1 Taking Off Into New Horizons Page 21 The Board of Directors of SMRT Holdings Berhad ( Board ) takes cognizance of the importance of good corporate governance to the success of the Company and its subsidiaries ( Group ). The Board has always been supportive of the adoption of the principles as set out in the Malaysian Code on Corporate Governance 2012 ( Code ). The Board is fully committed to ensure that the principles of corporate governance are observed and practiced throughout the Group to safeguard the stakeholders interest and to enhance shareholders value. The Board is pleased to provide the following statements which outline how the Group has applied the principles and best practices set out in the Code. A. THE BOARD OF DIRECTORS 1. The Board Responsibilities The Board is responsible for the overall corporate governance of the Group, including its strategic direction, overseeing the conduct of the company s business to evaluate whether the business is being properly managed, identifying principal risks and ensuring the implementation of appropriate systems to manage these risks, succession planning, developing shareholders communication policy and reviewing the adequacy and the integrity of the company s internal control systems. The Board has delegated specific responsibilities to three (3) main committees namely the Audit Committee, Remuneration Committee and Nomination Committee, which are guided by the terms of reference approved by the Board. The ultimate responsibility for the final decisions on all matters, however lies with the Board. 2. Board Charter and Code of Ethics The Board has formally established a Board Charter, which sets out the role, functions, composition, operation and processes of the Board. The Charter provides guidance to the Board in relation to the Board s role, duties, responsibilities and authorities which are in line with the principles of good corporate governance. The Charter also outlines the processes and procedures for the Board and their Committees to achieve highest governance standards. It acts as a source of reference for Board members and Senior Management. The Board Charter shall be periodically reviewed, as and when necessary. The Board Charter is accessible to the public on the Company s corporate website at The Board has also formalised a Code of Ethics for its Directors which is incorporated in the Board Charter. The Board would periodically review the said Code of Ethics.The Directors observe the Directors Code of Ethics established by the Companies Commission of Malaysia ( CCM ) which can be viewed from CCM s website at 3. Board Composition The Board consists of members from different backgrounds and diverse expertise in leading and directing the Group s business operation. The Board currently consists of two (2) Executive Directors and three (3) Independent Non-Executive Directors. The composition of the Board complies with paragraph of the AMLR of the Bursa Malaysia which requires at least two (2) Directors or one-third of the Board of the Company whichever is the higher, to be Independent Directors. The Independent Non-Executive Directors which make up more than half the Board play a crucial role in the exercise of independent assessment and objective participation in Board deliberations and the decision-making process and provides for effective check and balance in the functioning of the Board. The Independent Non-Executive Directors do not participate in the day-to-day management of the Group and do not engage in any business dealings and are not involved in any other relationship with the Group which could materially interfere with the exercise of their independent judgement. The Executive Directors are responsible for the implementation of the Board s policies and decisions and keep the Board informed of the overall operations of the Group. The Group is led and controlled by an experienced Board, many of whom have intimate knowledge of the business. The Board has noted that a clear division of responsibility between the Chairman and the Chief Executive Officer to ensure that there is a balance of power and authority is important for corporate governance. The Chairman is responsible for the leadership and governance of the Board, ensuring its effectiveness, orderly conduct and working of the Board whilst the Chief Executive Officer is overall responsible for the day-to-day management of the Group s operations and business as well as implementation of Board policies and decisions.
2 Page 22 Taking Off Into New Horizons A. THE BOARD OF DIRECTORS 3. Board Composition The Code recommends that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. During the financial year ended 31st December 2013, none of the Independent Directors has served on the Board beyond (9) years. The Code recommends the appointment of a Senior Independent Non-Executive Director to whom concerns may be conveyed. has been appointed to fulfill this role. 4. Board Gender Diversity The Board is supportive of gender diversity recommendations made in the Code as evidenced by the presence of a female Director namely Dato (Dr) Asariah Binti Mior Shaharuddin. The Board is comfortable with its current composition. 5. Board Meetings The Board holds regular meetings on a quarterly basis, while additional meetings may be convened to resolve any major and ad hoc matters requiring immediate attention. During the financial year under review, six (6) Board meetings were held. Details of the Directors attendance are as follows: Board Meetings Record During Tenure in Office Board Members Position 29th Jan 28th Feb 25th Mar 22nd May 26th Aug 26th Nov (nos) (%) Dato Dr R Palan Tuan Haji Ishak Bin Hashim Mr Kalaiarasu (re-designated on 1st November 2013) Dato (Dr) Asariah Binti Mior Shaharuddin (Appointed on 4th November 2013) 6. Supply of Information Chairman & Chief Executive Officer Independent Non- Executive Director Independent Non- Executive Director Executive Director (Re-designated from Independent Non-Executive Director) Independent Non- Executive Director 6/6 100% 6/6 100% 6/6 100% 6/6 100% n/a n/a n/a n/a n/a 1/1 100% Relevant information and agenda are circulated to the Board members in advance of the Board meeting to ensure the Directors have sufficient time to obtain further information and explanations, where necessary, before the meeting so as to enable them to duly discharge their duties. The proceedings and relevant board resolutions passed at the Board meetings are properly documented and filed in the Minutes Book maintained at the Registered Office. The Board has unrestricted access to any pertinent information to the Group s affairs. In addition, the Board has access to the advice and services of the Company Secretary who are responsible to the Board for ensuring that the Board meeting procedures are adhered to and that applicable rules and regulations are being compiled with. In exercising their duties, the Board is also entitled to obtain independent advice at the Company s expense whenever the need arises.
3 Taking Off Into New Horizons Page 23 A. THE BOARD OF DIRECTORS 7. Whistle Blowing Policy The Group in its effort to enhance corporate governance has put in place a whistle blowing policy to provide an avenue for employees and stakeholders to report genuine concerns about malpractices, unethical behaviour, misconduct or failure to comply with regulatory requirements without fear of reprisal. Any concern raised will be investigated and a report and update is provided to the Audit Committee. 8. Appointment to the Board All appointments of new directors to the Board are properly made with an established and transparent procedure and in compliance with the relevant rules of the relevant authorities. Any appointment of additional director will be made as and when it is deemed necessary by the existing Board with due consideration given to the mix and range of expertise and experience required for an effective Board. In line with the Best Practices of Code, the Company has established three Committees of Directors ( Committees ) to assist in the performance of certain duties of the Board under specific terms of reference. The Committees are composed mainly of non-executive directors, with the majority being Independent directors. The Board considers that the mix of commercial experience from the non-executives directors will complement the executive directors and create an effective Board. The Committees established are Audit Committee, Remuneration Committee and Nomination Committee. i) Audit Committee The composition of the Audit Committee, its role and Terms of Reference and attendance of each member during the financial year is set out in the Audit Committee Report of this Annual report. ii) Nomination Committee The present members of the Nomination Committee ( NC ) are as follows: Nomination Committee Members Position Date Appointed Tuan Haji Ishak Bin Hashim Chairman, Independent Non- Executive Director Member, Independent Non- Executive Director 5th October th October 2005 The primary objectives of the NC is to act as a committee of the full Board to assist in discharging the Board s responsibilities in: (a) (b) (c) assessing the ability of the existing Directors to contribute to the effective decision making of the Board; identifying, appointing and orienting new Directors; identifying the mix skills and experience and other qualities the Board requires in order to function completely and efficiently. The NC shall have the following responsibilities: (a) (b) Recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board. In making its recommendations, the Nomination Committee should consider the candidates skills, knowledge, expertise and experience, professionalism, integrity and in the case of candidates for the position of Independent Non-Executive Directors, the Nomination Committee should also evaluate the candidates ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors; Consider in making its recommendations, candidates for directorship proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any Director or shareholder;
4 Page 24 Taking Off Into New Horizons A. THE BOARD OF DIRECTORS 8. Appointment to the Board ii) Nomination Committee (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) Recommend to the Board, Directors to fill seats on Board Committees; Assess the effectiveness of the Board as a whole; Assess the effectiveness of the committees of the Board; Assess the contribution of each individual Director; Review and recommend to the Board the required mix of skills and experience and other qualities the Board requires in order to function completely and efficiently; Assess the performance and contribution of Directors who stand for re-election whether they meet established performance evaluation criteria; To develop criteria to assess independence of Directors; To review the Board s succession plan; To facilitate the Board induction and training for newly appointed Directors; To review training programs for the Board; and To facilitate achievement of Board gender diversity policies and targets. During the financial year ended 31st December 2013, the NC held one (1) meeting: Nomination Meetings Record During Tenure in Office Nomination Committee Members Position 28th February (nos) (%) Tuan Haji Ishak Bin Hashim Chairman, Independent Non- Executive Director Member, Independent Non- Executive Director 1/1 100% 1/1 100% iii) Remuneration Committee The Remuneration Committee ( RC ) comprises of a majority of Independent Non-Executive Directors. The composition meets the AMLR and the Code. The present members of the Remuneration Committee are as follows: Remuneration Committee Members Position Date Appointed Tuan Haji Ishak Bin Hashim Chairman, Independent Non- Executive Director Member, Independent Non- Executive Director 5th October th October 2005
5 Taking Off Into New Horizons Page 25 A. THE BOARD OF DIRECTORS 8. Appointment to the Board iii) Remuneration Committee The RC shall have the following responsibilities:- (a) (b) (c) (d) (e) (f) To recommend to the Board the framework of remuneration of Executive Directors and the remuneration package for each Executive Director, drawing from outside advice as necessary; To recommend to the Board guidelines for determining remuneration of Non-Executive Directors; To recommend to the Board any performance related pay schemes for Executive Directors; To review the scope of service contract of Executive Directors (if any); To consider the appointment of the service of such advisers or consultants as it deems necessary to fulfill its functions; and To review any major changes in remuneration policy and employee benefit structures for senior management throughout the Company or Group, and if thought fit, recommend them to the Board for adoption. During the financial year ended 31st December 2013, the RC held one (1) meeting: Remuneration Meetings Record During Tenure in Office Remuneration Committee Members Position 28th February (nos) (%) Tuan Haji Ishak Bin Hashim 9. Re-election of Directors Chairman, Independent Non- Executive Director Member, Independent Non- Executive Director 1/1 100% 1/1 100% Pursuant to the Articles of Association of the Company, an election of Directors shall take place each year. At every annual general meeting of the Company, one-third (1/3) of the Directors (including the Managing Director) or if their number is not a multiple of three (3), then the number nearest to one-third (1/3) shall retire from office PROVIDED ALWAYS that all Directors shall retire from office at least once every three (3) years. A retiring Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-election. 10. Directors Training As required under the AMLR of the Bursa Malaysia, all the Directors have attended the Directors Mandatory Accreditation Programme ( MAP ). The Directors will continue to attend various professional programmes necessary to enhance their professionalism in the discharge of their duties.
6 Page 26 Taking Off Into New Horizons A. THE BOARD OF DIRECTORS 10. Directors Training During the financial year ended 31 December 2013, the Directors have evaluated their own training needs on a continuous basis and attended the following:- Name of Directors Course Date Dato Dr R Palan ASTD Mena th 15th January 2013 Leading Board Challenges: Innovative Ideas For 27th February 2013 Breakthrough Performance Asia HRD Congress th -14th June 2013 MSWG - Special Dialogue & Presentation Session 20th June 2013 on Asean CG Scorecard 2013 TEDx KL rd August 2013 Seminar by Nick Vujicic 20th August 2013 Leadership Forum For SME s 27th -28th August 2013 Thought Leaders Round Table 29th August 2013 CNBC Summit Malaysia th September 2013 Tuan Haji Ishak Bin Hashim Trainers Meet Trainers th 28th February 2013 Executing Effective Transformation Process 7th May 2013 Getting It Right Asia HRD Congress th -14th June 2013 Leadership Forum For SME s 27th -28th August 2013 Advocacy Session On Corporate Disclosure 21st May 2013 Asia HRD Congress 12th -14th June 2013 Leadership Forum For SME s 27th -28th August 2013 Thought Leaders Round Table 29th August National Conference On Internal Auditing 23rd 24th September 2013 Mr Kalaiarasu Executive Coaching Jan May 2013 Technology Acceleration Programme ( TAP ) 17th May 2013 Seminar by Nick Vujicic 20th August 2013 Certificate in Human Resources Practice ( CHRP ) 18th November 2013 Oracle Cloud Strategy Workshop for Partners Dec 2013 Cloud Strategy Day! Dato (Dr) Asariah Binti Mior Shaharuddin Briefing on Company s history, operations and performance 4th November 2013 B. DIRECTORS REMUNERATION 1. The Level and Make-up of Remuneration The remuneration package is structured to attract, retain and motivate the Executive Directors of the quality required to manage the Group s operations and to align the interests of the Executive Directors with those of shareholders. The remuneration scheme is linked to performance, service seniority, experience and responsibilities. 2. Procedure The Remuneration Committee, meets when necessary, has the responsibility for reviewing and recommending to the Board the remuneration package and terms of employment of the Executive Directors. Directors play no part in decisions on their own remuneration.
7 Taking Off Into New Horizons Page 27 B. DIRECTORS REMUNERATION 3. Details of the Directors Remuneration The determination of the remuneration of the Executive Directors and Non-Executive Directors is a matter decided by the Board as a whole, with the Director concerned abstaining from participating in decision in respect of the individual remuneration. An analysis of the aggregate Directors remuneration paid for Directors of the Group for the year ended 31st December 2013 is set out below: Type of Directorship Salary & Allowance Directors Fees Fees Contribution to Provident Fund Total (RM 000) (RM 000) (RM 000) (RM 000) (RM 000) Executive *663 - *10 * Non-Executive - ^108 ^ Total: Notes: ^ includes the directors fees and attendance fees of Mr Kalaiarasu as the Independent Non-Executive Director (redesignated on 1 November 2013). * includes the salary and allowance, attendance fees and contribution to Provident Fund of Mr Kalaiarasu as the Executive Director (re-designated on 1 November 2013). An analysis of the number of Directors of the Group whose remuneration falls under each range is set out below: Number of Directors Remuneration band Executive Non-Executive Below RM50,000-3 RM50,001 RM100, RM750,001 RM800, Total: 2 3 The disclosure of Directors remuneration is made in accordance with Appendix 9C, Part A, item 11 of the AMLR. C. RELATIONS WITH SHAREHOLDERS The Company recognises the importance of keeping shareholders and investors informed of the Group s business and corporate developments. The Company s annual reports, quarterly financial results and any announcements on material corporate exercises are the primary modes of disseminating information on the Group s business activities and financial performance. Shareholders and members of the public are invited to access the Company s website at and Bursa Malaysia Securities Berhad website at to obtain the latest information on the Group. The Annual General Meeting ( AGM ) is the principal forum for dialogue and interaction with individual shareholders and investors where they may seek clarifications on the Group s businesses. Shareholders are notified of the meeting and provided with a copy of the Company s Annual Report 21 days before the meeting. All Directors are available to provide responses to questions from shareholders during this meeting. External Auditors are also present to provide their professional and independent clarification on issues and concerns raised by shareholders. In the event that an answer cannot be readily given at the meeting, the Chairman will undertake to provide a written reply to the shareholder. At the commencement of the voting process during the AGM, the shareholders were informed of their rights to demand a poll vote. The Board is of the view that with the current level of shareholders attendance at general meetings, voting by show of hands continues to be efficient. The Board will evaluate the feasibility of carrying out electronic polling at its general meetings in future.
8 Page 28 Taking Off Into New Horizons D. ACCOUNTABILITY AND AUDIT 1. Financial Reporting In presenting the annual financial statements and quarterly announcements of results to shareholders, the Directors are committed to present a balanced and fair assessment of the Group s position and prospects. The financial reports are also reviewed by the Audit Committee to ensure adequacy of information disclosed prior to submission to the Board for approval. The Board considers that in preparing the financial statements, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. 2. Internal Control The Board continues to review and evaluate the effectiveness of the Group s systems of internal control to safeguard the shareholders investment and the Group s assets. During the financial year, four (4) meetings were held with the outsourced professional service provider, Messrs Sterling Business Alignment Sdn Bhd. Meeting were held on 28th February 2013, 22nd May 2013, 26th August 2013 and 26th November More information on the Group s internal control is presented in the Statement on Risk Management & Internal Control set out on page 31 of this Annual Report. 3. Relationship with the External Auditors The Board has established a close and transparent relationship with the External Auditors of the Company. The External Auditors, Messrs Baker Tilly Monteiro Heng were invited to the Audit Committee Meetings on 28th February 2013 to brief the Audit Committee on specific issues arising from the annual audit of the Group and to give appropriate advice in ensuring due compliance with the approved accounting standards. Significant issues raised were taken note by the Management for improvement. In addition, on 28th February 2013 and on 26th November 2013, the Audit Committee met with the External Auditors without the presence of the Management and the Executive Directors. On both occasions, no issues of concern were raised by the External Auditors. This is in compliance with the Code. E. COMPLIANCE WITH THE CODE The Group has complied throughout the financial year with the principles and recommendations of the Code except for the balance of power and authority between Chairman and Chief Executive Officer where the Chairman of the Board is not an Independent Director. Deviation from the Code is explained above on page 21 Board Composition. F. STATEMENT OF DIRECTORS RESPONSIBILITIES The Directors affirm that they are responsible for ensuring the financial statements of the Group are drawn up in accordance with the requirements of the applicable approved Financial Reporting Standards in Malaysia and the AMLR of Bursa Malaysia and that the financial statements give a true and fair view of the state of affairs of the Group at the end of the financial year and of the results of the operations and of the cash flows of the Group for the financial year then ended. In preparing the financial statements, the Directors have: adopted the applicable approved Financial Reporting Standards in Malaysia; applied the appropriate and relevant accounting policies on consistent basis; made judgements and estimates that are reasonable and prudent; prepared the financial statements on going concern basis; and ensured that proper accounting records are kept so as to enable the preparation of the financial statements with reasonable accuracy. The Directors have also taken reasonable steps to safeguard the assets of the Group, and to prevent and detect fraud as well as other irregularities.