Haw Par Corporation Limited (the "Company, together with its subsidiaries, the "Group") is committed to upholding good corporate governance practices in line with the principles and guidelines of the Code of Corporate Governance 2012 (the "Code"). The following sections describe the Group's corporate governance practices and structures that were in place during the financial year ended 31 December 2015 ("FY 2015").
Click here to download a copy of the details as extracted from our 2015 annual report.
The principal responsibilities of the Board include:
All Board members bring their judgement and breadth of diversified knowledge and experience to bear on issues of strategy, performance, resources (including sustainability issues) and standards of conduct.
The Board meets at least four times a year to review the performance and business strategy of the Group. Meetings are scheduled in advance. Ad-hoc meetings can be called when there are important and urgent matters requiring the Board's consideration. Board approval in writing is sometimes needed in between scheduled meetings.
The Group has adopted internal guidelines which set out specific matters requiring Board approval. These written guidelines also include financial and non-financial limits of authority given to management to facilitate operational efficiency. Under the guidelines, Board approval is required for material transactions (above specified limits) such as joint ventures, mergers and acquisitions, as well as adoption and amendment of Group risk management policy.
The Board has delegated specific responsibilities to four Board Committees, which are the Audit, Nominating, Remuneration and Investment Committees.
The Board held four meetings during the year. Directors can attend Board and Board Committee meetings by telephone conference if they are unable to attend in person. The attendance of Directors at Annual General Meeting (AGM), Board and Board Committee meetings held in the financial year ended 31 December 2015 is as follows:
Directors are appointed by way of formal letters of appointment which set out their duties and obligations. The Company has an orientation programme for newly appointed Directors. The programme is tailored according to the profile and experience of new directors. It includes training in areas such as operational knowledge or accounting updates, duties as directors and how to discharge those duties as well as meetings with key personnel to understand the Group's businesses, governance practices, strategic plans and objectives. Site visits are conducted as needed. The Company encourages directors to keep abreast of relevant new laws, regulations, changing commercial risks from time to time and arranges and funds the training of Directors to attend external courses and talks by professional organisations if needed. Directors are continuously updated on developments in the regulatory and business environment affecting the Group, through the Company Secretary and auditors (both internal and external). During the year, the Company has arranged for external lawyers to brief the Directors on the key highlights of new regulations including Companies (Amendment) Act 2014.
The Board considers its present size of ten directors appropriate for the current scope and nature of the Group's operations. The Nominating Committee ("NC") has reviewed the composition of the present Board and is satisfied that the directors, as a group, possess core competencies in management experience, strategic planning, accounting, finance, and the necessary industry knowledge. The NC is aware of the importance of diversity of the Board composition (such as skills, experience, qualifications, core competencies, age, gender and race) and board appointments would continue to be based on merit and diversity factors.
The NC, having regard to the Code's guidance for assessing independence, has determined that the majority of Directors on the Board, being six Non-Executive Directors, namely Mr Sat Pal Khattar, Dr Lee Suan Yew, Mr Hwang Soo Jin, Dr Chew Kia Ngee, Mr Peter Sim and Mr Gn Hiang Meng, are Independent Directors, as indicated in Table 1 above, and that they have maintained their independence throughout the year.
Such Non-Executive Independent Directors have no relationships or connections which are likely to interfere, or could reasonably be perceived to interfere, with their independent business judgement with a view to the best interests of the Company. They are not substantial shareholders and are independent from the substantial shareholders of the Company.
The Non-Executive Independent Directors are not immediate family members of a 10% shareholder of the Company and were not directly associated with a 10% shareholder of the Company in the current or immediate past financial year. They and their immediate family members did not have any financial dealings with the Group whether in the current or immediate past financial year, nor are or were they or any of their immediate family members, during the current or immediate past financial year, a substantial shareholder of, or a partner in (with 10% or more stake), or an executive officer of, or a director of, any organisation to which the Group made, or from which the Group received, significant payments or material services (including auditing, banking, consulting and legal services) in the current or immediate past financial year. Also, neither they nor any of their immediate family members were in the past three financial years employed by the Group.
Although three of the directors, namely Mr Sat Pal Khattar, Dr Lee Suan Yew and Mr Hwang Soo Jin, have served as Non- Executive Directors for more than nine years each, the NC and the Board are of the view that their length of service does not compromise their objectivity in the discharge of their duties. Notes of Board and Board Committee meetings show that each of the three Directors continues to express his individual independent viewpoints and at all times the interests of the Company, Board and Committees were protected and enhanced by their length of service. Accordingly, the NC and the Board have determined that Mr Sat Pal Khattar, Dr Lee Suan Yew and Mr Hwang Soo Jin can continue to be designated as Independent Directors.
The Board will continue to look for new members who can serve the Board as older members step down in order to facilitate renewal of the Board.
There is a clear division of the role and responsibilities between the Non-Executive Chairman of the Board ("Chairman") and the Chief Executive Officer ("CEO"), who is the son of the Chairman. The Chairman's principal role is to lead and guide the Board. The scope of responsibilities and limits of authority of the CEO are set out in a written mandate. The CEO executes the strategic directions set by the Board and is responsible for the Group's day-to-day operations. Although the Chairman and CEO are related, the Board is of the opinion that it is not necessary to appoint a lead independent director. Shareholders can approach any Independent Director for assistance through the Company Secretary, if he has any issues that affect shareholders generally. Where necessary, the independent Directors also have the discretion to meet without the presences of other Directors and they are able to provide feedback to the Chairman. The chairpersons of each of the board committees have sufficient standing and authority to look into any matter which management or executive directors fail to resolve.
The NC comprises four members, namely, Mr Sat Pal Khattar, Dr Wee Cho Yaw, Dr Lee Suan Yew and Mr Peter Sim. Mr Peter Sim, an experienced independent director and a trained lawyer, joined the NC during the year as part of refreshment of the NC. The majority of the NC, including the chairman of the NC, Mr Sat Pal Khattar, are Independent Directors.
The principal responsibilities of the NC are to:
The NC adopts key principles from the Nominating Committee Guide, issued by the Singapore Institute of Directors in 2015.
Each year, the NC reviews the composition of the Board as part of its succession planning. Suitable candidates are identified through personal and professional networks and the NC reviews each candidate through an objective and comprehensive process. When assessing potential candidates, the NC takes into account the existing Board composition, the candidate's background, qualification, experience, time commitment and his/her ability to contribute to the Board's collective skills, knowledge and experience. In February 2016, the NC recommended and the Board approved the appointment of Mr Wee Ee-chao as Deputy Chairman, as part of the succession planning for the Chairman.
The NC makes annual recommendations to the Board on the re-appointment of Directors having regard to their competencies, commitment, contributions and performance on a qualitative basis. Each year, one-third of the Board retires from office by rotation and may submit themselves for re-election. New Directors submit themselves for re-election at the AGM immediately following their appointment by the Board.
In its review of the Directors' ability to commit time to the Company's affairs, the NC has taken into account whether a limit on the number of other listed boards Directors could sit on was necessary. The NC decided that it was not necessary to prescribe a limit on the number of other boards that Directors of the Company sit on. Although some Directors have multiple board representations and principal commitments, none of them had more than six listed companies' directorships and the NC is satisfied that each Director has devoted sufficient time and attention to the Company's affairs to adequately and competently carry out his duties as a Director of the Company. For a full list of each Director's directorships and principal commitments, please refer to the "Board of Directors" section of this Annual Report.
The NC evaluated and assessed the effectiveness of the Board's performance as a whole, taking into consideration, amongst other matters, the Board's discharge of its principal responsibilities, earnings of the Group, return on equity and the share price performance of the Company over a five year period. These performance criteria also include performance of the Company as compared to industry peers and are linked to long term shareholder value. The NC is of the opinion that the Board as a whole has performed well during the year and that the Chairman and each Director have contributed to the overall effectiveness of the Board.
The NC evaluated and reviewed the performance of the Board Committees (except the NC itself). It is satisfied with the matters dealt with by the Board and Board Committees and the frequency of such deliberations.
The Chairman of the Board and the Chairman of the NC evaluated the collective performance, commitment and contribution of all Directors based on each Director's attendance and contribution at Board meetings. They also reviewed the contribution of the Executive Directors and are of the view that the performance of each of them has been satisfactory.
Directors have unfettered access to complete and adequate information on the Group's financials and operations in a timely manner. Comprehensive information including strategic, financials, key operational and compliance matters is provided to Directors on a monthly and quarterly basis to enable them to make informed decisions. Matters requiring the Board's decision are generally sent to Directors at least five working days prior to Board meetings. Board meetings for each year are scheduled at least three months in advance while urgent Board meetings, if needed, are scheduled at least five days in advance save in exceptional circumstances. The Board is also provided with opportunities to meet with managers and heads of divisions, as needed to understand the businesses of the Group.
Directors have separate, independent and unrestricted access to the Company Secretary for assistance. The Company Secretary attends all Board and Board Committee meetings and ensures that board procedures are followed and the rules and regulations applicable to the Board are complied with. The Company Secretary is responsible for ensuring information flows within the Board and Board Committees and between senior management and Non-Executive Directors, advising the Board on all governance matters, as well as facilitating orientation and professional development as required. Directors may take independent professional advice, if necessary and with the approval of the Chairman, at the Company's expense, to carry out their duties. Under the Constitution of the Company, the decision to appoint or remove the Company Secretary rests with the Board as a whole.
The Remuneration Committee ("RC") comprises three members, namely Mr Sat Pal Khattar, Dr Wee Cho Yaw and Mr Hwang Soo Jin. The majority of the RC, including the chairman of the RC, Mr Sat Pal Khattar, are Independent Directors. All the members of the RC are Non-Executive Directors. The RC is supported by the Group Human Resource and/or external consultants if needed.
The principal responsibilities of the RC include:
During the year, the RC reviewed the amount of Directors' fees payable to the Non-Executive Directors to be recommended for shareholders' approval. It also assessed the performance of and determined all aspects of remuneration for the Executive Directors, and reviewed the remuneration packages for key executives and share options to eligible staff and the terms thereof. During the year, the RC, through management, appointed Mercer, an independent consultant to review the remuneration structure of senior executives, which includes the short and long term incentive schemes.
The RC has reviewed the Group's obligations arising in the event of termination of the Executive Directors' and key executives' service contracts, to ensure that such service contracts contain fair and reasonable termination clauses.
The RC takes into consideration current industry norms on compensation and adopts a remuneration policy in line with industry practices. None of the Non-Executive Directors have any service contract or consultancy agreement with the Company. Non-Executive Directors, including the Chairman of the Board, are paid directors' fees which comprise a basic fee and additional fees for serving on Board Committees. The RC recommends Directors' fees to the Board for endorsement prior to submission to shareholders for approval at each annual general meeting. The Company's share option scheme allows for grants of share options to Non-Executive Directors. To date, the Non-Executive Directors have not been granted any share option.
The Directors' fee(1) structure for services on the Board and Board Committees is as follows :
Nominating and Remuneration Committee
The Group remunerates its employees at market competitive levels, commensurate with their performance and contribution to the long-term interests and success of the Group. The remuneration package comprises fixed and variable compensation, provident fund and share options (for eligible employees). A variable bonus scheme is in place for each business unit. The bonus scheme takes into consideration working capital efficiency, productivity, current year earnings and long-term sustainability.
In the annual review of the remuneration of the Executive Directors, the RC takes into consideration performance of the individuals and comparative remuneration of similarly placed persons in the market as well as the findings of Mercer. The performance criteria include achievement of financial objectives using financial indicators such as overall profitability and return of assets over a period of time. Their remuneration is reviewed annually by the RC and includes a variable bonus component which is performance based. The level and structure of remuneration for executive directors are aligned with the long term interest of the Group.
Share options are granted to the Executive Directors and eligible key executives, based on their performance during the year. These share options are granted at market price around the date of grant and can only be exercised after a vesting period of usually one year to ensure that employees' interest gel with the longer term performance of the Group. In the event of misconduct on the part of a participant in the share option scheme, the RC may in its absolute discretion treat any outstanding option as lapsed and null and void. More information on the Haw Par Corporation Group 2002 Share Option Scheme can be found in the Directors' Statement and notes to the financial statements.
The details of the remuneration of each Director for FY 2015 are as follows:
The remuneration of each of the top six senior executives of the Group (who are not Directors), in no order of quantum sum, is as follows:
The total remuneration paid/accrued to the top six senior executives is about $2,103,000.
The aggregate amount of termination, retirement and post employment benefits that may be granted to Directors, the CEO and the top six key management personnel is around $524,000.
There is no employee (other than the CEO) who is an immediate family member of a Director or the CEO. A relative of the CEO, Mr Kelvin Whang, who is the General Manager of Underwater World Pattaya, received annual remuneration of between $150,000 to $200,000.
The Board provides shareholders with a balanced and clear assessment of the Group's performance through announcements of its quarterly and full-year results as well as timely announcement of any price-sensitive information. Internal guidelines are in place to comply with legislative and requlatory requirements and Management provides the Board with monthly management accounts of the Group. The management reports containing sufficient details and comparisons to planned budgets, provide the Directors with a means to monitor the Group's performance.
The Group has established a formal risk management framework across the entire organisation to provide a structured approach for managing risks. The framework enables management to have a formal structure in risk management assessment. The framework is designed to ensure that risks are identified, assessed, monitored and effectively managed. It is in line with the best practices as contained in the Risk Governance Guidance for Listed Boards, issued by the Corporate Governance Council in May 2012.
The Risk Management Committee is chaired by the CEO and comprises an Executive Director, the Chief Financial Officer ("CFO"), the Internal Audit Manager and Group General Manager. It performs the following roles:
Risks are analysed and assessed in terms of risk impact and risk likelihood. Risk impact includes financial, operational (business interruption), regulatory/legal and reputational impact. Risk likelihood includes both quantitative and qualitative appraisals and classified as 'Low', 'Moderate', 'High' and 'Critical'. Management evaluates the options and controls needed to deal with identified risks, depending on the risk impact, likelihood and related costs and benefits. These risks are reviewed both against the entity level parameters and from the Group's perspective. The AC monitors the Risk Management Committee's activities on behalf of the Board.
Risks are broadly categorised as follows:
These include most of the inherent risks of each operating unit and the relevant macro-environment such as competition and epidemic outbreak risks. All such risks are reported to the AC and the Board. Measures taken to manage risks include diversifying either geographically or in product offerings, putting in place business continuity plans and ensuring sufficient insurance coverage for various types of risks.
These relate to day-to-day operations and include effective and efficient use of the Group's resources. Operational risks include security threats, employee attrition and brand protection. The general manager of each operating unit implements policies and procedures to monitor such risks.
Each operating unit is subject to various degrees of regulatory controls, particularly the Healthcare division. Compliance with local laws and regulations in various geographical locations is monitored by the operating unit and the functional departments in Singapore.
Financial risks are mitigated by using appropriate hedging instruments when necessary and actively managing foreign exchange and credit exposures. Financial risks are monitored by the Investment Committee. Generally, the Group is conservative in its financial dealings and do not engage in speculative instruments that would expose the Group to unnecessary financial risks. The operations of the Group do not require complex use of information technology or data. Thus the risks in this area are not material.
The Board reviews the adequacy and effectiveness of the Company's risk management and internal control systems, including financial, operational, compliance and information technology controls.
For the year under review, the Board has received assurances from the CEO and the CFO:
Based on work performed by the internal and external auditors and reviews undertaken by the Risk Management Committee and the AC, the Board, with the concurrence of the AC, is of the opinion that the internal controls addressing financial, operational, compliance and information technology risks, and risk management systems and processes were adequate and effective for the Group as at 31 December 2015.
The Group's internal controls and risk management systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable, but not absolute, assurance that the Group will not be adversely affected by any reasonably foreseeable event. The Board recognises that no system of internal controls and risk management can provide absolute assurance.
The AC comprises three members, namely, Dr Chew Kia Ngee, Mr Hwang Soo Jin and Mr Gn Hiang Meng, all of whom are Non-Executive Independent Directors. The chairman of the AC, Dr Chew Kia Ngee, is a senior accountant with over 40 years' experience in the profession. Mr Hwang Soo Jin is a seasoned financial professional and has over 40 years of financial management expertise. Mr Gn Hiang Meng is a former senior banker with more than 30 years' experience in investment banking and hospitality industry.
The principal responsibilities of the AC include:
The AC has full authority to investigate any matter including but not restricted to issues of internal controls, suspected fraud or irregularity. It has access to and full co-operation by the management and may invite any director or executive officer to attend its meetings. The AC adopts key principles from the "Guidebook for Audit Committee in Singapore", issued by the Audit Committee Guidance Committee in Singapore in 2008 and updated in 2014.
During the year, the AC held four meetings during which it performed its responsibilities as set out above. It met the external and internal auditors separately in the absence of management and noted that there was no adverse feedback.
In reviewing non-audit services, the AC was satisfied that amount of non-audit services provided by the external auditors was not material and would not impair the independence of the external auditors. The AC has confirmed that the Company has complied with Rule 712 and Rule 715/716 of the Singapore Exchange Securities Trading Limited ("SGX-ST") Listing Manual which set out the requirements on the appointment of the auditor. The AC has recommended to the Board the re-appointment of PricewaterhouseCoopers LLP as the Group's auditor for the ensuing year. The aggregate amount of fees paid/payable to PricewaterhouseCoopers LLP for FY 2015 was $343,000. The breakdown of fees paid/payable for audit and non-audit services were $316,000 and $27,000 respectively. The AC has reviewed and is satisfied with the independence and objectivity of the external auditors. It conducted a formal tender exercise during the year and after reviewing comparable proposals, agreed to retain PricewaterhouseCoopers LLP as the Company's auditors.
The AC members are continuously updated by management and auditors (both internal and external) on changes to accounting standards and issues which have a direct impact on financial statements, compliance with legislation and accounting-related matters.
The Group has in place a Code of Conduct that sets out the business practices, procedures and ethical conduct expected of all employees in their course of employment and dealings with customers, suppliers and consultants.
In line with the Code of Conduct, the Group has in place a whistle-blowing policy and process under which employees and external parties may report to the AC any improprieties or suspected wrong-doing by management or other staff without fear of reprisal. All reports received are accorded confidentiality and independently investigated by the whistle blowing unit, comprising the Group Human Resource Manager and Group Internal Audit Manager. Details of the whistle blowing policy are posted on the Company's intranet. New employees are briefed on the policy during their orientation. Existing employees are reminded of the policy from time-to-time in order to raise awareness of the availability of the channel for such reporting.
The Company has an internal audit ("IA") department which is staffed with professionally qualified personnel. The Group Internal Audit Manager reports directly to the Chairman of the AC on audit matters and to the CEO on administrative matters. The appointment and removal of the Group Internal Audit Manager rests with the AC.
The IA function follows the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The IA adopts strict procedures in reporting its audit findings to the management and the AC.
The role of the IA function is to render support to the AC in ensuring that the Group maintains a sound system of internal controls by performing regular monitoring and testing of key controls and procedures, reviewing operational and financial activities and undertaking investigations as requested by the AC.
The IA department submits its internal audit plan to the AC for approval at the beginning of each year. IA reviews are carried out on all significant business units in the Group and a summary of findings and recommendations is discussed during each AC meeting. The IA has unfettered access to the AC and to all documents, reports, properties and personnel for the purposes of its audit. The AC is of the view that the IA function is adequately resourced and staffed with persons with the relevant qualifications and experience and has appropriate standing within the Company.
The Group is guided by an investor relations policy that aims to promote regular, effective and fair communication with shareholders. Communication of relevant announcements of the Group is generally made through annual reports, press releases, SGXNET announcements and its corporate website at www.hawpar.com. The Company's Annual Report is sent in a CD-ROM to all shareholders and posted on the Group's website. Hard copies of the Annual Report are available on request
A dedicated communications channel with the Investor Relations Department is available to shareholders and can be reached via email at firstname.lastname@example.org. The Investor Relations Department is required to respond to shareholders' queries in a timely and effective manner. When matters requiring shareholders' meetings are to be held, notices are published in newspapers and reports or circulars are sent in a timely manner to all shareholders. Shareholders will be informed of the rules, including voting procedures, which govern the shareholders' meetings. Resolutions of all general meetings of shareholders are conducted by electronic poll. The results of the votes for all resolutions taken during AGM and general meetings of shareholders are validated by independent scrutineers and are broadcast at the AGM. The results are also announced on the SGXNET after the meeting. The meetings' minutes with substantial and relevant comments are available to shareholders at the registered office upon request within reasonable time after each general meeting.
The Company holds regular meetings with research analysts, fund managers and institutional investors to review the Company's performance and provide investors with a better understanding of the Group's businesses.
The Group encourages the attendance of shareholders at general meetings, which are always held at a central location in Singapore. At such general meetings, shareholders are invited to raise questions on any matter that needs clarification. The notices of general meetings setting out the agenda are despatched to shareholders with the annual reports, and if necessary, letters to shareholders on the item of special business, at least 14 days before the general meetings are called to pass ordinary resolutions or 21 days before the general meetings are called to pass special resolutions. The Chairman and the other Directors (in particular, the chairpersons of the AC, NC and RC) as well as the external auditor are present at general meetings to address queries from shareholders on matters affecting the Group and the conduct of external audit. The Company Secretary is present to ensure that procedures under the Constitution and SGX Listing Manual are followed. Key management personnel are also present at such general meetings to respond to queries from shareholders.
The reception after each general meeting of shareholders provides an opportunity for shareholders to informally communicate their views and expectations to the Company's representatives.
Separate resolutions on each issue are tabled at such general meetings. The Company allows shareholders who hold shares through nominees to attend general meetings as observers. Following the implementation of the multiple proxies regime on 3 January 2016, the Company will allow nominee companies, custodian and the Central Provident Fund Board to appoint more than 2 proxies to attend and to vote at general meetings.
The Company does not have a formal dividend policy. For more than the past 30 years the Company has endeavoured to maintain a sustainable dividend payment with an upward trend. In certain years, the Company also paid special dividends.
The Investment Committee ("IC") is headed by the Chairman of the Board and comprises two Executive Directors and the CFO. The IC meets bi-monthly to review the performance of the Group's investments, funding requirements, key financial risks and strategic issues of each operating unit.
Management reports all interested person transactions to the AC. The Group does not have any general mandate from shareholders pursuant to Rule 920 with regard to interested person transactions. During the year, there were no interested person transactions entered into by the Company and any Director that require disclosure under the SGX-ST listing rules.
Except as disclosed on page 93 (Note 23 Related Party Transactions) of the financial statements, there were no other material contracts entered into by the Company or its subsidiaries involving the interests of the CEO, any Director or controlling shareholder of the Company.
The Group adopts best practices with respect to dealings in securities set out in Rule 1207(19) of the Listing Manual of the SGX-ST. It has a policy which prohibits its officers from dealing in the securities of the Company during the period commencing two weeks before the announcement of the financial results for each of the first three quarters and one month before the announcement of the full year results. The Company Secretary issues guidelines periodically to Directors and employees to remind them of the prohibitions in dealing with the Company's securities on short-term considerations or while in possession of material unpublished price-sensitive information, and to comply with the insider trading laws at all times.