeguard shareholders’
interests and the Group’s assets.
The board also determines the company’s levels
of risk tolerance and risk policies, and oversees
management in the design, implementation and
monitoring of the risk management and internal
control systems.
Risk Committee
The Risk Committee (RC) assists the board in
overseeing risk management for the Group.
The RC is chaired by Mr Henkes and its other
members include Mr Chin and Tan Sri Mohd
Hassan Marican. The RC’s main role is to appraise the adequacy and effectiveness of the Group’s
risk management plans, systems, processes and
procedures, group-wide risk policies, guidelines and
limits, as well as its risk portfolio, risk levels
and risk mitigation strategies.
Adequate and effective system of
internal controls
Sembcorp strives to maintain and improve its risk
management and internal control systems to ensure
that they remain sound and relevant. During the
year under review, the board was assured by the
Group President & CEO and Group Chief Financial
Officer that financial records have been properly
maintained and the financial statements give a
true and fair view of the company’s operations
and finances, and that the risk management and
internal control systems of the Group are adequate
and effective.
Based on the internal controls established
and maintained by the Group, work performed
by external and internal auditors, and reviews
performed by senior management, the board,
with the concurrence of the Audit Committee,
is of the opinion that the company’s internal
controls are adequate and effective in addressing
the financial, operational and compliance risks of
the company. Internal controls, because of their
inherent limitations, can provide reasonable but
not absolute assurance regarding the achievement
of their intended control objectives. In this regard,
the board will ensure that if any significant internal
control failings or weaknesses were to arise,
necessary remedial actions would be swiftly taken.
A dedicated Enterprise Risk Management
(ERM) function has been set up to facilitate the
implementation of the ERM framework. Through
this framework, risk capabilities and competencies
are continuously enhanced. The Group has
engaged KPMG Risk Consulting Services to
further assist in enhancing the ERM framework over the identification, prioritisation, assessment,
management and monitoring of key risks. The
risk management process in place covers, inter
alia, financial, operational and compliance risks
faced by the Group. The key risks identified are
deliberated by management, with the support of
the ERM function, and reported to the RC. The RC
reviews the adequacy and effectiveness of the ERM
programme and process against leading practices
in risk management and vis-à-vis the external and
internal environment which the Group operates in.
Complementing the ERM programme is a group-wide
system of internal controls, which includes
the Code of Conduct, documented policies and
procedures, proper segregation of duties, approval
procedures and authorities, as well as checks-and-balances
built into the business processes. The
Group has also considered the various financial
risks, details of which can be found here.
For more information on the company’s
enterprise risk management system, please refer
to the Risk Management & Mitigation Strategies section of this annual report.
Audit Committee (Principle 12)
The Audit Committee (AC) comprises directors who
are both independent and non-executive. During
the year under review, the AC was chaired by Mr
Chin. The other members are Tan Sri Mohd Hassan
Marican and Mr Henkes.
Authority and duties of the AC
The AC assists the board in fulfilling its fiduciary
responsibilities relating to the internal controls,
audit, accounting and reporting practices of the
Group. Its main responsibilities are to review
the company’s policies and control procedures
with the external auditors, internal auditors
and management and act in the interest of the
shareholders in respect of interested person transactions as well as any matters or issues that
affect the financial performance of the Group.
The AC reviews the quarterly, half-yearly and full
year results announcements, accompanying press
releases and presentation slides as well as the
financial statements of the Group and company for
adequacy and accuracy of information disclosed
prior to submission to the board for approval.
The AC has explicit authority to investigate any
matter within its TOR and enjoys full access to and
co-operation from management to enable it to
discharge its function properly.
Where relevant, the AC is guided by the
recommended best practices for audit committees
as set out in the Guidebook for Audit Committees
issued by Singapore’s Audit Committee Guidance
Committee in October 2008.
External auditors
Each year, the AC reviews the independence
of the company’s external auditors and makes
recommendations to the board on the re-appointment
of the company’s external auditors.
The AC reviews and approves the external
audit plan to ensure the adequacy of audit scope.
It also reviews the external auditors’ management
letter and monitors the timely implementation
of the required corrective or improvement
measures. The AC meets the external and internal
auditors at least once a year without the presence
of management. The AC has reviewed the nature
and extent of non-audit services provided by
the external auditors to the Group for the year,
excluding services provided to Sembcorp Marine,
a listed subsidiary that has its own audit committee.
The AC is satisfied that the independence of
the external auditors has not been impaired by
their provision of non-audit services. Details of
non-audit fees payable to the external auditors
are found in Note 33(a) in the Notes to the
Financial Statements.
Whistle-blowing policy
The AC also oversees the Group’s whistle-blowing
policy implemented by the company to
strengthen corporate governance and ethical
business practices across the Group. Employees
are provided with accessible channels to the
Group Internal Audit department to report
suspected fraud, corruption, dishonest practices
or other misdemeanours. The aim of this policy is
to encourage the reporting of such matters in
good faith, with the confidence that employees
making such reports will, to the extent possible,
be protected from reprisal.
For more information on the whistle-blowing
policy, please click here.
Internal Audit (Principle 13)
Independent internal audit function
The Group Internal Audit department (GIA) is
an independent function of the Group. The AC
approves the hiring, termination, evaluation and
compensation of the Head of GIA, who reports
directly to the AC on audit matters and to the
Group President & CEO on administrative matters.
Adequacy of the internal audit function
The AC reviews the effectiveness of the internal
audit function on an annual basis, including the
adequacy of audit resources. GIA adopts a risk-based
methodology in defining its annual internal
audit plan, which is reviewed and approved by the
AC. GIA also assists the board and management
in the discharge of their corporate governance
responsibilities as well as in improving and
promoting effective and efficient business processes
within the Group. The internal audits performed
are aimed at ensuring that the Group maintains
a sound system of internal controls and that
the operations comply with the internal control
framework. Internal audit reports issued are
reviewed by the AC.
Professional standards and competency
GIA employs qualified staff and identifies and
provides training and development opportunities
for them so that their technical knowledge remains
current and relevant. GIA is guided by and has
met the standards for the professional practice
of internal audit promulgated by the Institute
of Internal Auditors (IIA). In 2012, an external
assessment of GIA was conducted and the results
affirmed that the internal audit activity generally
conformed to the standards set by IIA.
Shareholder Rights (Principle 14)
Sembcorp ensures that all shareholders are treated
fairly and equitably. The company recognises,
protects and facilitates the exercise of shareholders’
rights and continually reviews and updates such
governance arrangements.
The company is committed to ensuring that all
shareholders have easy access to clear, reliable and
meaningful information in order to make informed
investment decisions. The company regularly
communicates major developments in its business
operations via SGXNET, press releases, circulars
to shareholders and other appropriate channels.
The company also encourages shareholder
participation and voting at general meetings
of shareholders.
Communication with Shareholders
(Principle 15)
Regular, effective and fair communication
with shareholders
Sembcorp is committed to upholding high
standards of corporate transparency and disclosure.
This commitment is embodied in the company’s
Investor Relations policy which adheres to fair
disclosure principles and emphasises active
dialogue and engagement with shareholders,
investors and analysts.
Disclosure of information on timely basis
Sembcorp makes every effort to ensure that
shareholders and all capital market players have
easy access to clear, meaningful and timely
information on the company in order to make
informed investment decisions. To do this, various
channels including announcements, press releases,
shareholder circulars and annual reports are
utilised. All price-sensitive and material information
are disseminated via SGXNET on a non-selective
basis and in a timely and consistent manner. The
company’s press releases are also uploaded on
the corporate website, www.sembcorp.com, after
dissemination on SGXNET.
The date of the release of quarterly results
is disclosed at least two weeks prior to the date
of announcement via SGXNET. On the day of
announcement, the financial statements as
well as the accompanying press release and
presentation slides are released via SGXNET
and on the company website. Thereafter, a
briefing or teleconference by management
is jointly held for the media and analysts. For
first half and full year results announcements,
results briefings are concurrently broadcast
live via webcast. Investor relations officers are
also available by email or telephone to answer
questions from shareholders, analysts and the
media as long as the information requested
does not conflict with the SGX-ST’s rules of
fair disclosure.
The company also maintains a dedicated
Investor Relations section on its corporate website
which caters to the specific information needs of
shareholders, investors, analysts and the financial
community. Designed to provide a convenient
location for investors’ information needs, the
site includes filings on the company’s results
announcements since the company’s listing in
1998, an archive of the company’s results briefings
webcasts, downloadable five-year financial data, a calendar of upcoming events as well as pertinent
stock information such as dividend history,
share price charts and analyst coverage. Investor
relations contact information is also displayed on
the website for direct shareholder enquiries.
Establishing and maintaining regular
dialogue with shareholders
Sembcorp employs multiple communication
platforms to engage with its shareholders. In
addition to its results briefings, the company also
maintains regular dialogue with its shareholders
through investor-targeted events such as AGMs,
roadshows, conferences, site visits, group briefings
as well as one-to-one meetings. These platforms
offer opportunities for senior management
and directors to interact first-hand with the
shareholders, understand their views, gather
feedback as well as address concerns.
To keep senior management and the board
abreast of market perception and concerns,
the Investor Relations team provides regular
updates on analyst consensus estimates and
views. On an annual basis, a more comprehensive
update is presented, which includes updates
and analysis of the shareholder register, highlights
of key shareholder engagements for the year
as well as market feedback.
For further details on Sembcorp’s communications
with its shareholders, please see the Investor
Relations chapter of this annual report.
Dividend policy
Sembcorp is committed to achieving sustainable
income and growth to enhance total shareholder
return. The Group’s policy aims to balance
cash return to shareholders and investment for
sustaining growth, while aiming for an efficient
capital structure. The company strives to provide
consistent and sustainable ordinary dividend
payments to its shareholders on an annual basis.
Conduct of Shareholder Meetings (Principle 16)
Greater shareholder participation at
general meetings
All shareholders are invited to participate in the
company’s general meetings.
The company disseminates information on
general meetings through notices in the annual
reports or circulars. These notices are also released
via SGXNET, published in local newspapers as well
as posted on the company website ahead of the
meetings to give ample time for shareholders to
review the documents.
The company’s Articles of Association allow all
shareholders the right to appoint up to two proxies
to attend general meetings and vote on their behalf.
The company also allows Central Provident Fund
investors to attend general meetings as observers.
Voting in absentia by mail, facsimile or email
is currently not permitted as such voting methods
would need to be cautiously evaluated for
feasibility to ensure that there is no compromise
to the integrity of the information and the
authenticity of the shareholders’ identity.
At each AGM, the Group President & CEO
delivers a short presentation to shareholders to
update them on the performance of Sembcorp’s
businesses. At general meetings, every matter
requiring approval is proposed as a separate
resolution. Shareholders present are given an
opportunity to clarify or direct questions on
issues pertaining to the proposed resolutions
before the resolutions are voted on. The board
and management are present to address these
questions and obtain feedback from shareholders.
The external auditors and legal advisors (if
necessary) are also present to assist the board.
To ensure greater transparency of the voting
process, the company conducts electronic poll
voting at the shareholder meetings for all the
resolutions to be put to vote to allow shareholders
present or represented at the meetings to vote
on a one share, one vote basis. The total number
of votes cast for or against each resolution is
announced after the meetings via SGXNET.
Minutes of shareholder meetings are available
upon request by shareholders.
The company has adopted a Code of Compliance
on Dealing in Securities, which prohibits dealings
in the company’s securities by its directors and
senior management within two weeks prior to
the announcement of the company’s financial
statements for each of the first three quarters
of its financial year and within one month prior
to the announcement of the company’s full year
financial statements. Directors and employees
are also expected to observe insider trading laws
at all times, even when dealing in the company’s
securities outside the prohibited trading period.
Shareholders have adopted an Interested Person
Transaction (IPT) Mandate in respect of interested
person transactions of the company. The IPT
Mandate defines the levels and procedures to
obtain approval for such transactions. Information
regarding the IPT Mandate is available on the
company website, www.sembcorp.com. All
business units are required to be familiar with
the IPT Mandate and report any interested person
transactions to the company. The Group maintains
a register of the company’s interested person
transactions in accordance with the reporting
requirements stipulated by Chapter 9 of the
SGX-ST Listing Manual. Information on interested
person transactions for 2012 may be found
in the related item under the Supplementary
Information section of the Financial Statements
in this annual report. |
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