• Corporate Governance

Board's Commitments

The Board of Directors (“Board”) of P.I.E. Industrial Berhad (“PIE” or “the Company”) is committed to ensure that good corporate governance is being practised by the Group in order to safeguard stakeholders’ interests as well as enhancing shareholders’ value.  


This Statement sets out the manner in which the Group has applied and the extent of compliance with the undermentioned principles and recommendations as set out in the Malaysian Code on Corporate Governance 2012 (“MCCG 2012” or “the Code”):-

1.    Establish Clear Roles and Responsibilities
2.    Strengthen Composition
3.    Reinforce Independence
4.    Foster Commitment
5.    Uphold Integrity in Financial Reporting
6.    Recognise and Manage Risks
7.    Ensure Timely and High Quality Disclosure
8.    Strengthen Relationship Between Company and Shareholders

The Board has assessed the level of corporate governance practiced in the Group and confirms that unless otherwise stated in this Statement, the Group has complied with all the principles and recommended best practices throughout the financial year ended 31 December 2014 (“FYE2014”).



1. Establish Clear Roles and Responsibilities
i) Board Roles and Responsibilities

The Board recognised its stewardship responsibility to lead the Group towards the highest level of corporate governance, strategic decisions and standard of conducts. To ensure the effective discharge of its function and responsibilities, the Board established an internal governance model for delegating of specific powers of the Board to the relevant Board Committees, the Managing Director (MD) and the Senior Management of the Company. The Board has direct access to Senior Management and has unrestricted and immediate access to information relating to the Group’s business and affairs in the discharge of their duties. The Board will consider inviting the Senior Management to attend meetings for reporting on major issues relating to their respective responsibility.

In general, the Non-Executive Directors are independent of Management. Their roles are to constructively challenge Management and monitor the success of Management in delivering the approved targets and business plans within the risk appetite set by the Board. They have free and open contact with Management at all levels, and they engage with the external and internal auditors to address matters concerning Management and oversight of the Company’s business and operations.

The Board delegates the day-to-day management to the MD and Senior Management, but reserves for its consideration significant matters such as following:
•    Approval of financial results
•    Declaration of dividends

The Board has approved a board charter (“Board Charter”) which sets out a list of specific functions that are reserved for the Board. The Board Charter addresses, which include amongst others, the Board obligations and liabilities, Directors’ Code of Ethics, role of the Board, Chairman and Managing Director, appointment of new directors, the right balance and composition of the Board, remuneration policy and the establishment of Board Committees together with the required mandate and activities.

The Board will review the Board Charter periodically to ensure their relevance and compliance. The Board has made available its Board Charter on the corporate website.

There is a clear division of responsibilities between the Chairman and the MD to ensure that there is a balance of power and authority. The Chairman is not related to the MD. The Chairman is responsible for the Board’s effectiveness and conduct. He also promotes an open environment for debate and ensures effective contributions from Non-Executive Directors. The Chairman also exercises control over the quality, quantity and timeliness of information flow between the Board and Management. At a general meeting, the Chairman plays a role in fostering constructive dialogue between shareholders, Board and Management. The MD has overall responsibilities over the operating units, organisation effectiveness and implementation of Board’s policies and decisions.

The Board promotes good corporate governance in the application of sustainability practices throughout the Group, the benefits of which are believed to translate into better corporate performance. A report on sustainability activities, demonstrating PIE’s commitment to the global environmental, social, governance and sustainability agenda, is detailed in the Corporate Social Responsibility Statement of this Annual Report.


ii) The Balance and Composition of the Board

The present Board of Directors, headed by the Chairman is comprised of:
- 3 Executive Directors
- 1 Non-Independent, Non-Executive Director
- 2 Independent, Non-Executive Directors and 1 Senior Independent, Non-Executive Director

The composition of the Board is in compliance with the Main Market Listing Requirements (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the Code. It also balanced to reflect the interests of the major shareholders, management and minority shareholders. Collectively, the Directors bring a wide range of business and financial experience relevant to the direction of the Group.

The Board is well balanced with the presence of Independent Non-Executive Directors who are of caliber and collectively provide independent assessments and judgments in the decision making process of the Board.


iii) Directors’ Code of Ethics

The Code of Ethics for Directors includes principles relating to their duties, conflict of interest and dealings in securities are available at the Company’s website.


Presently, the Group does not have the Whistleblower Policy and Procedures (WPP). As a measure to govern the conduct of its employees, the Management would be guided by its Employees Hand Book. The Board recognized that the WPP is to foster an environment where integrity and ethical behavior are maintained and any illegal or improper action and/or wrongdoing in the Group may be exposed. As such, the Board is in the midst of reviewing an effective framework on whistle-blowing for an extensive fraud prevention and detection.


iv) Board Meetings

The Board governs the operations of the Group. The Board meets regularly, at least once in a quarter, with additional meetings held as necessary to formulate and adopt strategic business plan for the Group, to evaluate the impact of risks affecting the operations of the Group and to formulate appropriate risk management system.


Agenda and documents relevant to the Board meetings are circulated at least 7 days in advance to the Directors for their review before the meetings to ensure the effectiveness of the Board meetings. Any additional information requested by the Directors will be provided in timely manners.

The Chairman of the Audit Committee would inform the Directors at Board meeting, of any salient audit findings deliberated at the Audit Committee meetings and which require the Board’s notice or direction.


v) Board Committees
a) Audit Committee

The Audit Committee of PIE is comprised of:
Chairman:    
Loo Hooi Beng (Independent Non-Executive Director)
Members:    
Ahmad Murad Bin Abdul Aziz (Senior Independent Non-Executive Director)
Khoo Lay Tatt (Independent Non-Executive Director)

The Audit Committee meets at least once every quarter.


b) Nominating Committee

The Company has on 22 February 2013 established the Nominating Committee and comprises exclusively of Non-Executive Directors with a majority of whom must be independent, as follows:
Chairman:
Ahmad Murad Bin Abdul Aziz (Senior Independent Non-Executive Director)
Member:    
Loo Hooi Beng (Independent Non-Executive Director)
Khoo Lay Tatt (Independent Non-Executive Director)

 

c) Risk Management Committee

 

The Company has on 23 May 2014 established the Risk Management Committee and its members comprised of:

 

Chairman:
Loo Hooi Beng (Independent Non-Executive Director)
Member:    
representative from each major business units to be identified by the Management from time to time
Secretary:    
to be assumed by the Internal Auditors


vi) Supply of Information

 

The Chairman ensures that all Directors have full and timely access to information with an agenda on matters requiring Board’s consideration issued with appropriate notice and in advance of each meeting to enable Directors to obtain further explanations during the meeting, where necessary.

 


The Directors meet to review and approve all corporate announcements, including the announcement of the quarterly interim financial reports, before releasing them to the Bursa Securities.

 


All Directors have direct access to the advice and services of the Company Secretaries. The Company Secretaries, whose appointment and removal is the responsibility of the Board collectively, are qualified professionals with the necessary experience to advise the Board. The Company Secretaries play an advisory role to the Board in relation to the Company’s constitution, Board’s policies and procedures and compliance with the relevant regulatory requirements, codes or guidance and legislations. The Company Secretaries support the Board by ensuring that all Board meetings are properly conducted and deliberations at the Board and Board Committee meetings are well captured and recorded. The Company Secretaries also keep the Board update on new statutes and directives issued by the regulatory authorities, and the resultant implications to the Company and the Directors in relation to their duties and responsibilities.

 


When necessary, the Directors could request for the service of independent professional advisors at the cost of the Company.

 


In leading and controlling the operations of the Group, the Board is assisted by the Board of Directors of each individual subsidiary that is primarily responsible to carry out decisions made by the Board. The Executive Directors of the Company also participate in management meeting of certain subsidiaries to ensure that decisions made by the Board are disseminated and delegated effectively to the management of the subsidiaries.



2. Strengthen Composition
i) Nominating Committee

The Company strives to have a Board comprising members with suitable academic and professional qualifications, skills, expertise and wide exposure.


The Company has in place its procedures and criteria for appointment of new directors. All candidates for appointment are first considered by the Nominating Committee, taking into account the mix of skills, competencies, experience, professionalism and other relevant qualities required to well manage the business, with the aim to meet the current and future needs of the Board composition. The Nominating Committee also evaluates the candidates’ character and ability to commit sufficient time to the Group. Other factors considered for appointment of Independent Director will include the level of independence of the candidates. During the financial year ended 31 December 2014, no new director was appointed.


The Nominating Committee has also established a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole. The criteria for assessment of Directors shall include attendance record, intensity of participation at meetings, quality of interventions and special contributions.


On 27 February 2015, an assessment of the effectiveness of the Board, respective Board Committee and Independence (“the Assessment”) were carried out in respect of the financial year ended 31 December 2014. Appraisal form which comprising quantitative and qualitative performance criteria to evaluate the performance of each member of the Board as well as each Board Committee, were being circulated at the Meeting for assessment. The Nominating Committee reviewed the required mix of skills, experience and other qualities of the Board and Board Committee and agreed that it has the necessary mix of skill, experience and other necessary qualities to serve effectively.


ii) Appointment and Re-election of Director

a)    Appointment of Directors

The Code requires a formal and transparent procedure to be established for appointment of new Directors to the Board. The Code also endorses the establishment of a nominating committee, comprised exclusively of Non-Executive Directors, a majority of whom are Independent to propose new nominees to the Board and to assess directors on an on-going basis.


The Nominating Committee had been established on 22 February 2013 by the Board. The Nominating Committee is responsible for assessing the nominee(s) for directorship and Board Committee membership and thereupon submitting their recommendation to the Board for decision. Procedures and criteria for appointment of new directors are disclosed in item 2 (i) aforesaid.


b)    Re-election of Directors

Pursuant to Section 129(2) of the Companies Act, 1965, Directors who are over the age of 70 years shall retire at every annual general meeting and may offer themselves for re-appointment to hold office until next annual general meeting.


In accordance with the Company’s Articles of Association (“Articles”), all Directors are subject to election at the AGM following their appointment.


The Articles also provide that at least one-third of the remaining Directors be subject to re-election by rotation at each AGM.


The current terms of all directors are less than three years. This is in compliance with the provision of the requirement of the Code that all directors are required to submit themselves for re-election at regular intervals and at least every three years.


The performance of those Directors who are subject to re-appointment and re-election of Directors at the AGM will be assessed by the Nominating Committee whereupon recommendations are submitted to the Board for decision on the tabling of the proposed re-appointment or re-election of the Director concerned for shareholders’ approval at the next AGM.


Also, during the Assessment, the Nominating Committee recommended to the Board on those Directors who retire pursuant to Article 98 (1) of the Articles, being eligible, to seek re-election during the Annual General Meeting to be held on 25 May 2015.


Notwithstanding the recommendation of the Code, the Board is presently of the view that there is no necessity to fix a specific gender diversity policy. The Board is also of the view that it is a challenge to the Group to get a female director with relevant experience and qualification in the wire and cable manufacturing industry. However, the Board will endeavor to tap talent from human capital market from time to time with the aim to have at least one female director in its Board in future.


c)    Directors’ Remuneration

It is vital for the Group to attract and retain Directors of the necessary caliber to run the Group successfully. In line with requirements of the Code, the Group has established a remuneration policy for the Directors.

Given the present size of the Board, the Board has decided not to set up a remuneration committee as recommended by the Code. As an alternative, the Board formulated the following policy for fixing remuneration packages of each Director:
1.    Determination of remuneration of Directors remained a collective decision of the Board.
2.    The remuneration package of Executive Directors shall be determined based on the performance of the Group, the responsibilities, the experience required and the contribution by each individual Director in comparison to the industry norm.
3.    The remuneration of Non-Executive Directors should be reflective of their experience, level of responsibilities and the contribution by each individual Director.
4.    All Directors are entitled to directors’ fee that is subject to shareholders’ approval.
5.    Other than directors’ fee, Executive Directors shall be entitled to salary and bonus, statutory contribution and other allowances incidental to the performance of their duties.
6.    The Board shall meet at least once in a financial year to deliberate on the remuneration packages for the Directors.
7.    In determining the remuneration package of each Director, the Director concerned will abstain from the discussion.
8.    The Board may obtain independent professional advice in formulating the remuneration package of its Directors.


3. Reinforce Independence

The Independent Non-Executive Directors are not employees and they do not participate in the day-to-day management as well as the daily business of PIE. They bring an external perspective, constructively challenge and assist the Company to develop corporate strategy, scrutinize the performance of Management in meeting approved goals and objectives, and monitor the risk profile of the Company’s business.

 


The Nominating Committee played an important role to assist the Board in assessing the independence of Non-Executive Directors of the Company on annual basis. The Nominating Committee develops the criteria to assess independence of Independent Director, include but not limited to directors’ background, family relationships, interest of shareholdings in the Company and related party transactions with the Group. Each of the 3 Independent Non-Executive Directors has provided an annual confirmation of their independence to the Nominating Committee and the Board in FYE2014.

 


Based on the Assessment conducted by the Nominating Committee, the Board is generally satisfied and concluded that each of the 3 Independent Non-Executive Directors continues to demonstrate conduct and behavior that are essential indicator of independence, and that each of them continues to fulfill the definition of independence as set out in LR

 


En. Ahmad Murad Bin Abdul Aziz is the Senior Independent Non-Executive Director and Chairman of the Company who has served the Company for more than nine years. In accordance with the Malaysian Code on Corporate Governance 2012 (Code), the tenure of an independent director should not exceed a cumulative term of nine years. After having assessed the independence of En. Ahmad Murad and also the Assessment by the Nominating Committee, the Board is satisfied that En. Ahmad Murad during his tenure as Senior Independent Non-Executive Director and Chairman of the Company has neither clouded his judgment nor his assessment, and has not prejudiced his objectivity in the discharge of his role and responsibilities as an Independent Director. The length of his service on the Board does not in any way interfere with his exercise of independent judgment and ability to act in the best interests of the Group. En. Ahmad Murad has been demonstrably independent in carrying out his roles as Member of the Audit Committee, notably in fulfilling his roles as Chairman of the Board and Nominating Committee. In addtion, he also has the necessary knowledge of the business and operations of the Group and has the experience to make informed decision and participate actively and contribute positively during deliberations or discussions at Board Meetings. The Board has assessed and with the recommendation of the Nominating Committee, strongly recommend to the members of the Company to vote in favour of the resoluion for Ahmad Murad Bin Abdul Aziz to continue to serve as Senior Independent Non-Executive Director of the Company.

 


Notwithstanding the recommendation of the Code, the Board is presently of the view that there is no necessity to fix a maximum tenure limit for Directors as there are significant advantages to be gained from the long-serving Directors who possess tremendous insight and knowledge of the Company’s businesses and affairs. Similarly, the Board does not set a time-frame on how long an Independent Director should serve on the Board, mainly for the following reasons:-

 

•    The ability of a Director to serve effectively as an Independent Director is very much dependent on his calibre, qualification, experience and personal qualities, particularly his integrity and objectivity, and has no real connection to his tenure as an Independent Director.
•    Nominating Committee would conduct an annual assessment of Independent Directors in respect of inter-alia their skills, experience and contributions, and whether the Independent Directors are able to discharge their duties with unbiased judgment. Furthermore, the Nominating Committee also would review the Directors Profile of Independent Directors and assess its family relationship, interest of shareholdings in the Company and related party transactions with the Group (if any).



4. Foster Commitment

i) Discharged of Duties

 

All the Non-Executive directors have committed sufficient time to carry out their duties for the tenure of their appointments, whether as members of standing Board Committees or whether required to carry out special duties as members of Ad-Hoc Board Committees.

 


The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities as Directors of PIE. This is evidenced by the attendance record of the Directors at Board meetings as disclosed in Item (1)(iv) aforesaid.

 


To facilitate the Directors’ time planning, an annual meeting calendar is prepared and circulated in Q4 to all Directors before the beginning of every year.

 


The Directors are required to submit an update on their other directorships from time to time for monitoring of the number of directorships held by the Directors of PIE and for notification to Companies Commission of Malaysia accordingly.

 

ii) Directors’ Training

 

All the Directors have attended and successfully completed the Mandatory Accreditation Programme (MAP) conducted by Bursatra Sdn. Bhd. to enhance their skills in the area of corporate governance.

 


The Directors are mindful that they should continue to attend training programmes to enhance their skills and knowledge where relevant, as well as to keep abreast with the changing regulatory and corporate governance developments. 



5. Uphold Integrity in Financial Reporting

In presenting the annual financial statements and quarterly announcement of interim financial results to the shareholders, the Board aims to provide and present a balanced and understandable assessment of the Group’s financial performance and prospects. The Board is assisted by the Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting. At the same time, the Audit Committee is assisting the Board in ensuring the accuracy, adequacy and completeness of the financial information to be disclosed. The financial reports will be reviewed and approved by the Audit Committee prior to tabling them to the Board for approval.


The following activities were carried out by the Audit Committee during the FYE2014 on discharging of its duties and responsibilities, amongst others:
•    Reviewed the draft quarterly results and year-end financial statements prior to submission to the Board for approval;
•    Reviewed the risk assessment reports of major subsidiaries and approved the internal audit plan prepared by internal auditor;
•    Reviewed the audit reports and related party transaction reports issued by the internal auditors and the implementation of audit recommendations.        
•    Discussed with the external auditors before the audit commences, the nature and scope of the audit.
•    Reviewed the external auditors’ management letter and management's response.


The Board maintains a transparent relationship with external auditors. Members of the Audit Committee meet the external auditors at least twice a year without the presence of the executive Board members to discuss the results and concerns arising from their audit.  Two discussion sessions between the Audit Committee and the external auditors were held on 4 April 2014 and 14 November 2014 respectively.


The Audit Committee had obtained written assurance from its external auditors, Messrs. KPMG, confirmed that they are, and have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.

 


6. Recognise and Manage Risks

 

The Board is fully aware of its responsibility to safeguard and enhance the value of shareholders in the Group. Since the listing of the Company, the Board has continuously placed emphasis on the need for maintaining a sound system of risk management and internal control.

 


In this regard, major internal control systems are documented and followed by the management of the Group. To enhance the effectiveness of risk management and internal control systems, the Board had in March 2002, established an internal audit function with the assistance of an external professional firm.

 


The internal auditors will be able to provide additional independent review on the state of risk management and internal control of the Group and has an independent reporting channel to Audit Committee. The Audit Committee reviews, deliberates and decides on the next course of action and evaluates the effectiveness and efficiency of the risk management and internal control systems in the organization.

 


With the expertise of internal auditor, the Groups’ system of risk management and internal control comprised of the following key elements:

 

•    The Group has adopted the Enterprise Risk Management (“ERM”) framework for all major subsidiaries. With the ERM, departments of the said subsidiaries are required to identify risks and evaluate control within key functions/activities of their business processes. A report has been provided to the management of the respective subsidiaries to enable them to review, discuss and monitor the risk profiles and implementation of action plans;
•    The risk profiles and status of the action plans are reviewed on a yearly basis by the Risk Management Committee;
•    The Group’s Audit Committee reviews internal control issues identified by the internal auditors, the external auditors, regulatory authorities and management, and evaluate the adequacy and effectiveness of their risk management and internal control systems. They also review the internal audit functions with particular emphasis on the scope and frequency of audits and the adequacy of resources. ;
•    Professional service firm is engaged by the Board as internal auditors to review compliance with policies and procedures and the effectiveness of their risk management and internal control systems and report any significant non-compliance. Audits are carried out on major subsidiaries, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report on operational and management activities of these subsidiaries. The annual audit plan is reviewed and approved by the Audit Committee. The audit findings are submitted to the Audit Committees for review at their periodic meetings. The system of risk management and internal control is reviewed regularly to ensure that its functions are carried out as planned and remains effective and applicable given the passage in time and change in business scenarios;
•    There are guidelines within the Group for hiring and termination of staff, formal training programmes for staff and annual performance appraisals to enhance the level of staff competency in carrying out their duties and responsibilities;
•    The Board receives and reviews reports from management on a regular basis. These reports include the accounts and financial information reports which are tabled to Board at their periodic meetings;
•    There are authority limits imposed on executive directors and management within the Group in respect of the day-to-day operation, investment, acquisitions and disposal of assets;
•    Policies and procedures are set out in operations manuals, guidelines and directives issued by the Group which are updated from time to time to ensure compliance with internal controls and the relevant laws and regulations.

 


A Risk Management Committee’s Meeting chaired by Mr. Loo Hooi Beng was held 17 June 2014, to discuss and review on the risks of the major subsidiaries as set out in the Risk Management Report dated April 2014, with the business/operations heads and the internal auditors.

 


The risk management and internal control systems are designed to manage and mitigate rather than eliminate the risk of failure in achieving the Company’s corporate objective and safeguarding the Company’s assets as well as investors’ interests.

 


On 6 March 2015, the Board received assurance from the Managing Director and the Chief Financial Officer that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management and internal control system of the Group.



7. Ensure Timely and High Quality Disclosure

 

The Board exercise close monitoring of all price sensitive information potentially required to be released to Bursa Securities and makes material announcements to Bursa Securities in a timely manner as required. In line with best practices, the Board strives to disclose price sensitive information to the public as soon as practicable through Bursa Securities and the Company’s website.

Price sensitive information is defined as any information that on becoming generally available would tend to have a material effect on the market price of the Company’s listed security. The Company Secretary is responsible to compile such information for the approval of the Board soonest possible and release such information to the market as stipulated by Bursa Securities.

 


The Company will enhance the disclosures on its website for broader and effective dissemination of information to its stakeholders from time to time.



8. Strengthen Relationship Between Company and Shareholders

PIE dispatches its notice of AGM to shareholders more than 21-days before the AGM, in advance of the notice period as required under the Companies Act, 1965 and LR. The additional time given to shareholders allows them to make necessary arrangements to attend and participate either in person, by corporate representative, by proxy or by attorney.

In line with the requirement of the LR and the Code, material information is disseminated to shareholders and investors on a timely basis. The Group maintains a corporate website at www.pieib.com.my which provides information, include:

1.    Quarterly results
2.    Annual reports
3.    Announcements
4.    Circular to shareholders
5.    Other important announcements

The above information also could be accessed through Bursa Securities website at www.bursamalaysia.com

The Articles of the Company further accord proxies the same rights as members to speak at the general meeting. Essentially, a corporate representative, proxy or attorney is entitled to attend, speak and vote both on a show of hands and on a poll as if they were a member of the Company. In addition to the above, time will be allocated during AGM for dialogue with shareholders to address issues concerning the Group.

The Board will consider adopting electronic voting to facilitate greater shareholder participation at general meetings, and to ensure accurate and efficient outcomes of the voting process.

In compliance with the recommended best practice by the Code, the Board has appointed En. Ahmad Murad Bin Abdul Aziz as a Senior Independent Non-Executive Director to whom minority shareholders could convey their concern over the operations of the Group. His contact information is as follows:

                           P.I.E. Industrial Berhad
                           Plot 4, Jalan Jelawat 1
                           Seberang Jaya Industrial Estate,
                           13700 Prai, Penang, Malaysia
                           Tel: 04-399 0401   Fax: 04-399 5669