Extracted from Annual Report 2015
The Board of Directors ("Board") of Malaysia Building Society Berhad strongly believes in the importance of corporate governance and is fully committed to ensure that the highest standards of corporate governance and integrity are applied throughout the Group.
In addition, the Board also considers and adopts where appropriate, the principles and best practices of corporate governance as prescribed in the Malaysian Code of Corporate Governance 2012 ("Code") and those outlined by other regulatory bodies such as Bank Negara Malaysia's guidelines on Corporate Governance save for one of the recommendations that the tenure of an Independent Director should not exceed a cumulative tenure of 9 years.
The Board is pleased to report to shareholders the manner in which it has applied the Principles of the Code and the extent to which it has complied with the Best Practices of the Code, pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Bursa Malaysia") and Corporate Governance Guide : Towards Boardroom Excellence, throughout the Financial Year 2015.
|A.||Board of Directors|
The Directors are guided by the Board Charter which clearly identifi es the Board's role, duties and responsibilities. The Board Charter also outlines the processes and procedures to ensure the effectiveness and effi ciency of the Board and its Committees.
The Board Charter is a dynamic document and will be updated from time to time to refl ect changes to the Company's policies, procedures and processes as well as amended rules and regulations of the relevant authorities.
The Board Charter also includes the terms of reference and the authority limits for the Board and its Committees and the various relevant internal policies.
Duties and Responsibilities of the Board
The Board's statutory and fiduciary duties include responsibilities to approve and periodically review the overall business strategies and significant policies of the Company and the Group.
The primary responsibilities of the Board are, amongst others, the following:-
Directors' Code of Ethics
The Company has established the Directors' Code of Ethics which was adopted from the recommended Code of Ethics for Directors issued by the Companies Commission of Malaysia. The Directors observe the Code of Ethics in performance of their duties and they fully subscribe to highly ethical standards and take into account the interest of all stakeholders.
Composition of the Board/Board Balance
The Board currently comprise of eight (8) Directors of whom fi ve (5) are Independent Non-Executive Directors and three (3) are Non–Independent Non-Executive Directors.
The Independent Non-Executive Directors are independent of Management and free from any business or other relationship with the Company and the Group which could materially affect the exercise of their independent judgement. The number of Independent Directors not only fulfill the requirement of Bursa Malaysia for one-third of Board membership to be independent but also contributes towards greater impartiality and objectivity in the Board's decision making process.
The Chairman of the Board is YBhg Tan Sri Abdul Halim bin Ali, a Non-Independent Non-Executive Director. Although the Chairman is a Non-Independent Director, the Board composition comprising a majority of Independent Directors can bring expertise and objectivity which will assure that the Company is effectively managed and in the best interest of stakeholders.
The diversity of skill, experience and knowledge of its members in various disciplines and profession allows the Board to address and/or to resolve the various issues in an effective and effi cient manner. The brief description of the background and experience of each of the Board member is contained in the Directors' Profi le section of this Annual Report.
The Board recognises the challenges in achieving the right balance of diversity on the Board to form a highly effective Board in today’s competitive business environment. Diversity is not limited only to gender, but includes ethnicity and age.
The Board is committed to Board diversity and will ensure that all appointments to the Board will be made based on merit while taking into account the Company's needs and circumstances, present size of the Board, suitability for the role, skills, experience, knowledge, experience and diversity.
The Board has not set a specific gender diversity target at this time. Nonetheless, the presence of a female director to the Board of MBSB reflects that the Board recognises the value of gender diversity in the Board and was an initial step taken by the Board towards achieving a more gender diversified Board.
In respect of ethnic diversity, the ethnicity of the Board members is reflective with the three major ethnic groups in Malaysia. The Board is also composed of Directors in varying ages, ranging from 45 to 72 years old.
Board meetings for the ensuing financial year are scheduled in advance before the end of each financial year to enable Directors to plan ahead and fit the year's Board meetings into their own schedule.
The Board has at least four (4) scheduled quarterly meetings with additional meetings being convened as and when necessary.
Prior to each meeting, every Director is given the complete agenda and a set of Board papers well in advance so that the Directors have ample time to review matters to be deliberated at the meeting and to facilitate informed decision making.
The Board met twenty-fi ve (25) times during the fi nancial year ended 31 December 2015.
The details of each of the Directors' attendance are given as below:
All Directors have complied with the minimum requirements of 50% on attendance at Board meetings during the fi nancial year as stipulated in the Main Market Listing Requirements of Bursa Malaysia.
Training and Development of Directors
The Board members are encouraged to attend continuous training to enable the directors to effectively discharge their duties. The Board continuously evaluates and determines its' training needs.
During the year, all Directors have attended various training programmes, seminars, conferences and talks conducted by Regulatory Authorities, professional bodies and professional trainers and speakers, in order to stay abreast with the latest developments in the industry and business environment as well as on changes to statutory requirements and regulatory guidelines, so as to enhance their skills and knowledge to enable them to carry out their roles effectively.
The training programmes/conferences/seminars/dialogues attended by the Directors in 2015 focus on Corporate Governance, Directors Responsibilities, Finance (Conventional & Islamic), Accounting, Investment, Business Sustainability and Risk Management:-
YBhg Tan Sri Abdul Halim bin Ali
YBhg Datuk Syed Zaid bin Syed Jaffar Albar
YBhg Datuk Shahril Ridza bin Ridzuan
YBhg Dato' Jasmy bin Ismail
Encik Aw Hong Boo
Encik Lim Tian Huat
Cik Ravinder Kaur a/p Mahan Singh
Ir. Moslim bin Othman
All Directors have attended the MAP as required under the Main Market Listing Requirements of Bursa Malaysia. The Directors are also regularly updated on any changes to legal and governance requirements which will affect the Group and also themselves as Directors.
Roles and Responsibilities of the Chairman and the President and Chief Executive Officer
There is a clear division of responsibility between the Chairman and the President and Chief Executive Offi cer to ensure a proper balance of power and authority. The Chairman of the Board is a Non-Executive Director and together with the rest of the Board, is responsible for setting the policy framework within which the Management is to work. The Chairman also leads the collective effort of the Board in monitoring the performance of Management in meeting the corporate goals and objectives. He also guides the Board on all issues presented before them at meetings or at such other forums where the consensus of the Board is required.
The President and Chief Executive Officer is primarily responsible for overseeing the day to day management to ensure the smooth and effective running of the Company and the Group.
He is entrusted with making sure that all decisions, directions, policies and/or instructions approved by the Board are carried out by Management in a timely and efficient manner. He carries the primary responsibility in ensuring management competency including the emplacement of an effective succession plan to sustain continuity.
Senior Independent Director
In accordance with the best practices on Corporate Governance, Encik Aw Hong Boo has been appointed as a Senior Independent Non-Executive Director on 22 April 2014. Encik Aw Hong Boo has extensive experience in finance and accounting and he is able to continue to provide constructive and independent advice from various perspective.
The responsibilities of the Senior Independent Non-Executive Director, amongst others, include the following:-
Appointment and Re-election of the Board
A formal and transparent procedure has been established by the Board for the appointment of new directors. A proposed candidate is fi rst considered by the Nominating & Remuneration Committee which takes into account the skills and experience of the person before making a recommendation to the Board. The process of appointment is detailed out in Page 65 of this Annual Report.
In accordance with the Company's Articles of Association, one third (1/3) of the members of the Board for the time being shall retire by rotation at each Annual General Meeting and, subject to eligibility, may offer themselves for re-election.
Directors who are appointed by the Board during the financial year are subject to re-election by shareholders at the next Annual General Meeting held following their appointments.
The performance of those Directors who are subject to re-appointment and re-election of Directors at the Annual General Meeting will be subject to assessment whereupon the recommendation is submitted to the Board for decision on the proposed re-appointment or re-election of the Director concerned for shareholders’ approval at the next annual general meeting.
The Board will assess the Independent Directors annually. The following are considered when assessing the independence:-
In addition to the annual assessment by the Board on the Directors' independence, each Independent Director also submits an annual declaration on their independence.
The Board noted Recommendation 3.2 of the Code that the tenure of an independent director should not exceed a cumulative term of nine (9) years. The Board is of the view that the ability of long serving independent director to remain independent and to discharge their duties with integrity and competency should not be measured solely by tenure of service or any pre-determined age. Their long service should not affect their independence as they are independent minded and had provided necessary checks and balances in the interest of the shareholders. Further, the continued tenure of directorship brings stability to the Board and the Company benefits from directors who have over time gained valuable insight into the Group, its market and the industry.
Therefore, Recommendation 3.2 of the Code (assessment criteria for independence of directors should include tenure) and Recommendation 3.3 of the code (the Board is allowed to seek shareholders' approval for independent directors after nine (9) years to remain as an independent director) do not arise.
Accordingly, Encik Aw Hong Boo who have been Independent Non-Executive Director since 18 November 2005 will continue to be Independent Director of the Company notwithstanding having served as independent director on the Board for more than nine (9) years.
Supply of Information
Prior to the Board Meeting, the agenda and a set of Board papers relevant to the business of the meeting are circulated to all Directors on a timely basis for Directors to study and evaluate the matters to be discussed. Urgent papers may be presented and tabled at the meetings under supplemental agenda.
The President and Chief Executive Officer, Senior Management and relevant external consultants are invited to attend the Board meetings to brief and provide details on matters relating to their areas of responsibilities and also to provide details to the Directors on recommendations or reports submitted to the Board for deliberation and consideration.
The Board has full and unrestricted access to all information within the Company and Group as well as the advice and services of Senior Management and Company Secretaries in carrying out their duties. The Directors may also seek independent professional advice, at the Company's expense, if and when required.
The Company Secretary demonstrates ongoing support in advising and assisting the Board on matters relating to the affairs of the Company, including issues pertaining to compliance, corporate governance and best practices, boardroom effectiveness and Directors’ duties and responsibilities.
The Company Secretary also facilitates the communication of key decisions between the Board, Board Committees and Senior Management. The Company Secretary is also responsible for advising the Directors of their obligations and duties to disclose their interest in securities, disclosure of confl ict of interest in transactions, prohibition on dealing in securities and restrictions on disclosure of price sensitive information.
All Directors have access to the advice and services of the Company Secretary.
The Board has established Board Committees to assist the Board in the running of the Company and the Group.
Pursuant to the above, the Board has established five (5) Board Committees. Each committee has clearly defined terms of reference regarding its objectives, duties and responsibilities, authority, meetings and memberships.
The Board Committees of the Company are as follows:-
Any decision not within the authority of the Board Committee is referred back to the Board with its recommendations and comments for the Board's deliberation and approval.
The salient terms of reference of each Board Committee and details of members' attendance of meetings are as follows:
Objective of Directors' Remuneration
The Company's remuneration policy for Directors is tailored towards attracting and retaining Directors with relevant experience and expertise needed to assist in managing the Company and the Group effectively.Remuneration Package
The remuneration package is as follows:-
|Relationship with Shareholders and Investors|
The Board recognises the importance of communication and proper dissemination of information to its shareholders, investors and all other stakeholders including the general public. Through extensive disclosures of appropriate and relevant information, the Company aims to effectively provide shareholders and investors with information to fulfill transparency and accountability. In this respect, the Company keeps shareholders informed via announcements and timely release of quarterly financial reports, press releases, annual reports and circulars to shareholders.
As part of the Group's initiatives, the President and Chief Executive Officer together with the Chief Financial Officer and the Company's Corporate Planning and Communications Division conducts discussions, dialogues and briefings with fund managers, financial analyst and media, as and when necessary and/or after the Group's quarterly financial results are released to Bursa Malaysia. This is to promote better understanding of the Group's financial performance, operations and other matters affecting shareholders' interest.
In addition, the Company has a website at www.mbsb.com.my which provides updated information on the corporate and business aspect of the Group. Press releases, announcements to Bursa Malaysia, analysts briefings and quarterly results of the Group are also made available on the website and this helps to promote accessibility of information to the Company's shareholders and all other market participants.
The Company also provides an abridged version of the Annual Report together with its Annual Report in CD format, highlighting key financial information to facilitate shareholders' easy access to such key information.Annual General Meeting
The Annual General Meeting (AGM) of the Company is the principal forum for dialogue and interaction with its shareholders. Shareholders are given the opportunity to participate effectively in resolutions tabled at the AGM. All shareholders have direct access to the Board members at this AGM. In addition, the senior management, external auditors and other advisors are present at the AGM to provide answers and clarifi cations to shareholders.
The notice and agenda of AGM together with Form of Proxy are given to shareholders at least 21 days before the AGM, which gives shareholders suffi cient time to prepare themselves to attend the AGM or to appoint a proxy/proxies to attend and vote on their behalf. Each item of special business included in the notice of AGM will be accompanied by an explanatory statement on the effects of a proposed resolution.
|D.||Accountability and Audit|
The Board acknowledges its responsibility to ensure that the Company's and the Group's financial statements present a true and fair view of the state of affairs and are prepared in accordance with Malaysian Financial Reporting Standards ("MFRS"), International Financial Reporting Standards ("IFRS") and the provisions of the Companies Act, 1965.
The Board is also committed to providing the highest level of disclosure possible to ensure integrity and consistency of the financial reports
The Group publishes full financial statements annually and condensed financial statements quarterly as required by the Main Market Listing Requirements of Bursa Malaysia.
The Audit Committee assists the Board in scrutinizing the information for disclosure to ensure accuracy, adequacy and completeness.Internal Control
The Board has the overall responsibility of maintaining a sound system of internal controls to safeguard shareholders' investment and the Company's assets
The Audit Committee through the Internal Audit Division reviews the effectiveness of the system of internal controls of the Group periodically. The review covers the financial, operational and compliance controls.
The Statement on Risk Management and Internal Control as set out in this Annual Report provides an overview of the state of risk management and internal controls within the Group.
The minutes of the Audit Committee meetings are tabled to the Board for notation and for action by the Board where appropriate.Complaint & Whistle Blowing Policy
The policy is developed to provide an avenue for employees to report on suspected fraud, misconduct behavior and/or violations of the Company's Code of Conduct and Ethics as well as any other directives or policies issued by the Company from time to time. The Company also has in place a Fraud and Corruption Control and Guidelines in managing the risk of fraud and corruption which should be read together with the Complaint and Whistle Blowing Policy.
All employees are entrusted with the responsibility to stay alert for preventing and detecting defalcations, misappropriations and other irregularities. The policy sets out the specific roles of employees in prevention and detection of fraud and fraud discovery reporting as well as the procedures and processes the Company will take in respect of employees involved in fraudulent acts.Relationship with Auditors
The Company's external auditors, Messrs Ernst & Young continue to provide the independent assurance to shareholders on the Company's and the Group's financial statements. The Board maintains a formal and transparent relationship with the auditors to meet their professional requirements.
The role of the Audit Committee in relation to the internal and external auditors is described in the Audit Committee Report section of the Annual Report.
|E.||Directors' Responsibility Statement|
The Directors are required by the Companies Act, 1965 to prepare financial statements for the financial year which have been made out in accordance with the applicable Malaysian Financial Reporting Standards ("MFRS"), International Financial Reporting Standards ("IFRS") and the provisions of the Companies Act, 1965 in Malaysia and give a true and fair view of the state of affairs and of the results and cash flows of the Company and the Group for the financial year then ended.
In preparing the financial statements, the Directors have used appropriate and relevant accounting policies that are consistently applied and supported by reasonable as well as prudent judgments and estimates, and ensure that applicable MFRS and IFRS have been complied with.
The Directors are responsible for ensuring that the Company and the Group keep proper accounting records which disclose with reasonable accuracy the financial position of the Group and Company and which enable them to ensure that the financial statements comply with the Companies Act, 1965.
The Directors have the general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group, to detect and prevent fraud and other irregularities.
|F.||Additional Compliance Statement|
|Utilisation of Proceeds Raised from any Corporate Proposal|
During the financial year ended 31 December 2015, the following were carried out by the Group:Dividend Reinvestment Plan ("DRP")
The net proceeds raised from DRP (after deducting the estimated expenses for DRP) are for working capital purposes and/or other requirements of the Group.Share Buy-back
There was no approved share buy-back scheme during the financial year.Options, Warrants or Convertible Securities
During the financial year ended 31 December 2015, a total of 3,691,041 options over ordinary shares were exercised pursuant to the Company's Employees' Share Option Scheme ("ESOS").
The share options granted to the President and Chief Executive Officer were as follows:-
Since the commencement of the ESOS, the maximum allocation applicable to Key Senior Management of MBSB is 50% of the ESOS Aggregate Maximum Allocation.
As at 31 December 2015, the actual percentage of total options granted to Key Senior Management of MBSB under the ESOS was 0.87% of the total ESOS granted.
Details of the ESOS during the financial year 2015 are set out under Note 22 of the Notes to the Financial Statements in this Annual Report
During the financial year ended 31 December 2015, a total of 4,026,684 warrants were exercised pursuant to the Company's warrant 2011/2016.American Depository Receipt (ADR) or Global Depository Receipt (GDR) Programme
The Company did not sponsor any ADR or GDR programme during the financial year.Sanctions and/or Penalties Imposed
There were no sanctions or material penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies during the financial year.Non-Audit Fees
Apart from the annual audit fees, the Group has incurred other assurance related fees of RM5,000 and non-audit fees of RM1,311,000 to the external auditors of MBSB, Messrs Ernst & Young or its affiliates for the financial year ended 31 December 2015.Variation in results
There were no variations between the audited results for the financial year ended 31 December 2015 and the unaudited results for the fourth quarter ended 31 December 2015 of the GroupProfit Guarantee
The Company did not issue any profit guarantee during the financial year.Material Contracts with Related Parties
Save as disclosed in Note 35 to the financial statements, there are no other material contracts subsisting at the end of the financial year or entered into since the end of the previous financial year by the Company and its subsidiaries which involves interests of Directors and major shareholders.Dividend Payment Policy
The Company has adopted a 30% dividend payment ratio on profit after tax.
|G.||Statement on Compliance with the Best Practices of the Malaysian Code on Corporate Governance|
Having reviewed the governance structure and practices of the Company and the Group, the Board considers that it has complied with the best practices as set out in the Code as well as the items set out in Part A of Appendix 9C of the Main Market Listing Requirements of Bursa Malaysia in relation to the requirement of a separate disclosure in the Annual Report.
This Statement on Corporate Governance was approved by the Board of Directors on 9 March 2016.