Microsoft word - statement cg 2013(final)-website.3.6.13
STATEMENT ON CORPORATE GOVERNANCE
The Board of Directors (“the Board”) of Harn Len Corporation Bhd (“Harn Len” or “the Company”) recognizes the importance of good corporate governance towards building and maintaining corporate credibility and enhancing shareholders value. The Board is pleased to present the following statement on the application of the principles and compliance with the best practices as set out in the Malaysian Code of Corporate Governance 2012 (“the Code”) and throughout the year ended 31 December 2012. Unless otherwise specified and explained, the Board is of the opinion that the Company has generally complied with the best practices in the Code. BOARD OF DIRECTORS Board Roles and Responsibilities The Board has the ultimate and overall responsibility for setting the objectives and steering the strategic direction of the Company. Other responsibilities of the Board include formulating and reviewing the policies and procedures in succession planning, risk management, internal control and to oversee the management’s performance over the Group’s business operations. In addition, the Board also advocates a policy of maintaining effective communication with shareholders and investors through timely dissemination of announcement to enhance corporate governance best practices within the Company and its Subsidiaries (“Harn Len Group” or “the Group”). The Executive Directors are primarily responsible for managing the day-to-day operations of the various business segments of the Company comprising plantation, oil milling, hotel management and property investment. The Independent Non-Executive Directors are actively involved in the various Board Committees. Coming from different backgrounds and fields of expertise, the Independent Directors are able to offer different perspectives and independent assessment of the proposals put forward by management. Board Charter The Board is guided by the Board Charter which provides reference for directors in relation to the Board’s role, powers, duties and functions. The primary objective of the Company’s Board Charter (“Charter”) is to set out the roles, composition, principal responsibilities and operation of the Board of Directors to ensure all Board members acting on behalf of the Harn Len Group are aware of their duties and responsibilities as Board members. The Board Charter also addresses the Code of Ethics of the Directors. The approval and adoption of the Board Charter and Directors’ Code of Ethics formalizes the ethical standards to ensure that the Directors, in discharging their duties and responsibilities, practice ethical and lawful business conduct and embrace high standards of personal integrity and professionalism. The Board Charter will be periodically reviewed and updated in accordance with the needs of the Company and any new regulations that may have an impact on the discharge of the Board’s responsibilities.
Board Composition and Independence
The Board comprises ten (10) members, of whom seven (7) are Executive Directors (“EDs”) and three (3) are Independent Non-Executive Directors (“INEDs”). The Board composition complies with the Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”) that requires at least two (2) or one-third (1/3) of the Board to be Independent Directors, whichever is the higher. The Board is comprised of individuals from diverse academic background that provides a collective range of skills, expertise and experience in various fields such as plantations, property, manufacturing, legal and accounting. A brief profile of each Director is presented on pages 12 to 14 of the Annual Report. The INEDs are assessed annually by the Nominating Committee(“NC”) and Board with the completion of Performance Evaluation and the relevant questionnaires to assess the independence of the INEDs, taking into account each of the Director’s ability to exercise judgment at all times and contribute effectively to the functioning of the Board. Moreover, the INEDs do not engage in day-to-day management of the Group and do not participate in any business dealings and are not involved in any other commercial relationship with the Group that could interfere with their exercise of independent judgments. The NC and Board have assessed and reviewed the independence of all the three INEDs namely Mr Loh Wann Yuan, Brig. Jen. (B) Dato’ Ali Bin Hj. Musa and Mr Law Piang Woon who have all served for over nine years. Upon the recent assessment and review, it was determined that their long tenure do not in any way interfere with their exercise of objective judgment and they remain demonstrably independent. In addition, they have also:- 1.
fulfilled the criteria under the definition of Independent Director pursuant to the Main Market Listing Requirements;
ensured effective check and balance in the proceedings of the Board and Committee
actively participated in Board deliberations and, provided objectivity in decision
making and an independent voice to the Board;
devoted sufficient time and attention to their professional obligations ;
exercised due care in the interest of the Company and shareholders;
developed deep insight into the Group’s businesses and operations and therefore
will be able to provide invaluable contributions to the Group;
Accordingly, the Board strongly recommends that Brig. Jen. (B) Dato’ Ali Bin Hj. Musa, Mr Law Piang Woon and Mr Loh Wann Yuan be retained as INEDs.
Clear Roles and Responsibilities
There is a clear division of roles and responsibilities between the Executive Chairman (“EC”) and Executive Directors (“EDs”) to ensure there is balance of power authority and that no one individual has unfettered powers of decision. The executive powers of the Executive Chairman and the Executive Directors are balanced by the presence of Independent Non- Executive Directors who provides unbiased and independent views, advice and exercise their independent judgment on issues of strategy, standards of conduct, resources, process and safeguarding of interests of minority shareholders. The EC is responsible for providing effective leadership in determination of the Group’s strategy, conduct and governance of the Board. The EC is also responsible for ensuring the efficient organization and conduct of the Board’s function and meetings, and effective communications with shareholders and stakeholders. The EC, given his years of experience and track record capabilities to show leadership, entrepreneurship skills and business acumen, plays an instrumental role in developing the business of Harn Len Group and provides the Group with strong leadership and vision. The EDs are collectively responsible for implementing the corporate strategies, policies and decision of the Board as well as initiating the business development efforts of the Group. The EC also ensures the efficiency and effectiveness of the operation for the Group and are responsible for overseeing the administration and management of the day-to-day operations of the Group’s business. All major proposals and decisions of the Group are discussed and reviewed by the AC which comprised solely of INEDs. The INEDs play a pivotal role in ensuring there are enough check and balance and corporate accountability. The Board as a whole is ultimately responsible for the decision made on all matters affecting the businesses of the Group. The Board believes the existing arrangement is in the best interest of the Group. The existing size and composition of the Board is appropriate for the complexity and scale of operations of the Group. With the presence of Audit Committee (“AC”), Nomination Committee (“NC”) and Remuneration Committee (“RC”), comprising mainly independent directors, the Board believes that there are sufficient strong and independent elements and adequate safeguards in place against an uneven concentration of power and authority in one individual.
From a practical perspective, increasing the size of the Board further would be cumbersome and expensive for Harn Len, a medium size company, to maintain.
The Board maintains that the current size remains optimum and conducive for effective deliberations at the Board Meetings for efficient conduct of Board Meetings.
The Board of Directors regularly reviews the strategic direction of the Company and the progress of the Company’s operation to include sustainable commitment in business practices and development focusing on the environment, socially responsibility, and well- being of its employees, the benefits of which are believed to translate into better corporate performance and image. The Corporate Responsibility Statement which provides a better overview on the practices and activities of Harn Len Group, aims at promoting business sustainability and is set out on pages 8 and 9 of this CG Statement. Board Meetings and Attendance
The Board meets on a scheduled basis at least four (4) times a year and, as and when the need arises. The Chief Financial Officer is usually invited to attend the Board meeting to help provide additional information and/or clarify any issues raised by the Board members. Other key management personnel and/or external advisers may also be invited to attend the meeting when required. During the financial year, a total of five (5) Board meetings were held. The attendance of each Director is as follows:- Director Designation Attendance
Supply of Information
The agenda of each meeting is determined by the Chairman of the Board with assistance from the Company Secretary. All the Board members are provided with an agenda and a set of Board papers (containing information relevant to the matters for deliberation) usually one week before each Board meeting. This is to ensure that the Board has sufficient opportunity to have queries answered, obtain further explanations if necessary and to be properly briefed before Board meetings. Matters discussed include periodical financial information, annual budgets, significant operational, financial and corporate issues, performance of the business units, acquisition and disposal of undertakings and properties of a substantial value. Minutes of Board meeting are circulated to all Directors for their perusal prior to confirmation of the minutes at the following Board meeting. The Directors may request for further clarification or raise comments on the minutes prior to confirmation of the minutes as a record of proceedings of the Board. The Board has full and unrestricted direct access to members of the Senior Management and any officers of the Company for any information relating to the Group’s operations in the discharge of their duties. In exercising their duties, the Directors may seek independent professional advice where deemed necessary, at the Company’s expense.
The Board has the services of two (2) Company Secretaries who are responsible to the Board for ensuring that all Board procedures are followed and that applicable laws and regulations are complied with. The Directors are regularly updated by the Company Secretary on new statutory as well as regulatory requirements relating to the duties and responsibilities of Directors. The Company Secretary attends all board meetings and ensures that accurate and adequate records of the proceedings of board meetings and decisions made are properly kept. Directors’ Training
All Directors have completed the Mandatory Accreditation Programme as required under the Listing Requirements. The Board encourages each and every individual Director to attend seminars, conferences, workshops and training programmes to update themselves with the latest economic and industry trends, technical developments, new concepts and the latest changes to laws and regulatory requirements. The Board views training as an important knowledge acquisition process for the Directors to contribute effectively to the Company. During the financial year, the Directors have attended the following training:- Director Course Title Trainer/Organiser
Mr Low Quek Kiong 1) Overview on Chapter 10 of Listing
Mr Low Kueck Shin 1) Overview on Chapter 10 of Listing
Mr Low Kwek Lee 1) Overview on Chapter 10 of Listing
Mr Low Kuek Kong 1) Overview on Chapter 10 of Listing
Mr Lee Chon Sing 1) Overview on Chapter 10 of Listing
Director Course Title Trainer/Organiser
Mr Loh Wann Yuan 1) Impact of Amendments to Listing
Mr Law Piang Woon 1) Going Concern- Auditing & Accounting Malaysian Institute
To assist the Board in discharging its duties, the various Board Committees have been established. The functions and terms of references of the Board Committees are clearly defined and where applicable, comply with the recommendations of the Code.
Audit Committee (“AC”)
The AC comprises wholly of Independent Non-Executive Directors, one of whom is a practicing public accountant. The following are members of the AC:-
The information of the functions and duties of the AC, and its activities carried out during the financial year are set out on pages 30 to 32 of the Annual Report. Nominating Committee (“NC”)
The NC met once during the year and comprises wholly INEDs. The following are members of the NC:-
The NC is responsible for making recommendations for any new candidates to the Board and assessing the Directors on a on-going basis. It is also responsible for reviewing the required mix of skills, expertise, experience and other qualities (including core competencies) which the Directors should bring to the Board.
Re-appointment and Re-election of Directors
The appointment, re-appointment and annual assessment of Directors are set out in the Terms of Reference of the NC. When making recommendations on the selection of candidates or on re-appointment of Directors, the NC will consider criteria such as skills, knowledge, expertise, experience, professionalism, character and integrity, competence and time to effectively discharge their role. In accordance with the Company’s Articles of Association, all Directors who are appointed by the Board are subject to election by shareholders at the first opportunity after their appointment. The Articles also provide that at least one-third (1/3) of the remaining Directors including the Managing Director shall retire from office at least once every three (3) years but shall be eligible for re-election. Pursuant to Section 129 of the Companies Act, 1965, Directors who are over the age of seventy (70) years shall retire at every Annual General Meeting and may offer themselves for re-appointment to hold office until the next Annual General Meeting. At the meeting held subsequent to the financial year under review, the Committee had recommended the re-appointment of Tan Sri Dato’ Low Nam Hui, Brig. Jen. (B) Dato’ Ali Bin Hj. Musa, Mr Law Piang Woon and Mr Lee Chon Sing under Section 129 of the Companies Act, 1965 and the re-election of Mr Loh Wann Yuan and Mr Low Kwek Lee pursuant to Article 84 of the Company’s Articles of Association. The NC has assessed and evaluated their skills, knowledge, expertise and experience relevant to the Harn Len Group’s activities, character of honesty, and integrity, professionalism, competence and devotion of sufficient time to their duties and responsibilities, prior to their recommendations.
Remuneration Committee (“RC”)
The RC met twice during the year and comprises the following Directors:-
Brig. Jen. (B) Dato’ Ali Bin Hj. Musa(Independent Non-Executive Director)(Independent Non-Executive Director)
The RC is responsible for developing the Group’s remuneration policy framework and recommending the remuneration packages and benefits to be extended to the EDs and key management personnel. The ultimate responsibility of approving the recommendations rests on the Board. The criteria set for the remuneration of individual Director is primarily based on number of years of working experience, qualifications obtained, level of responsibilities as well as individual and corporate performance.
Policies and Procedures to Attract and Retain Directors
The RC reviews the remuneration package of the EDs on an annual basis and submits its recommendations to the Board on specific adjustments and/or rewards that reflect their respective contributions throughout the year. The scope of work of the EDs and financial performance of the Harn Len Group are criteria taken into consideration for reviewing the remuneration packages of EDs. To ensure that the remuneration packages remains competitive to attract and retain Directors, RC compares the remuneration package offered with that of companies in the same industry. Each individual Director abstains in the deliberation of his own remuneration package. The allowances and director’s fees for INED are determined by the Board as a whole. Directors’ Remuneration
The aggregate remuneration of the Directors of the Company categorised into appropriate components is as follows:- Executive Directors Independent Executive Directors
The breakdown of aggregate remuneration for Directors who had served during the financial year in bands of RM50,000 are as follows:- Number Directors Executive Directors Independent Executive Directors CORPORATE RESPONSIBILITY STATEMENT
The Group does not have a formal Corporate Social Responsibility (CSR) Policy. However, the Group endeavors to contribute to a sustainable and better world by focusing on the environment, health and safety and the well-being of the community that it serves.
Harn Len has committed to development of land in East Malaysia and for the last decade the development there has brought much social and economic benefits to landowners who are from the indigenous community of Malaysia. Many jobs have since been created and employments of the locals are given priority. Some of the managerial positions at our operating units are held by the locals.
The Estate Management continues to engage with the local community to promote a harmonious working relationship especially in aspects of land procurement and use which are managed in accordance with prevailing local laws and with due respect to its local cultural sensitivities. The Group also promotes local social customs through sponsorship and donations in cash and kind for various local cultural and religious activities. Contributions have also been made to the local community for festive celebrations during Gawai, Christmas, and Hari Raya Aidil Fitri. Our Group places great emphasis on enhancing living conditions of the communities where we operate. Substantial sums have been invested for housing, provision of free electricity and water supplies to the employees in the estates and mills with the objective of providing the residents with better living conditions. During the year, the Group sponsored repairs of roads serving villages and flood mitigation projects within our estates in Sarawak. The Group practices zero burning where there is strictly no open burning of any kind at its respective plantations and ensures that all waste products are disposed of safely and appropriately. The oil palm by-products generated from our Group’s plantation operations such as empty fruit bunches which are naturally rich in nutrients are applied to the fields as organic manure to complement the regular fertiliser programme. The oil mills has a waste treatment system to ensure that the palm oil effluent is properly treated before recycling. In addition, light shells are utilised as green fuel in oil mill boilers for power generation to reduce the reliance on fossil fuels which contributes to global warming. The Company has also continued its annual practice of returning to the community by giving yearly educational awards in the form of cash to deserving children of the Group’s employees and hosting a festive celebration for two orphanages. In addition, in our commitment to improve literacy rate and alleviate poverty via education the Group makes monetory contributions annually to support the efforts of social NGO, Humana Child Society Sabah at our Uniglobal Estate. Other funded education based initiatives to cater for children of our employees are providing amenities such as crèches and kindergartens. Transport are also provided to children going to schools at the estates. In enhancing a safe and healthy working environment, Safety and Health Committees (SHC) have been established at various units of the operation. The SHC has conducted safety courses, organized fire fighting training, fire drill and First Aid programmes for employees as well as tenants of its own hotel cum office building, Johor Tower, to raise awareness on safety and health issues. Further, in our effort to promote a healthy lifestyle, the Company organizes activities such as Waidangong, a form of peaceful Chinese Qi Qong, twice weekly for its employees as well as other workers within its vicinity. ACCOUNTABILITY AND AUDIT Financial Reporting
The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which give a true and fair view of the Company’s state of affairs, results and cash flows. It is therefore the responsibility of the Board, with the assistance of the AC, to ensure that the preparation and presentation of the Company’s financial statements are in accordance with applicable approved Financial Reporting Standards in Malaysia. The Directors are of the opinion that the Company has adopted appropriate accounting policies that are consistently applied and supported by reasonable as well as prudent judgment and estimates.
In preparing the annual audited financial statements and the unaudited quarterly financial reports to the shareholders, the Board strives to present a balanced and comprehensible assessment of the Company’s financial position and prospects and also ensures that the financial results are released within the stipulated time frame. Relationship with External Auditors
The Board maintains a transparent and professional relationship with the External Auditors (“EA”), through the Audit Committee and the Board. It is the policy of the AC to meet with the EA at least three (3) times to discuss on audit findings, audit plan and the Company’s financial statements. In at least two of these meetings, AC will meet the EA without the presence of the Executive Directors and Management. The AC meets additionally with the EA whenever it deems necessary. Regular dialogues are held between the management and the AC with the EA to ensure compliance and accuracy in the preparation of the financial statements. Issues and technical matters raised by the EA are discussed initially with the AC before these are highlighted to the Board. During the year under review the AC met twice with the EA without the presence of the Executive Directors and Management. The terms of engagement for the services rendered by the external auditors are reviewed by the AC and approved by the Board. Internal Audit Function
The Group has an Internal Audit Function that is independent of the activities and operations. The Internal Audit Function of the Group is outsourced to an external consultant who reports, directly to the AC. The AC reviews and approves the internal audit plan and the scope of work of the internal audit function. Details of the activities of the Internal Audit Function are set out in the Statement of Risk Management and Internal Control on pages 33 and 34 of the Annual Report. Related Party Transactions All related party transactions are reviewed by the Internal Auditors yearly and a report is submitted to the Audit Committee for their review. Details of all the related party transactions of the Group for the financial year are disclosed in Note 30 to the Financial Statement of this Annual Report. Internal Corporate Disclosure Policies and Procedures The Company is committed to provide the investment community with accurate, comprehensive and high quality material information on a timely basis. In line with this commitment and in order to enhance good corporate governance, transparency and accountability, the Board has established an Internal Corporate Disclosure Policies and Procedures (“Internal CDPP”) to facilitate the handling and disclosure of material information in a timely and accurate manner and to avoid any selective disclosure. This is aim at ensuring that the Company complies with the disclosure requirements as set out in the Bursa Malaysia Securities Berhad Main Market Listing Requirements and other applicable laws.
SHAREHOLDERS Dialogue with Investors
The Board acknowledges the need for shareholders to be kept informed of all material business matters affecting the Company. Information on the latest corporate developments affecting the Company are disseminated promptly via public announcements. These announcements are also posted on the Company’s website using Bursa Link. Annual General Meeting
The Annual General Meeting is an important means of communication with shareholders and it provides opportunity for the shareholders to meet the Board, the External Auditors, the Company Secretaries as well as some of the Company’s key management officers. Shareholders of the Company have been active at the Annual General Meeting over the past few years as they raised questions at the Directors and offered suggestions. Ample opportunities and time are provided for the shareholders to speak. Their questions and issues raised were addressed by the Directors at the meeting. The Directors welcome their suggestions and feedback and spend time interacting with the shareholders on a more informal basis after the meeting. The Company believes that a constructive and effective investor relationship is an essential factor in enhancing shareholder value. In this instance, the Company aims to ensure timely disclosure of information to all shareholders. However, the Company is also mindful of the legal and regulatory framework governing the release of material and price-sensitive information. COMPLIANCE STATEMENT
In relation to the principles of and the best practices in corporate governance as set forth in the Code, the Board is satisfied that it has generally complied with the Code throughout the financial year. This statement is made in accordance with the resolution of the Board of Directors dated 26 April 2013.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS
The Directors are legally required to prepare financial statements for each financial period/year which give a true and fair view of the state of affairs of the Company at the end of the financial period/year and of the results of the Company for the financial period/year then ended. The Directors consider that in preparing the financial statements:-
the Company has used appropriate accounting policies and applied them consistently;
reasonable and prudent judgments and estimates were made; and
applicable approved accounting standards in Malaysia have been followed.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act, 1965 and applicable approved accounting standards. The Directors are also responsible for the assets of the Company and hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities. This statement made in accordance with the resolution of the Board of Directors dated 26 April 2013. .
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