Corporate Governance

The Board of Directors (the Board) reaffirms its commitment to and supports the recommendations of the Malaysian Code on Corporate Governance (the Code). The Board strives to ensure that the highest standards of corporate governance are practised to protect and enhance shareholders’ value.

During the financial year under review, the Board continued to adhere to the Principles and Best Practices of the Code including the recent revisions.The Board is pleased to report to the shareholders on its application and measures implemented to strengthen its compliance of the Code as follows:

A. BOARD OF DIRECTORS

The Company is managed and led by Board members from diverse professional backgrounds with relevant experiences and expertise in financial, business and other fields.

1. Composition of the Board

As at the date of this Report, the Board has eight (8) members comprising:

  • Three (3) Executive Directors; and
  • Five (5) Non-Executive Directors of whom four (4) are independent.

This composition complies with the Listing Requirements of Bursa Malaysia Securities Berhad which require that at least two (2) or one third (1/3) of the Board to be Independent Directors.

2. Board Balance

To ensure there is balance in the Board, the Independent Non-Executive Directors fulfil their roles by providing independent views, evaluations as well as advice in Board deliberations and decision makings. This ensures that the interests of the Group, shareholders, employees, customers, suppliers and other business associates are safeguarded.

The roles of the Chairman and Group Chief Executive Officer are distinct and held by two different persons. The Chairman is responsible for ensuring Board effectiveness and conduct, whilst the Group Chief Executive Officer has overall responsibility to manage the operations, organisational effectiveness and implementation of policies and decisions.

In line with the recommendations stipulated in Part 2 of the Code, the Board appointed Dato’ Chew Kong Seng @ Chew Kong Huat as the Senior Independent, Non-Executive Director to whom any concerns of shareholders can be conveyed to.

3. Board Meetings

To ensure that Directors can plan ahead, Board meetings are scheduled in advance at the beginning of each year. Special Board meetings will be convened as and when necessary for the Board to deliberate on matters that require expeditious decisions.

Minutes of all Board meetings are properly recorded in substantial detail and length, including issues discussed in arriving at decisions. This is in line with the Best Practices under Part 2 of the Code.

During the financial year under review, six (6) Board meetings and one (1) Annual General Meeting (AGM) were held. The summary of attendance of the Board is as follows:

Name of Director
 No. of Meetings Attended Attendance (%)
Tan Sri Datuk (Dr) Omar bin Abdul Rahman
6/6
100
Yeoh Soo Ann
6/6
100
Efeida binti Mohd Effendi
5/6
83
Datuk Ramli bin Shamsudin
6/6
100
Dato’ Chew Kong Seng @ Chew Kong Huat
6/6
100
Datuk Fong Joo Chung
6/6
100
Datuk (Dr) Philip Ting Ding Ing
6/6
100
Datuk (Dr) Zainal Aznam bin Mohd Yusof
5/6
83


4. Supply of Information

All Directors are provided with the necessary information relating to the business, operations and financial matters of the Company and the Group.

Board meetings are governed by a structured formal agenda for each meeting and the Company adopts the policy of circulating Board papers relating to the agenda to the Directors ahead of scheduled meetings. This ensures that Directors are given sufficient time to review and appraise the issues to be deliberated at the Board meetings.

All Directors have full and unrestricted access to the senior management within the Group and are entitled to the advice and services of the Company Secretary. Further, Directors may obtain independent professional advice relating to the affairs of the Group where necessary at the Company’s expense, in order for them to discharge their responsibilities. In line with the recommendations of the Code, the Board adopted a policy on the procedures to be taken by a Director before he seeks such independent professional advice.

5. Duties and Responsibilities of the Board

The Board has full control over the business and affairs of the Company and the Group. Its primary responsibilities include:-

  • To review and approve the business plan and overall strategic directions;
  • To review the adequacy and integrity of the Company’s internal control systems and functions;
  • To identify and manage principal risks areas affecting the Company; and
  • To oversee the overall conduct of the business of the Group’s businesses.

6. Appointment & Re-Election of Directors

The Nomination Committee recommends suitable candidates for appointment to the Board, the appointment of which will be decided upon by the Board as a whole to ensure a balanced mix of experience and expertise amongst its members.

In accordance with the Company’s Articles of Association, one-third of the Directors are required to retire from office at each AGM. Retiring Directors can offer themselves for reelection. Directors who are over seventy years of age are required to submit themselves for re-appointment annually in accordance with Section 129 of the Companies’ Act, 1965.

Details of Directors seeking re-election at the forthcoming AGM are disclosed in the Statement Accompanying the Notice of AGM in this Report.

7. Committees established by the Board

To assist the Board to carry out their duties and responsibilities, the Board has delegated certain functions to the following committees comprising selected members of the Board. Each committee operates within clearly defined terms of reference and makes appropriate recommendations to the Board for decisions on matters deliberated by the committee.

a. Audit Committee

The Audit Committee was set up with the objective to assist the Board in fulfilling its responsibilities relating to financial reporting of the Company and its subsidiaries.

The members of the Audit Committee are as follows:

Name
Designation
Directorship
Datuk (Dr) Philip Ting Ding Ing
Chairman
Independent,
Non-Executive Director
Tan Sri Datuk (Dr) Omar bin Abdul Rahman
Member
Non Independent,
Non-Executive Director
Dato’ Chew Kong Seng @ Chew Kong Huat
(appointed on 24 May 2007)
Member
Senior Independent,
Non-Executive Director
Efeida binti Mohd Effendi
(resigned on 28 September 2007)
Member
Non-Independent,
Executive Director
Datuk (Dr) Zainal Aznam bin Mohd Yusof
Member
Independent,
Non-Executive Director

In line with the revised Part 2 of the Code:

  • All members of Audit Committee are Non-Executive Directors with effect from 28 September 2007; and
  • Two (2) meetings were held with the external auditors without the presence of Executive board members for the financial year under review.

The terms of reference of Audit Committee and summary of activities for the financial year under review are reported from pages 45 to 50.

b. Nomination Committee

The members of the Nomination Committee are as follows:

Name
Designation
Directorship
Datuk (Dr) Zainal Aznam bin Mohd Yusof
Chairman
Independent,
Non-Executive Director
Datuk Fong Joo Chung
Member
Independent,
Non-Executive Director
Datuk (Dr) Philip Ting Ding Ing
Member
Independent,
Non-Executive Director

The Nomination Committee was established with the objective to assist the Board in fulfilling the following functions:

  • To identify and recommend suitable committee members and candidates directorship of the Company and its subsidiaries;
  • To evaluate and recommend to the Board for approval, the appointment, promotion, transfer, termination and scope of duties of the Group Chief Executive Officer, Executive Directors and Senior Management reporting to the Group Chief Executive Officer;
  • To assess the effectiveness of the Board as a whole including its size, composition and contribution of each individual director; and
  • To ensure an appropriate framework and plan for succession of the Board and Senior Management.

In line with Part 2 of the Code, the Board implemented an evaluation process, carried out by the Nomination Committee for assessing the effectiveness of the Board as a whole.

c. Remuneration Committee

The Remuneration Committee was established to provide assistance to the Board in establishing and recommending the remuneration package and policy for the Executive Directors, Group Chief Executive Officer and Senior Management. Remuneration Committee is to ensure that a strong link is maintained between the level of remuneration and individual performance based on agreed targets and other relevant factors.

The members of the Remuneration Committee are as follows:

Name
Designation
Directorship
Datuk Fong Joo Chung
Chairman
Independent,
Non-Executive Director
Tan Sri Datuk (Dr) Omar bin Abdul Rahman
Member
Non Independent,
Non-Executive Director
Dato’ Chew Kong Seng @ Chew Kong Huat
Member
Senior Independent,
Non-Executive Director
Efeida binti Mohd Effendi
Member
Non-Independent,
Executive Director

7. Directors’ Training

The Directors constantly participate in trainings, seminars and conferences to keep themselves abreast with changes and new development, both in the legal and commercial aspects. Amongst such trainings, programmes and courses attended by the Directors during the financial year under review, include:

  • Malaysian Budget;
  • Inspirational Leadership;
  • 50th Merdeka Expo;
  • Structural Earthquake Analysis and Design;
  • Updates on the Companies (Amendment) Act 2007 “A1299”;
  • Elite Director’s Academy 2007.

B. DIRECTORS’ REMUNERATION

Policies and Procedures

The Remuneration Committee recommends the remuneration package for the Executive Directors to the Board for approval. The Executive Directors will abstain from deliberation and voting on decisions in respect of their own remuneration.

Directors are paid yearly fees which are determined by the Board and approved at the AGM. Attendance allowances are also paid to the Non-Executive Directors for each Board or committee meeting they attend.

The aggregate remuneration of Directors for the financial year ended 31 December 2007 are categorised into appropriate components as follows:

Description of Payment
Executive Directors (RM)
Non-Executive Directors (RM)
Salaries / Allowances & other emoluments
1,222,420*
150,000
Fees
94,274
267,247
Defined contribution plan
142,779*
-
Estimated money value of benefits-in-kind
101,343
14,166
Total
1,560,816*
431,413

* This includes the salary and contribution to the Employees Provident Fund paid by one of the subsidiaries of Encorp Bhd to a Director for the months of January and February 2007.

The number of Directors whose remuneration falls into each successive band is as follows:

Range of Remuneration
Executive Directors
Non-Executive Directors
Below RM50,000
  
1
RM50,001 – RM100,000
  
3
RM150,001 – RM200,000
  
1
RM200,001 – RM250,000
2
  
Above RM350,000
1
  
Total
3
5


C. SHAREHOLDERS

Communication with Shareholders and Investors

The Company recognises the importance of effective communication with shareholders, investors and the public in general. In this respect, the Company keeps shareholders, investors and the public informed through announcements, releases of quarterly financial results, annual reports, circulars and general meetings. In line with the recommendations under the Code, a shareholders’ communication policy was implemented to handle the process of handling queries from its shareholders.

Annual General Meeting (AGM)

The AGM is the principal forum for communication with shareholders. The notices of the AGM and annual reports are sent out to shareholders at least twenty-one (21) days before the AGM. Details of any special business are included in an explanatory statement to provide relevant information on matters involved.

D. ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board aims to present a clear, balanced and comprehensive assessment of the Group’s financial position and prospects. The financial statements for each financial year and quarterly results are prepared in accordance with the Companies Act, 1965 and applicable FRS.

The Board is assisted by the Audit Committee to oversee the Group’s Financial Reporting processes and the accuracy, adequacy and completeness of its Financial Reporting.

Internal Control

The Board of Directors recognises the pivotal role of a strong internal control system in keeping the Group on course towards its goals of maximising shareholders’ value. To this extent, the need for a strong internal control environment has been ingrained into the culture of the Group by the Board and Management.

The effectiveness of the Group’s system of internal control is reviewed periodically by the Audit Committee.

The Group’s Statement on Internal Control is set out on pages 50 to 51.

Relationship with External Auditor

Through the Audit Committee, the Group has established a transparent relationship with the external auditor in seeking professional advice and ensuring compliance with the laws and regulations.

The external auditor also highlights to the attention of the Board of any material deficiency pertaining to the system of internal control and compliance issues of the Group.