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CORPORATE GOVERNANCE REPORT
STOCK CODE : 3026
COMPANY NAME : DUTCH LADY MILK INDUSTRIES BERHAD
FINANCIAL YEAR : December 31, 201 9 OUTLINE: SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing Requirements. SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES PERSUANT CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA MALAYSIA Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures) of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is only applicable for financial institutions or any other institutions that are listed on the Exchange that are required to comply with the above Guidelines.
SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE
Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing Requirements. Intended Outcome Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1. The board should set the company’s strategic aims, ensure that the necessary resources are in place for the company to meet its objectives and review management performance. The board should set the company’s values and standards, and ensure that its obligations to its shareholders and other stakeholders are understood and met. Application : Applied Explanation on application of the practice : The Board plays an active role in the development of the Company’s strategy. At each Board meeting, the Managing Director reports to the Board on various management issues such as the Company’s business performance, marketing strategies, commercial performance, risk management, sustainability initiatives and other matters of strategic importance and the Board reviews and deliberates on these matters. The Board also receives a comprehensive summary of the Company’s financial performance from the Finance Director for each quarterly reporting period. In November 201 9 , the Board together with Management deliberated on the financial budget for the financial year ending 31 December 2020 and the same was approved for implementation. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1. The positions of Chairman and CEO are held by different individuals. Application : Applied Explanation on application of the practice : The roles of the Chairman and the Managing Director are separate and there is a clear division of responsibilities between them. The Managing Director is an appointee of the major shareholder and heads the Management Team. He is primarily responsible for the day to day management of the business and operations of the Company. The Chairman is an independent director who has never assumed an executive position in the Company. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
Every company is headed by a board, which assumes responsibility for the company’s leadership and is collectively responsible for meeting the objectives and goals of the company. Practice 1. The board is supported by a suitably qualified and competent Company Secretary to provide sound governance advice, ensure adherence to rules and procedures, and advocate adoption of corporate governance best practices. Application : Applied Explanation on application of the practice : The Company Secretary is a licensed secretary qualified to act as Company Secretary under Section 235 of the Companies Act 2016. She has legal qualifications and provides legal and company secretarial advice to the Company’s Management Team and the Board as a whole. All Board members have access to the advice and services of the Company Secretary in carrying out their duties. The Company Secretary facilitates overall compliance with the Listing Requirements, the Companies Act 2016 and the recommendations in compliance with the Malaysian Code on Corporate Governance (as amended from time to time). Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
There is demarcation of responsibilities between the board, board committees and management. There is clarity in the authority of the board, its committees and individual directors. Practice 2. The board has a board charter which is periodically reviewed and published on the company’s website. The board charter clearly identifies– ▪ the respective roles and responsibilities of the board, board committees, individual directors and management; and ▪ issues and decisions reserved for the board. Application : Applied Explanation on application of the practice : Since 2014, the Board has adopted a Board Charter which sets out the Board’s strategic intent and outlines the Board’s roles and responsibilities, the vision, mission, shared values and principles, as well as the policies and strategic development of the Company. The Board Charter specifies clearly the roles and responsibilities of the Board, the Board Committees, individual directors and management. The latest update to the Charter was approved by the Board in November 2019. The Charter is available for reference at the Company’s website at www.dutchlady.com.my Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
The board is committed to promoting good business conduct and maintaining a healthy corporate culture that engenders integrity, transparency and fairness. The board, management, employees and other stakeholders are clear on what is considered acceptable behaviour and practice in the company. Practice 3. The board establishes a Code of Conduct and Ethics for the company, and together with management implements its policies and procedures, which include managing conflicts of interest, preventing the abuse of power, corruption, insider trading and money laundering. The Code of Conduct and Ethics is published on the company’s website. Application : Applied Explanation on application of the practice : Specific principles and procedures in the manner the Company conducts its business are clearly spelt out in the Royal FrieslandCampina (RFC) Code of Business Conduct which has been adopted by the Company. The Code of Business Conduct is known as “Compass” and is designed to set a certain standard for all employees and officers of the Company. It promotes integrity in the workplace with focus on safety, rights of employees and human rights, sustainability and avoidance of conflicts of interest. Compass also promotes integrity in business practices with focus on anti-bribery and anti-corruption, gifts and hospitality, fair competition, and fair communication. Finally, Compass focusses on the protection of the Company’s interests with focus on protection of confidential information, data protection, integrity of financial reporting and the prevention of fraud. A copy of Compass is available on the Company’s website at www.dutchlady.com.my. In addition to Compass, the Company has adopted RFC’s anti-bribery and corruption policy known as the Doing Honest Business Policy (“DHB Policy”). The DHB Policy is a policy to conduct business in an honest and ethical manner. The policy has been localized to set out values in Malaysian Ringgit for easier application by the Company’s employees and stakeholders. The Company’s business partners are also required to conduct business in the manner set out in RFC’s Business Practices for Business Partners, which the Company has adopted. Compass, the DHB Policy and RFC’s Business Practices for Business Partners are published on the Company’s website.
The board is committed to promoting good business conduct and maintaining a healthy corporate culture that engenders integrity, transparency and fairness. The board, management, employees and other stakeholders are clear on what is considered acceptable behaviour and practice in the company. Practice 3. The board establishes, reviews and together with management implements policies and procedures on whistleblowing. Application : Applied Explanation on application of the practice : Under Compass, employees and other stakeholders have access to the Speak-Up Procedure, which serves as an avenue for employees and other stakeholders to voice out their concerns on matters relating to Compass. The Speak-Up Procedure clearly sets out a well-defined process upon which Compass-related matters can be raised in confidence and in good faith and without fear of reprisal. The Company has also established a procedure whereby certain Speak Up Reports which are of a financial or fraudulent nature will be escalated to the Company’s Audit Committee. A copy of the Speak Up Procedure is available on the Company’s website at www.dutchlady.com.my. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
Board decisions are made objectively in the best interests of the company taking into account diverse perspectives and insights. Practice 4. At least half of the board comprises independent directors. For Large Companies, the board comprises a majority independent directors. Application : Departure Explanation on application of the practice
Explanation for departure : Currently the board consists of 4 independent and 4 non-independent directors. Of the 4 non-independent directors, 3 are nominees of Royal FrieslandCampina N.V, and 1 is a nominee of Permodalan Nasional Berhad. The Company’s major shareholder is a foreign co-operative of farmers. The Board considers that the current composition fairly reflects the foreign direct investment and the investment of the minority shareholders. The proportion of independent directors ensures effective checks and balances on the Board and the independent directors effectively safeguard the interest of the minority shareholders. Alternative: The Company has an equal number of independent and non- independent directors. Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : The Board shall consist of an equal number of independent and non- independent directors by 2020 Timeframe : Achieved
Board decisions are made objectively in the best interests of the company taking into account diverse perspectives and insights. Practice 4.3- Step Up The board has a policy which limits the tenure of its independent directors to nine years. Application : Not adopted Explanation on adoption of the practice
Board decisions are made objectively in the best interests of the company taking into account diverse perspectives and insights. Practice 4. Appointment of board and senior management are based on objective criteria, merit and with due regard for diversity in skills, experience, age, cultural background and gender. Application : Applied Explanation on application of the practice : The Company’s Board consists of qualified individuals with a good mix of operational and commercial experience. Members of the Board have both local and international experience and together, they bring a wide range of competencies, capabilities, technical skills and relevant business experience. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
Board decisions are made objectively in the best interests of the company taking into account diverse perspectives and insights. Practice 4. In identifying candidates for appointment of directors, the board does not solely rely on recommendations from existing board members, management or major shareholders. The board utilises independent sources to identify suitably qualified candidates. Application : Applied Explanation on application of the practice : In respect of the appointment of all directors, the Nominating & Remuneration Committee considers shortlisted candidates based on their profiles, professional achievements and personality assessments. Appropriate candidates for independent directors are sourced through recruitment firms based on the needs of the Board. The Nominating & Remuneration Committee then ensures that the candidates are suitable and of sufficient calibre for recommendation for the approval of the Board. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
Board decisions are made objectively in the best interests of the company taking into account diverse perspectives and insights. Practice 4. The Nominating Committee is chaired by an Independent Director or the Senior Independent Director. Application : Applied Explanation on application of the practice : The Chairman of the Nominating & Remuneration Committee is the Senior Independent Director. Explanation for departure
Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : Timeframe :
carried out on a periodic basis. Alternative: Internally conducted annual assessment on Board effectiveness. Large companies are required to complete the columns below. Non-large companies are encouraged to complete the columns below. Measure : To carry out a review on Board effectiveness using External Consultants on a periodic basis. Timeframe : Within 1 year
The level and composition of remuneration of directors and senior management take into account the company’s desire to attract and retain the right talent in the board and senior management to drive the company’s long-term objectives. Remuneration policies and decisions are made through a transparent and independent process. Practice 6. The board has in place policies and procedures to determine the remuneration of directors and senior management, which takes into account the demands, complexities and performance of the company as well as skills and experience required. The policies and procedures are periodically reviewed and made available on the company’s website. Application : Applied Explanation on application of the practice : The policy for Directors’ remuneration is to provide a remuneration package needed to attract, retain and motivate directors of quality required to supervise and/or manage the business of the Company. The Non-Executive Directors are paid fixed annual directors’ fees as members of the Board and these are approved by shareholders at the Annual General Meeting. The remuneration for the Managing Director of the Company is based on the human resource policies and procedures of the RFC Group. The Company follows the performance appraisal system and compensation and benefits scheme of the RFC Group. For the Managing Director, corporate and individual performance are rewarded through the use of an integrated pay benefits and bonus structure. Market competitiveness, business results and individual performance are also considered by the RFC Group in evaluating the Manging Director’s remuneration. The Company’s Remuneration Policy is available on the Company’s website at www.dutchlady.com.my. Explanation for departure
