STATEMENT OF CORPORATE GOVERNANCE
ANNUAL REPORT 2016 | DAMANSARA REALTY BERHAD
The Board of Damansara Realty recognizes the importance of adopting good corporate governance in its efforts to safeguard and enhance shareholders’ investment and value and also to protect the interests of other stakeholders. The Board presents this statement to provide an insight into the corporate governance practices of Damansara Realty under the leadership of the Board.
As such, the Board supports the 8 principles and 26 recommendations stated in the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”) as set out below in promoting best corporate governance through structures, systems, processes in self-promoting good practices and development of a corporate governance culture and environment, will continue the existing corporate governance practices and shall strive to adopt the substance behind the corporate governance prescriptions and not merely in form, but also in managing its business affairs.
In line with this commitment, the Board has taken and is continuously reviewing, where appropriate, the necessary steps to comply with the requirements on the standard of corporate responsibility, integrity and accountability and provide greater disclosure and transparency by complying with the principles of the MCCG 2012. The corporate governance adopted by the Group during the FY2016 is as follows:
PRINCIPLE 1 – ESTABLISH CLEAR ROLES AND RESPONSIBILITIES
1.1 Clear Function Reserved for Board and Delegation to Management
The Board is made up of 8 members, comprising:
• One (1) Independent Non- Executive Chairman;
• One (1) Executive Vice Chairman (“EVC”);
• Five (5) Independent Non-Executive Directors; and
• One (1) Non-Independent Non-Executive Director
In accordance with Paragraph 15.02 of the Main Market Listing Requirements (“MMLR”) of Bursa Securities (“Bursa Securities”) that requires at least 2 directors or one-third of the Board to comprise Independent Directors, the presence of 6 Independent Non-Executive Directors lead to the Board being satisfied that the size and composition of the Independent Non-Executive Directors has fulfilled this requirement adequately. In the opinion of the Board, the composition and size of the Board is sufficient and well balanced for Damansara Realty to carry out its duties effectively, whilst providing greater assurance that no individual or small group of individuals can dominate the Board’s decision.
The Group CEO and the Group CFO are separated from the Board and were appointed to be accountable for the day-to-day management of financial and operational matters of the Group within the prescribed limits of authority.
There is a clear distinction of responsibilities between the Chairman and the Group CEO to ensure a balance of power and authority. The Board is led by the Chairman, YB Dato’ Ahmad Zahri bin Jamil, while the post of Group CEO is held by En. Brian Iskandar bin Zulkarim who attained the post on 1 September 2016.
The Chairman is responsible for the leadership, effectiveness, conduct and governance of the Board. The Group CEO holds the principal responsibilities of reporting, clarifying, communicating and recommending key strategic and operational matters and proposals to the Board for approval as well as implementation of policies and strategies.
In determining the limitation of authorities within the Group, the Board has approved the Group Approval Limit of Authority (“GALOA”) aims to give clear indication on the management authority (i.e. EVC, Group CEO, Group CFO, Managing Director (“MD”) of Subsidiaries, General Manager) to approve matters related to company’s day to day operation requirement (i.e. purchases of stocks, payments, appointment of contractors and etc).
The GALOA shall cover all operational item that require management approval which include but not limited to:
1) Procurement: Purchase limits, direct awards, variation orders, extension of time, Tender exercise, etc;
2) Human Resource: Recruitment, promotion, demotion, salary adjustment, disciplinary action, employment contract, termination, organization structure & employees benefits;
3) Legal : Appointment of external lawyers, execution of agreements (Memorandum of Understanding (MOU), Joint Venture Agreement (JVA), Non- Disclosure Agreement (NDA), Material litigation, Settlement outside of court for a specific amount at threshold);
4) Corporate Communication : Press release, sharing of information with Bursa, sharing info with external parties, etc; and
5) Finance : Signatory, reporting to Bursa, Reports to the Board of Directors, etc.
1.2 Clear Roles and Responsibility in Discharging Fiduciary / Leadership
All members of the Board contribute significantly in the areas of formulation of strategic direction and policies, performance monitoring and allocation of resources and enhancement of controls and governance.
As prescribed by the MCCG 2012, the Board assumes 6 principal stewardship responsibilities:
• Reviewing, monitoring and where appropriate, approving fundamental financial and business strategies and major corporate actions.
• Overseeing the conduct of the Group’s business to evaluate whether the business is properly managed.
• Establishing the Group’s Enterprise-Wide Risk Management (EWRM) framework.
• Formulating a succession plan for the Managing Director and Senior Executives.
• Establishing an investor relations programme.
• Ensuring processes are in place for maintaining the integrity of the Company, integrity of the financial statements, compliance with law and ethics, relationships with customers and suppliers and relationship with stakeholders.
The 6 principal stewardship responsibilities assumed by the Board are also available at the Board Charter in the corporate website (www.dbhd.com.my).
During the Board meeting held on 22 November 2016, the Board has approved the Strategic Restructuring Planning (“SRP”) and currently implemented by Damansara Realty. The conceptual plan of SRP consist of 3 phases as follows:
• Diagnostic Phase – to identify basic issues/ challenges faced by the Company (Phase 1)
• Prescription Phase –to implement quick wins and immediate corrections (Phase 2)
• Health Plan Phase – Long term business development and strategy (Phase 3)
The following initiatives of SRP have been done in the Diagnostic phase:-
ii. Centralized Procurement services;
iii. Establishment of EXCO;
iv. Reshuffle leaders from various key positions;
v. Usage of earnings before interest, tax, depreciation and amortization (EBITDA) as performance measure;
vi. Business acumen – enhance project evaluation ;
vii. New Vision & Mission;
viii. External talents with competency; and
ix. Disciplinary inquiry – action on non-compliance.
Executive Committee (EXCO)
The Board also has established EXCO on 22 November 2016 that comprises of the following members:-
– Chairman: Group CEO
– Secretary : Company Secretary
– Secretariat: Corporate Planning & Transformation
• Group CFO
• MD TMR Urusharta
• MD HC Duraclean
• MD Healthcare & Technical Services
• MD Metro Parking
• GM Property & Land Development Division
• GM Corporate Services Division
The roles and responsibilities of EXCO including:-
– Ensure sufficient deliberation on matters regarding performance of the Group & its Subsidiaries
– Deliberate & decide on matters regarding projects participation including assessment on project viability & profitability, operational strategy, risk analysis & mitigation as well as its impact to Group reputations / image etc
– Review & approve any change of management policy/ policies & its implementation
– Ensure effective implementation of the (SRP)
– Ensure effective progress update on Group SRP plans
– Allow effective monitoring and tracking of the SRP’s deliverables
– To update the Board of Directors on the progress of the SRP
The EXCO meeting will be held quarterly with the following matters will be discussed:-
i. Business Review For EXCO;
ii. Policy related matters;
iii. New project;
iv. Special update request from EXCO; and
v. Update on SRP
At the same time, the Board also ensures the sustenance of a dynamic and robust corporate climate focused on strong ethical values. This emphasizes active participation and dialogue on a structured basis involving key personnel at all levels, as well as ensuring accessibility to information and transparency on all executive actions. The corporate climate is also continuously nourished by value-centered programmes for team-building and active subscription to core values.
The Board has delegated certain specific responsibilities to four (4) Committees which operate within clearly defined terms of references, with the main objective to assist the Board in discharging its duties and responsibilities. Under the previous board governance structure, the Board Committees included the Board Audit Committee (“BAC”), Board Nomination and Remuneration Committee (“BNRC”), Tender Board Committee (“TC”) and Board Risk Management Committee (“BRMC”). During FY2016, the Board undertook a review of the compositions and functions of the Board Committees aimed at ensuring an optimum level of governance model for further enhancing the Board’s operations.
The Terms of Reference (“TOR”) of the relevant Board Committees are available on www.dbhd.com.my.
The Board shall place great importance in ensuring the high standards of transparency and accountability in its communication to shareholders, as well as to potential investors, analysts and the public.
The Board recognizes the need of effective communication with shareholders and the investment community and adheres strictly to the disclosure requirements of Bursa Securities. Dissemination of information includes the distribution of annual reports and relevant circulars to shareholders, issuance of press releases, announcing the quarterly financial results and performance of the Group to Bursa Malaysia Securities Berhad and the public as well as holding press conferences.
The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually as well as in the EGM. The shareholders are given the opportunity to seek clarification by making use of the Question and Answer session during the AGM / EGM on any matters pertaining to the business and financial performance of Damansara Realty. The rights to demand for a poll during the meetings are conveyed to shareholders by the Board.
The details of the investor relations and shareholder communication can be referred to the Board Charter. It is also available in the corporate website at www.dbhd.com.my.
The new management has now put succession planning in place by ensuring that all candidates appointed to senior management positions are of sufficient, calibre and that there are programmes to provide for the orderly succession of senior management.
1.3 Formalised Ethical Standards through Code of Ethics
The Board has developed a Code of Conduct for the Directors and employees of the Group by setting out standards of conduct expected from Directors and employees, to create a good corporate behavior across the Group. The Code of Conduct of the Directors which included in the Board Charter, includes the related whistle-blower procedures which outline the procedures to raise any actual or potential corporate fraud or breach of conduct involving employee, Management or Director in the Group. The Board also recognizes the importance of adherence to the Code by all employees in the Group and will take measures to put in place a process to ensure its compliance.
The Group in its effort to enhance corporate governance has put into place its Whistle Blowing Policy, providing an avenue for employees and stakeholders to report genuine concerns on malpractices, unethical behavior and misconduct without fear of reprisal. All concerns raised shall be investigated and reports of investigations of genuine concerns shall be provided to the Audit Committee. The Whistle Blowing Policy is available in the corporate website www.dbhd.com.my.
1.4 Strategies Promoting Sustainability
The Board promotes good corporate governance in the application of sustainability practices. The Group practices a system of rewards based on the philosophy of pay for performance. Employees are rewarded for productivity improvements and contribution towards the achievement of the Group’s immediate and long-term objectives. The rewards encompass not only compensation and benefits but also performance recognition and professional development and career progression.
A summary of the Group’s sustainability activities including its corporate social responsibility activities are set out in the Sustainability Report of this Annual Report.
1.5 Access to Information and Advice
The Board has full and unrestricted access to all information on the Group’s business and affairs including inter alia, financial results, annual budgets, business reviews against business plans and progress reports on the Group’s developments and business strategies. Therefore, it will enable them to discharge their duties effectively.
Prior to each Board Meeting, every director is given an agenda and a set of board papers for each agenda item to be deliberated. The board papers will be distributed to the board members at least seven (7) days before the meeting. At the Board Meetings, the Management will present the board papers and provide comprehensive explanation of pertinent issues. Information provided to the Board goes beyond quantitative performance data to include other qualitative performances. Board Meetings are held regularly. The Board and its Committees have access to all information within the Group pertaining to the Group’s business and affairs.
The Board is provided in advance with the agenda for every Board Meeting, together with management reports and supporting documents for the Board’s perusal. The Board is briefed in a timely manner on all matters requiring their deliberation and approval.
All directors are entitled to call for additional clarification and information to assist them in matters that require their decision. In arriving at any decision on recommendation by the Management, deliberation and discussion by the Board is a prerequisite. All proceedings of the Board Meetings are minuted and signed by the Non- Executive Chairman of the Meeting in accordance with the provision of Section 156 of the Companies Act, 1965. Apart from the quarterly and year end financial statements, a report of the Group’s performance and progress is presented to the Board every quarter for the directors to be kept informed of the Group’s state of affairs. The Board is also notified of any disclosures or announcements made to Bursa Malaysia Securities Berhad. For each financial year, the Board will review and approve the Group’s plan and budget for the forthcoming year. Whilst the Management reviews the budget results regularly, reports of the results and variances against the budget are presented to the Board for review every quarter. In furtherance of their duties as Directors, whenever independent professional advice is required, external independent experts may be engaged at the Group’s expense.
1.6 Qualified and Competent Company Secretary
The Board has unrestricted access to the advice and services of the Company Secretary and where necessary, in the furtherance of their duties, obtain independent professional advice with the Company paying the related costs. The Company Secretary must obtained a professional qualification from professional bodies or qualified under section 139 (A) of the Companies Act 1965.
The Company Secretary play an advisory role to ensure all Board Members’ decisions and actions are complied with the relevant rules and regulations. The Company Secretary must ensures that all Board and Committee members’ deliberations and decisions are complied with the Damansara Realty’s Articles and Association and other statutory regulations.
The Company Secretary also keeps abreast of the evolving capital market environment, regulatory changes and developments in Corporate Governance through continuous training. The Company Secretary has attended several trainings provided by Companies Commissioner of Malaysia (CCM) and Malaysian Association of Chartered Secretaries and Administrators (MAICSA) to improve his knowledge in ensuring all the board members are updated on the developments of Corporate Governance in Malaysia and the new Companies Act 2016.
1.7 Board Charter
The Board has always conducted itself in an ethical manner while executing its duties and functions with the establishment of its own Board Charter. The Board Charter of the Company sets out key values, principles and ethos of the Company in ensuring the Board’s efficiency in discharging its duties.
The Company Directors’ Code of Ethics in tandem with the recommendation by the Companies Commission of Malaysia had also been established. The Board Charter and Directors’ Code of Ethics shall be reviewed annually or as and when necessary. Both are available on the corporate website at www.dbhd.com.my.
PRINCIPLE 2 – STRENGTHENED COMPOSITION
2.1 Establishment of a Nomination and Remuneration Committee
Recommendation 2.2 of the Malaysian Code on Corporate Governance 2012 recommends that the Board should establish a policy formalising its approach to boardroom diversity. The Board through its nominating committee had taken steps to ensure that women candidates are sought as part of its gender diversity target. Therefore, the Board has ensured at least one (1) female director in its composition.
The Group recognises and embraces the benefits of having a diverse Board, and sees increasing diversity at Board level as an essential element in maintaining a competitive advantage.
The Company also has made good use of differences in thought, perspective, knowledge, skills, regional and industry experience, cultural and geographical background, age, ethnicity and gender which will ensure that the Company retains its competitive advantage. These differences have been considered in determining the optimum composition of the Board and when possible, be balanced appropriately.
All Board appointments are made on merit, in the context of the skills and experience the Board as a whole requires to be effective.
The Board consists of qualified individuals with diverse set of skills, experience and knowledge necessary to govern the Group. The composition and size of the Board is such that it facilitates the decision making of the Group. The Articles of Association of the Group provides for a minimum of 2 Directors and maximum of 15 Directors. The composition and size of the Board are reviewed from time to time to ensure its effectiveness.
The Group seeks to maintain a Board comprised of talented and dedicated directors with a diverse mix of expertise, experience, skills and backgrounds. The skills and backgrounds collectively represented on the Board should reflect the diverse nature of the business environment in which the Group operates. For purposes of Board composition, diversity includes, but is not limited to, business experience, geography, age, ethnicity and gender.
In reviewing Board composition, Board Nomination and Remuneration Committee (“BNRC”) has considered the benefits of all aspects of diversity in order to maintain an appropriate range and balance of skills, experience and background on the Board. In identifying suitable candidates for appointment to the Board, BNRC also has considered candidates on merit against objective criteria and with due regard for the benefits of diversity on the Board.
In accordance with Paragraph 15.02 of the Main Market Listing Requirements of Bursa Securities, that requires at least two directors or one-third of the Board to comprise Independent Directors, the presence of six (6) Independent Non-Executive Directors out of eight (8) lead to the Board being satisfied that the size and composition of the Independent Non-Executive Directors has fulfilled this requirement adequately. The number of members is sufficient and well balanced for Damansara Realty to carry out its duties effectively, whilst providing greater assurance that no individual or small group of individuals can dominate the Board’s decision.
The Board on 21 March 2011, resolved to establish its own BNRC. The Board is of the view that the composition of the BNRC meets the objectives and principles of good corporate governance. The members of the BNRC comprise exclusively of non-executives directors, a majority of whom is independent. The BNRC develops, maintains and reviews the criteria to be used in the recruitment process and annual assessment of directors.
The BNRC consists of the following members:
(i) Y.B Dato’ Mohd Aisom bin Omar – Chairman
(ii) Puan Zainah binti Mustafa– Member
(iii) Tuan Haji Abdullah bin Md Yusof – Member
The appointment of a BNRC member terminates when the member ceases to be a director of the Company. The BNRC shall have no executive power. In the event of equality of votes, the Chairman of the BNRC shall have a casting vote. In the absence of the Chairman of the BNRC, the members present shall elect one of them to chair the meeting. The BNRC shall meet at least once a year and any additional meetings shall be scheduled as considered necessary by the Chairman of the BNRC. The BNRC may establish procedures from time to time to govern its meeting, keeping of minutes and its administration.
The TOR of the BNRC is set out in the corporate website (www.dbhd.com.my).
During the financial year, the BNRC had met once, attended by all members purposely to assess the Board members’ effectiveness.
The BNRC shall have access to such information and advice, both from within the Group and externally, as it deems necessary or appropriate in accordance with the procedures determined by the Group. The BNRC may request other directors, members of management, counsels and consultants as applicable to participate in the BNRC Meetings, as necessary, to carry out the BNRC’s responsibilities. Non-BNRC directors and members of the Management in attendance may be required by the Chairman to leave the meeting of the BNRC when so requested.
The Secretary of the BNRC shall be the Company Secretary.
BNRC meeting agenda shall be the responsibility of the Chairman of the BNRC with input from the BNRC members. The Chairman may also request Management to participate in this process. The agenda of each meeting including supporting information shall be circulated at least seven (7) days before each meeting to the BNRC members and all those who are required to attend the meeting.
The BNRC shall cause the minutes to be duly entered in the books provided for the purpose of all resolutions and proceedings of all meetings of the BNRC. Such minutes shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting, and if so signed, shall be the conclusive evidence without any further proof of the facts thereon stated.
The BNRC, through its Chairman, shall report to the Board at the next Board of Directors’ meeting after each BNRC meeting. When presenting any recommendation to the Board, the BNRC shall provide such background and supporting information as may be necessary for the Board to make an informed decision.
The BNRC shall provide such information to the Board as necessary to assist the Board in making a disclosure in the Annual Report of the Group in accordance with the Best Practices of the Code Part 2 AAIX.
The Chairman of the BNRC shall be available to answer questions about the BNRC’s work at the Annual General Meeting of Damansara Realty.
Scope Activities of BNRC
The duties of the BNRC shall include the following:
(i) To determine the criteria for Board membership, including qualities, experience, skills, education and other factors that will best qualify a nominee to serve on the Board;
(ii) To review annually and recommend to the Board with regard to the structure, size, balance and composition of the Board and Committees including the required mix of skills and experience, core competencies which Non-Executive Directors should bring to the Board and other qualities to function effectively and efficiently;
(iii) To consider, evaluate and propose to the Board any new board appointments, whether of executive or non-executive position. In making a recommendation to the Board on the candidate for directorship, the BNRC shall have regard to:
• Size, composition, mix of skills, experience, competencies and other qualities of the existing Board, level of commitment, resources and time that the recommended candidate can contribute to the existing Board; and
• Best Practices of the Code Part 2 AAIII which stipulate that Non-Executive Directors should be persons of calibre, credibility and have the necessary skill and experience to bring an independent judgment to bear on issues considered by the Board and that Independent Non-Executive Directors should make up at least one-third of the membership of the Board.
(iv) To propose to the Board the responsibilities of Non-Executive Directors, including membership and Chairpersonship of Board Committees.
(v) To evaluate and recommend the appointment of Senior Executive positions, including that of the Managing Director or Chief Executive Officer and their duties and the continuation (or not) of their service.
(vi) To establish and implement processes for assessing the effectiveness of the Board as a whole, the Committees of the Board and for assessing the contribution of each director.
(vii) To evaluate on an annual basis:
a. The effectiveness of each director’s ability to contribute to the effectiveness of the Board and the relevant Board Committees and to provide the necessary feedback to the directors in respect of their performance;
b. The effectiveness of the Committees of the Board; and
c. The effectiveness of the Board as a whole.
(viii) To recommend to the Board:
a. Whether directors who are retiring by rotation should be put forward for re-election; and
b. Termination of membership of individual director in accordance with policy, for cause or other appropriate reasons.
(ix) To establish appropriate plans for succession at Board level, and if appropriate, at Senior Management level.
(x) To provide for adequate training and orientation of new directors with respect to the business, structure and management of the Group as well as the expectations of the Board with regard to their contribution to the Board and Company.
(xi) To consider other matters as referred to the BNRC by the Board.
(i) To establish and recommend the remuneration structure and policy for directors and key executives, if applicable and to review for changes to the policy as necessary.
(ii) To ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets, the performance-related elements of remuneration setting forming a significant proportion of the total remuneration package of Managing Directors.
(iii) To review and recommend the entire individual remuneration packages for the Managing Director and, as appropriate, other Senior Executives, including: the terms of employment or contract of Employment / service; any benefit, pension or incentive scheme entitlement; any other bonuses, fees and expenses; and any compensation payable on the termination of the service contract.
(iv) To review with the Managing Director/Group Chief Executive Officer, his/her goals and objectives and to assess his/her performance against these objectives as well as contribution to the corporate strategy.
(v) To review the performance standards for key executives to be used in implementing the Group’s compensation programs where appropriate.
(vi) To consider and approve compensation commitments/severance payments for Executive Directors and key executives, where appropriate, in the event of early termination of the employment/service contract.
(vii) To consider other matters as referred to the BNRC by the Board.
TENDER BOARD COMMITTEE
The Group has also established a Tender Board Committee (“TC”) at Board level comprising Independent Non-Executive, Non- Independent Non-Executive Directors and the Group Chief Executive Officer. The functions of the said TC are to evaluate, deliberate and approve the recommendations made by the Management prior to awarding of major contracts and tenders to potential contractors.
The members of the TC are as follows:
Y.B Dato’ Daing A Malek bin Daing A Rahaman
Encik Brian Iskandar bin Zulkarim
(Appointed on 1 September 2016)
Tuan Haji Abdullah bin Md. Yusof
Encik Wan Azman bin Ismail
Y.B Dato’ Ar. Wan Mohammad Khair-il Anuar bin Wan Ahmad
(Resigned w.e.f 28.04.2016)
BOARD RISK MANAGEMENT COMMITTEE
The Group has also established a Board Risk Management Committee (“BRMC”) on 23 November 2016 during the Board meeting. The function of BRMC is to identify, assess, monitor and report significant risks faced by the Group. BRMC comprised of Independent Non-Executive members as follows:-
Y.B Dato’ Mohd Aisom bin Omar
Puan Zainah binti Mustafa
En Shahrizam bin A. Shukor
Tuan Haji Abdullah bin Md Yusof
Duties, Responsibilities and Functions of the BRMC
The duties, responsibilities and functions are as follows:-
i. Review and recommend appropriate risk management strategies, policies and risk tolerances in with Damansara Realty business objectives for the Board’s approval;
ii. Ensure the implementation of the Enterprise Risk Management Department (“ERMD”) and review the adequacy and integrity of the same in identifying, assessing and managing risk and in establishing Damansara Realty’s risk appetite;
iii. Discuss with management on action taken to improve the ERM framework based on the risk identified in the Risk Management reports;
iv. Review the adequacy of the scope, functions, competency and resources of the ERMD and ensure that it has the necessary authority to carry out its work;
v. Consider and evaluate other matters as judged appropriate by the Committee or as authorized by the Board; and
vi. All recommendations and findings of the Committee shall be submitted to the Board for approval and notation.
2.2 Recruitment Process and Annual Assessment
The Board has been aware of the needs for diversity in its composition which provides the Board the benefits of different opinions to bear on issues and right decisions that are aligned to stakeholders’ needs. The Board considers diversity from various areas, including gender, age, ethnicity, academic and professional experience and skills. Every year, the composition of the Board will be reviewed by the BNRC in order to ensure the effectiveness of the Board to meet the targets of the Group.
During the financial year, the BNRC, during the meeting had carried out all assessments and evaluations which were properly documented. The assessments and evaluations were carried out as follows:-
a) Directors’ Self- Evaluation:-
Each Director will be assessed based on the following level of assessment:-
i. Developmental: Performance and quality of contribution sometimes meet standard requirements. Training should overcome any gaps.
ii. Competent: Performance and quality contribution are of a standard expected of a director.
iii. Outstanding: Performance and quality of contribution consistently exceeds the standards expected of a director.
List of Competencies to be assessed:-
i. Integrity & Ethics
iii. Strategic Perspective
iv. Business Acumen
v. Judgement and Decision Making
b) Independent Directors’ Self-Assessment
c) Board Committee’s Assessment
The results of the assessments are compiled into a report for deliberation and recommendation at the BNRC meeting. The BNRC will table the matter to the Board for further deliberation. The deliberations of the BNRC and the Board are duly minuted in the respective meetings.
The Board is satisfied that the combination of different professionals and skills of each Director provide much diversity of perspectives and comprehension to lead and guide the Group in a competitive business environment.
The Board also recognizes the importance of gender diversity policy and target as set out in the MCCG 2012 and currently there is 1 female Senior Independent Non-Executive Director, Puan Zainah binti Mustafa. There are also few female Directors in the board of directors of Damansara Realty’s subsidiaries. The presence of Independent Directors is essential as to provide unbiased and independent views, advice and judgment to safeguard the interest of stakeholders. It is also implemented at Metro Parking, HTS and TMR.
2.3 Remuneration policies and procedures
Through the BNRC, the Board has established formal and transparent remuneration policies and procedures to attract and retain directors in which BNRC are responsible for making recommendations on the framework, policies and procedures in reviewing and determining the specific remuneration package of the Directors of Damansara Realty. Damansara Realty’s remuneration scheme for the Group CEO commensurate with performance, seniority, experience and scope of responsibilities and is benchmarked to market/industry standards. For Non-Executive Directors, the level of remuneration reflects the level of responsibilities undertaken by them.
The Group’s remuneration scheme for the Group CEO commensurate with performance, seniority, experience and scope of responsibilities and is benchmarked to market/industry standards. For Non-Executive Directors, the level of remuneration reflects the level of responsibilities undertaken by them. Directors’ fees are subject to approval by the shareholders. Details of the remuneration paid/payable to each Director for the FY2016 are as below:
PRINCIPLE 3 – REINFORCED INDEPENDENCE
3.1 Assessment of Independence Annually
The Board, through its BNRC, undertakes an evaluation in order to assess how well the Board, its Committees, the Directors including Independent Directors and the Chairman are performing. The evaluation covers the Board’s composition, skills mix, experience, communication, roles and responsibilities, effectiveness as well as conduct.
The process also includes a peer review in which Directors assess their fellow Directors’ performance against set criteria, including the skills they bring to the Group and the contributions they make.
3.2 Tenure of Independent Directors
The Board recognizes the importance of the Independent Non- Executive Directors to ensure that issues of strategies, performance and resources proposed by the Management are professionally evaluated by taking into consideration the interest of the stakeholders in which the Group conduct its business. It is also include ensuring the interest of Minority Shareholder is fairly considered through Board representation.
The MCCG 2012 recommends for the tenure of an Independent Director of the Company not to exceed a cumulative term of 9 years. However, the Board does not have a policy on the tenure for Independent Directors as the Board is of the view that a term of more than 9 years may not necessary impair independence and judgement of an Independent Director and therefore the Board does not impose a fixed term limit for Independent Directors.
However, the Board will seek shareholders’ approval to retain Independent Directors who have served on the Board for more than 9 years by providing strong justifications and its recommendations to shareholders.
3.3 Shareholders’ Approval for the retention of Independent Directors
The Board shall seek the shareholders’ approval for the retention of the independent status of an existing Director who had served in that capacity for more than 9 years.
Puan Zainah binti Mustafa was appointed as a Board Member on 17 April 2003 and had served the Board as Independent Non-Executive Director beyond than nine (9) year tenure limit. Hence, the Board has, after conducting an assessment, has recommended her tenure as an Independent Director be retained subject to the shareholders’ approval at the forthcoming Annual General Meeting (AGM) with the following justifications:-
(a) She has fulfilled the criteria under the definition of Independent Director as stated in the Main Market Listing Requirements of Bursa Securities, and thus, she would be able to function as a check and balance, bring an element of objectivity to the Board;
(b) She has possessed vast experience in the finance industry that would enable her to provide the Board with a diverse set of experience, expertise and independent judgement;
(c) She has been with the Group for more than nine (9) years and has the knowledge of the Group’s business operations and the property development market;
(d) She has devoted sufficient time and attention to her professional obligations for informed and balanced decision making; and
(e) She has exercised due care during her tenure as an Independent Non-Executive Director of the Group and carried out her professional duties in the best interest of the Group and shareholders.
3.4 Separation of Chairman and CEO
There is a clear distinction of responsibilities between the Chairman and the Group CEO to ensure a balance of power and authority. The Chairman was responsible for conducting meetings of the Board and shareholders and ensuring all Board members were properly briefed during Board discussions and shareholders were informed of the subject matters requiring their approval. The Group CEO has responsibility to ensure that the strategic planning of the Group be effectively implemented as well as responsible for the whole performance of the Group.
The Chairman of Damansara Realty is the Independent Non- Executive Chairman, YB Dato’ Ahmad Zahri bin Jamil, while the post of Group CEO is held by En. Brian Iskandar bin Zulkarim who attained the post on 1 September 2016.
PRINCIPLE 4 – FOSTER COMMITMENT
4.1 Commitment of Board Members and Protocols for Accepting New Directorships
The Directors will notify the Chairman of the Board before accepting any new directorship in a public listed company and to indicate the time expected to be spent on the new appointment. The Directors are at liberty to accept other board appointments so long as such appointments are not in conflict with the business of the Group and do not adversely affect the Directors’ performance as a member of the Board.
The Directors are the view that their acceptance of directorships in private limited companies does not affect their commitment and performance as a director of company.
The Board shall conduct at least 4 scheduled meetings annually, with additional meetings to be convened as and when necessary. All Directors will be provided with the performance and progress reports on a timely basis prior to the scheduled Board meetings. A full agenda of the meeting and all Board papers, including complicated issues or specific matters, would be distributed in advance to ensure Directors are well informed and have the opportunity to seek additional, and are able to obtain further clarification from the Company Secretary, should such a need arise. Where necessary, the services of other senior management or external consultants will be arranged to brief the Directors or clear to their doubts or concerns. The Board and Board Committee’s’ meeting schedule will be provided to all Directors at the beginning of the financial year.
For the FY2016, there were 6 meetings held on the following dates and venue:
The Board Members remain committed and dedicated in fulfilling their duties and responsibilities and this is reflected via their attendance at each Board Meeting for the FY2016 as listed below:
Any nominations for new Directors to the Board are reviewed by the BNRC and presented to the Board for approval. The Company Secretary will ensure that all appointments are properly made and that statutory requirements are met.
4.2 Continuing Education Programmes
The Board is aware of the importance for its members to participate and undergo continuous training to be notified and enlighten on any changes on the relevant regulatory requirements and the impact of the said regulatory requirement to the Group.
In compliance with the MMLR of Bursa Securities, all members of the Board have completed the Mandatory Accreditation Programme (MAP) conducted by Bursatra Training Sdn Bhd or relevant courses recognized by Bursa Securities.
The Board encourages its Directors to attend talks, seminars, workshops and conferences to update and enhance their skills and knowledge to enable them to carry out their roles effectively as Directors in discharging their responsibilities towards good corporate governance, operational and regulatory standards. The Board took note of the amendments to the Listing Requirements, which stated that the Board of Directors of listed companies will assume the onus of determining or overseeing the training needs of their directors.
During the financial year, the Directors attended the following courses:
PRINCIPLE 5- UPHOLD INTEGRITY IN FINANCIAL REPORTING
5.1 Compliance with Applicable Financial Reporting Standards
Pursuant to Paragraph 15.26(a) of the MMLR of Bursa Securities, all the Company Directors are collectively responsible in ensuring that the financial statements and the quarterly results are drawn up in accordance with the approved accounting standards adopted by the Malaysian Financial Reporting Standard (MFRS), the provisions of the Companies Act, 1965, and the MMLR of Bursa Securities.
It is the responsibility of the Directors to ensure that the financial reporting of the Group presents a true and fair view of the state of affairs of Damansara Realty and its subsidiary companies as of the end of the financial period and of the results and cash flows of the Group and of the Company for the FY2016.
The Directors have applied the appropriate and relevant accounting policies on a consistent basis and made judgments and estimates that are reasonable and fair in preparing the financial statements of Damansara Realty and of the subsidiaries. The financial statements are also prepared on a going concern basis and the Directors have assured that proper accounting records are kept so as to enable the preparation of the financial statements with reasonable accuracy.
In overseeing the financial reporting, the BAC reviewed the financial statements and the quarterly results as presented by Group CFO in accordance with the approved accounting standards adopted by the Malaysian Financial Reporting Standard (MFRS). During the fourth quarter of 2016 meeting, discussion was conducted on detailed analysis of impairment of assets in compliance with the MFRS 136 Impairment of Assets with the present of external auditors and internal auditors. The external auditors, Messrs. Jamal Amin & Partners (“JAP”) also conducted limited review for every quarterly results.
The further details of the compliance with applicable financial reporting standards can be referred in the Audit Committee Report section.
Every quarter, each Director declared their interest in companies (as director or shareholder) pursuant to section 135 of the Companies Act, 1965 which were tabled during the quarterly Board of Director’s meeting. The Board monitors and review any potential Related Party or Conflict of Interest transactions. During the year, there were no Related Party and/or Conflict of Interest transactions except for Y.B Dato’ Mohd Aisom bin Omar, pursuant to section 131 of the Companies Act 1965, whom has declared his interest as a partner of a Legal firm to be appointed as a panel lawyer for one of Damansara Realty’s subsidiaries and he has abstained from deliberating and participating in the decision made by the Board.
5.2 Assessment of Suitability and Independence of the External Auditor
The external auditors play an important role in ensuring the reliability of the Group’s financial statements and providing the assurance of accuracy to shareholders. The Board, via the BAC, maintains a formal and transparent professional relationship with the external auditors, JAP, in seeking professional advice and ensuring compliance with the applicable accounting standards and statutory requirements.
The external auditors were invited and had attended all the BAC meetings and general meetings of Damansara Realty during the financial year.
The BAC ensures that the policies and procedures to assess the suitability and independence of external auditors are complied. The Committee meets with the external auditors without the presence of the Senior Management at least once a year to assess the suitability and independence of the external auditors. During the year, one meeting was conducted without the presence of the Management. Representatives from the external auditors were also invited to attend every Annual General Meeting (“AGM”).
During the meeting held on 24 February 2017, the BAC has agreed and adopted the external auditors’ assessment and the BAC had on 7 March 2017, assessed the external auditor on their quality of service, sufficiency of resources, communication and interaction, and independence, objectivity and professional skepticism.
The BAC was satisfied with the suitability of JAP, as a firm as well as in terms of the professional staff assigned to the audit, based on the quality of services and sufficiency of resources they provided to the Group. The BAC also took note of the openness in communication and interaction with the lead audit engagement partner and engagement team, which demonstrated their independence, objectivity and professionalism.
Further details of the assessment of suitability and independence of the external auditor can be referred in the Audit Committee Report section.
PRINCIPLE 6 – RECOGNIZE AND MANAGE RISKS
6.1 Sound Framework to Manage Risks
The BRMC was set-up to assist the Board to oversee the risk management framework. The BRMC reviews the risk management framework and processes, and receives periodic reporting on risk management matters and management’s actions to mitigate and manage significant risks to ensure that the Group’s business objectives are met.
6.2 Internal Audit Function
The Group has an Internal Audit Department which reported directly to the BRMC members. The details of the recognition and risk management and the Internal Audit Functions are set out in the Statement on Risk Management and Internal Control and Audit Committee Report of this Annual Report, respectively.
The Internal Audit function is independent from the operations of the Group and provides reasonable assurance that the Group’s system of internal control and risk management is satisfactory and operating effectively. The internal auditors adopt a risk based approach towards the planning and conduct of their audits, and this is consistent with the Group’s framework in designing, implementing and monitoring its internal control system.
PRINCIPLE 7 – ENSURE TIMELY AND HIGH QUALITY DISCLOSURE
7.1 Corporate Disclosure Policy
The Group has in place procedures for compliance with the MMLR of Bursa Securities and ensures that all material information must be announced immediately to Bursa Securities.
The Corporate Disclosure Policy and Procedures can be accessed by Stakeholders through the corporate website www.dbhd.com.my.
7.2 Leverage on Information Technology for Effective Dissemination of Information
The Group maintains a website which enable public to access information on the latest updates on the corporate information, corporate events, annual report, corporate announcements, financial information as well as the Board Charter of Damansara Realty. Thus, it will create greater awareness of the Group activities, performance and other relevant information among the stakeholders and general public.
PRINCIPLE 8 – STRENGTHEN RELATIONSHIPS BETWEEN THE COMPANY AND SHAREHOLDERS
8.1 Encourage Shareholder Participation at General Meetings
The AGM is the principal forum for dialogue with shareholders. Notice of the AGM and Annual Reports are sent out at least 21 days before the date of the meeting. In the case of an Extraordinary General Meeting, the Notice is sent out at least 14 days before the date of the meeting (or 21 days where any special resolutions are proposed).
The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually as well as in the EGM. The shareholders are given the opportunity to seek clarification by making use of the Question and Answer session during the AGM / EGM on any matters pertaining to the business and financial performance of Damansara Realty.
8.2 Encourage Poll Voting
The rights to demand for a poll during AGM was conveyed to the shareholders at the commencement of the AGM by the Chairman in line with Recommendation 8.2 of the MCCG 2012. The Board also encourages poll voting for substantive resolutions specifically, the Recurrent Related Party Transactions.
8.3 Effective Communication and Proactive Engagement
The Board also recognizes the importance of effective communication with shareholders and the investment community and adheres strictly to the disclosure requirements of Bursa Securities.
Dissemination of information includes the distribution of annual reports and relevant circulars to shareholders, issuance of press releases, announcing the quarterly financial results and performance of the Group to Bursa Malaysia Securities Berhad and the public as holding press conferences.
This Statement is made in accordance with a resolution of the Board dated 15 March 2017
MATERIAL CONTRACTS INVOLVING DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
Except as otherwise disclosed in the report, there were no material contracts involving Directors and substantial shareholders entered by Damansara Realty for the FY2016.
UTILISATION OF PROCEEDS
There were no proceeds raised by Damansara Realty from any corporate proposals during the FY2016.
AUDIT AND NON-AUDIT FEES
The Audit and Non-audit fees of External Auditors during the FY2016, as follows:-
RELATED PARTY TRANSACTIONS AND RECURRENT RELATED PARTY TRANSACTIONS (“RPT AND RRPT”)
All RPT including RRPT entered into by the Group were made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with other persons or charged on the basis of equitable rates agreed between the parties. All RPT are reviewed by the BAC and reported to the Board.
At the forthcoming AGM to be held on 24 May 2017, Damansara Realty intends to seek its shareholders’ approval to renew the existing mandate for recurrent related party transactions of a revenue or trading nature. The details of the shareholders’ mandate to be sought will be furnished in the Circular to Shareholders dated 28 April 2017 attached to this Annual Report.
COMPLIANCE WITH THE MCCG 2012
The Board is of the opinion that Damansara Realty and Group had complied with the spirit and objectives of the MCCG 2012. Although, there are deviations from several recommendations as contained in the MCCG 2012, the Board believes that there are justifiable rationale for the deviations and that the overall corporate governance of Damansara Realty is not compromised. Nevertheless, Damansara Realty will continue to strengthen its governance practices to safeguard the best interest of its shareholders and other stakeholders.
This Corporate Governance Statement is made in accordance with the resolution of the Board of Directors dated 15 March 2017.