Establish Clear Leadership Role and Responsibilities of the Board
The board should demonstrate a thorough understanding of its leadership role, assume its responsibilities in overseeing the company, and strengthen good governance, including:
(1) defining objectives;
(2) determining means to attain the objectives; and
(3) monitoring, evaluating, and reporting on performance.
To achieve sustainable value creation, the board should exercise its leadership role and pursue the following governance outcomes:
(1) competitiveness and performance with long-term perspective;
(2) ethical and responsible business;
(3) good corporate citizenship; and
(4) corporate resilience
1.2.1 In evaluating the performance of the company, the board should not just consider the company’s financial results but also take into account non-financial performance such as its ethical performance and impact on stakeholders, society and the environment.
1.2.2 The board should assume a leadership role in creating and driving a culture of compliance and ethical conduct throughout the company, and lead by example.
1.2.3 The board should ensure the creation of written policies and guidelines, such as a corporate governance policy, codes of ethics, and business conduct, applicable to all directors, executives, employees and staff of the company.
1.2.4 The board should ensure effective implementation including regular communication of the company’s policies and guidelines to all directors, executives, employees and staff. The board should ensure adequate mechanisms are in place for monitoring, reviewing and reporting compliance with the company’s policies and guidelines.
The board should ensure that all directors and executives perform their responsibilities in compliance with their fiduciary duties, and that the company operates in accordance with applicable law and standards.
1.3.1 In assessing whether directors and executives have performed their fiduciary duties with the required responsibility, due care and loyalty, reference should be made to the applicable law and standards, including those contained in the Securities and Exchange Act of Thailand 1992.
Securities & Exchange Act B.E. 2535 (1992)
SECTION 89/7 In conducting the business of the company, a director and an executive shall perform his duty with responsibility, due care and loyalty, and shall comply with all laws, the objectives, the articles of association of the company, the resolutions of the board of directors and the resolutions of the shareholders’ meeting.
SECTION 89/8 In performing duty with responsibility and due care, a director and an executive shall act in the similar manner as an ordinary person undertaking the like business under the similar circumstance.
Any matter proven by the director or executive that, at the time of considering such matter, his decision has met the following requirements shall be deemed that the said director or executive has performed his duty with responsibility and due care under the first paragraph:
(1) decision has been made with honest belief and reasonable ground that it is for the best interest of the company;
(2) decision has been made in reliance of information honestly believed to be sufficient; and
(3) decision has been made without his interest, whether directly or indirectly, in such matter.
SECTION 89/9 In considering whether each director or executive has performed his duty with responsibility and due care, the following factors shall be taken into account:
(1) position in the company held by such person at that time;
(2) scope of responsibility in the position of such person in accordance with the laws or as assigned by the board of directors and;
(3) qualification, knowledge, capability, and experience including purposes of appointment.
SECTION 89/10 In performing duty with loyalty, a director and an executive shall:
(1) act in good faith for the best interest of the company;
(2) act with proper purpose and;
(3) not act in significant conflicts with the interest of the company.
1.3.2 The board is responsible for the implementation of adequate systems and controls to ensure that the company complies with applicable law and standards for specified matters, including material investment, related party transaction, acquisition/disposal of assets, and dividend payment decisions.
Principle 1.4The board should demonstrate a thorough understanding of the division of board and management responsibilities. The board should clearly define the roles and responsibilities of management and monitor management’s proper performance of its duties.
1.4.1 The board should adopt a written policy (such as a charter) that clearly sets out the roles and responsibilities of the board and management. The board should regularly review the policy.
1.4.2 The board is responsible and accountable for the overall affairs of the company but may delegate day-to-day managemen duties. The board must provide written directions to management that clearly set out management’s responsibilities.
|Matters for which the board has primary responsibility:||Matters involving shared responsibility of the board and management:||Matters that the board should delegate or not get involved with:|
a) Defining objectives and business model
b) Developing culture of compliance and ethical conduct, and lead by example.
c) Strengthening an effective board structure and practices conducive for achieving the company’s objectives.
d) Ensuring suitable CEO selection, remuneration, development, and performance evaluation.
e) Ensuring appropriate compensation architecture that supports achievement of the company’s objectives.
a) Formulating and reviewing policies and strategies, plans and targets.
b) Ensuring robust system for risk management and internal control
c) Clearly defining management’s responsibilities
d) Overseeing appropriate policies and plans for resource allocation, including HR, IT, and budgeting.
e) Monitoring and evaluating financial and non-financial corporate performance.
f) Ensuring integrity of financial and non-financial information disclosures.
a) Engaging in activities which under normal circumstances are not expected roles of the board, including day-to-day management and decisions (such as procurement and staffing), ongoing monitoring that conduct and operations are in compliance with the company’s policies, strategies, plans, and applicable law and standards.
b) Not getting involved in or influencing matters in which a director may have vested interests.
(1) Matters for which the board has primary responsibility are matters that the board should fully consider. Some matters may be decided following recommendation by management as appropriate.
(2) Matters involving shared responsibility of the board and management are matters requiring joint consideration between the board and management. The board must closely monitor these matters and seek regular reports from management.
(3) Matters that the board should delegate to management are matters in which the board should refrain from active involvement in normal circumstances.
Principle 2.1The board should define objectives that promote sustainable value creation and governance outcomes as a framework for the operation of the company.
Define Objectives that Promote Sustainable Value Creation
2.1.1 The board should ensure that the company has clearly defined objectives that support the company’s business model. The board should ensure company-wide communication of the objectives, for instance, in the form of the company’s vision and values, or principles and purposes.
2.1.2 When developing the business model for sustainable value creation, the board should take into consideration the following factors:ง
(1) the company’s ecosystem, including changes to business conditions and opportunities, and the company’s effective use of innovation and technology;
(2) customers and other stakeholders; and
(3) available resources and competitiveness of the company.
Explanation Here are sample questions for defining the company’s objectives and business model.
(1) What are the purposes of the company?
(2) Who does the company provide products or services for?
(3) What is the company’s value proposition?
(4) How can the company achieve sustainability considering opportunities and risks?
2.1.3 The company’s values should reflect characteristics of good corporate governance, such as accountability, integrity, transparency, and due consideration of social and environmental responsibilities.
2.1.4 The board should promote a good corporate governance culture and strive to have the company’s objectives embedded in company-wide decision-making and conduct through effective communication and leading by example.
Principle 2.2The board should ensure that the company’s annual and medium-term objectives, goals, strategies, and plans are consistent with the long-term objectives, while utilising innovation and technology effectively.
2.2.1 The board should ensure that the company’s annual and medium-term (for example, 3 - 5 years) objectives, goals, strategies, and plans correlate and align with the company’s long-term objectives, while considering the business environment, opportunities, and the company’s risk appetite. The board should ensure that the company’s medium-term objectives, goals, strategies, and plans are annually reviewed and updated as appropriate.
2.2.2 The board should ensure that the company’s strategies and plans take into account all relevant factors influencing the value chain, including the company’s ecosystem, risks, resources, competitiveness, and stakeholders. The board should ensure that a mechanism for stakeholder engagement is in place that:
(1) Clearly defines stakeholder engagement policies, procedures, and practices that enable the company to identify and assess the interests of each stakeholder group.
(2) Clearly identifies stakeholder groups (internal and external, short term and long term) including individuals, groups, and entities, such as employees and staff, investors, customers, business partners, communities, society, environment, government agencies and regulators.
(3) Identifies, prioritises and addresses stakeholder concerns and expectations, considering their level of importance and (potential) impact on the company.
2.2.3 When developing strategies and plans, the board should promote innovation and the use of technology to enhance competitiveness, respond to stakeholder concerns and expectations, and meet social and environmental responsibilities.
2.2.4 In considering the approval of the company’s targets (financial and non-financial), the board should ensure that they are suitable to the company’s business profile, and they do not cause the company to engage in illegal or unethical conduct.
2.2.5 The board should ensure effective communication of the company’s objectives, goals, strategies, plans, and targets throughout the company.
2.2.6 The board should ensure proper resource allocation and effective systems and controls, and monitor the implementation of the company’s strategies and plans.
Strengthen Board Effectiveness
Principle 3.1The board should be responsible for determining and reviewing the board structure, in terms of size, composition, and the proportion of independent directors so as to ensure its leadership role in achieving the company’s objectives.
3.1.1 The board should establish a skills matrix to ensure that the board consists of directors with appropriate and the necessary qualifications, knowledge, skills, experience, character traits, with an appropriate gender and age balance and diversity to achieve the objectives of the company and stakeholder interests. At least one of the non-executive directors should be experienced and competent in the company’s main industry.
3.1.2 The board should determine the proper number of directors to function effectively. It must comprise at least 5 directors and should not be more than 12 directors, depending on the company’s size, type, and complexity of the business.
3.1.3 The proportion between executive directors and non-executive directors should support proper checks and balances to prevent unfettered power of decision and authority by any one individual, whereby:
a) the majority of the board should be non-executive directors, who exercise objective and independent judgement;
b) the number and qualifications of the independent non-executive directors should reflect applicable legal requirements.
The board should ensure that the independent directors and the entire board can fulfil its role and responsibilities efficiently and in the best interest of the company while exercising objective and independent judgement.
3.1.4 The board should explicitly disclose in the company’s annual report and on the website its diversity policies and details relating to directors, including directors’ age, gender, qualifications, experience, shareholding percentage, years of service as director, and director position in other listed companies. Principle 3.2The board should select an appropriate person as the chairman and ensure that the board composition serves the best interest of the company, enabling the board to make its decisions as a result of exercising independent judgement on corporate affairs.
3.2.1 The chairman of the board should be an independent director.
3.2.2 The chairman’s roles and responsibilities are different from those of the chief executive officer. The board should clearly define the roles and responsibilities of both positions. To ensure effective checks and balances of power, the two positions should be held by different individuals.
3.2.3 The chairman is responsible for leading the board. The chairman’s duties should at least cover the following matters:
(1) Oversee, monitor, and ensure that the board efficiently carries out its duties to achieve the company’s objectives.
(2) Ensure that all directors contribute to the company’s ethical culture and good corporate governance.
(3) Set the board meeting agenda by discussing with the chief executive officer which important matters should be included.
(4) Allocate sufficient time for management to propose topics and for directors to debate important matters thoroughly. Encourage directors to exercise independent judgement in the best interest of the company.
(5) Promote a culture of openness and debate through ensuring constructive relations between executive and non-executive directors, and between the board and management.
3.2.4 If the roles and responsibilities of the chairman and the chief executive officer are not clearly separated, for instance, when the chairman and the chief executive officer are the same person, the chairman is not an independent director, the chairman and the chief executive officer are family members, or the chairman is a member of the management team or has been assigned a management role, the board should ensure the balance of power and authority of the board and between the board and management by:
(1) having the board comprise a majority of independent directors, or
(2) appointing a designated independent director to participate in setting the board meeting agenda.
3.2.5 The board should establish the policy that the tenure of an independent director should not exceed a cumulative term of nine years from the first day of service. Upon completing nine years, an independent director may continue to serve on the board, subject to the board’s rigorous review of his/her continued independence.
3.2.6 The board should appoint relevant committees to review specific matters, to screen information, and to recommend action for board approval; however, the board remains accountable for all decisions and actions.
3.2.7 The board should disclose the roles and responsibilities of the board and the committees, the number of meetings and the number of directors participating in meetings in the previous year, board and committee performance. Principle 3.3The board should ensure that the policy and procedures for the selection and nomination of directors are clear and transparent resulting in the desired composition of the board.
3.3.1 The board should establish a nomination committee. The majority of its members and the chairman should be independent directors.
3.3.2 The nomination committee should set the nomination criteria and process consistent with the skills matrix approved by the board and ensure that the candidate’s profile meets the requirements set out in the skills matrix and nomination criteria. Upon proposal to and approval by the board of a candidate, the candidate is presented to the shareholders’ meeting for election and appointment as a director. Shareholders should receive adequate prior notice and sufficient information about candidates up for election at the shareholders’ meeting.
3.3.3 The nomination committee should present a description of the nomination criteria and process, and role and responsibilities of a particular appointment to the board before nominating new directors. If the nomination committee nominates current directors, their performance should be considered.ย
3.3.4 If the board appoints any person as a consultant to the nomination committee, relevant information about that consultant should be disclosed in the annual report, including information about independence and conflicts of interest. Principle 3.4 When proposing director remuneration to the shareholders’ meeting for approval, the board should consider whether the remuneration structure is appropriate for the directors’ respective roles and responsibilities, linked to their individual and company performance, and provide incentives for the board to lead the company in meeting its objectives, both in the short and long term.
3.4.1 The board should establish a remuneration committee with the majority of its members and the chairman being independent directors. The remuneration committee is responsible for setting the remuneration policy.
3.4.2 The remuneration of the board should be consistent with the company’s strategies and long-term objectives, and reflect the experience, obligations, scope of work, accountability and responsibilities, and contribution of each director. Directors who have additional roles and responsibilities, such as a member of a committee, should be entitled to additional remuneration, comparable to industry practice.
3.4.3 Shareholders must approve the board remuneration structure, including level and pay components (both cash-based and non-cash compensation). The board should consider the appropriateness of each pay component, both in terms of fixed rates (such as retainer fee and attendance fee) and remuneration paid according to the company’s performance (such as bonus and rewards). The remuneration should reflect the values that the company creates for shareholders taking a long-term perspective on company performance, and the pay level should not be too high so as to avoid the board excessively focusing on the company’s short-term results.
3.4.4 The board should disclose the directors’ remuneration policy that reflects the duties and responsibilities of each individual, including the pay components and level received by each director. The remuneration disclosed for each director should also include remuneration for what each individual receives from holding directorship at the company’s subsidiaries.
3.4.5 If the board appoints any person to consult with the remuneration committee, that consultant’s information should be disclosed in the annual report, including information regarding independence and any conflicts of interest. Principle 3.5The board should ensure that all directors are properly accountable for their duties, responsibilities and (in-) actions, and allocate sufficient time to discharge their duties and responsibilities effectively.
3.5.1 The board should ensure that there is a mechanism to support directors in understanding their roles and responsibilities, and the time commitment expected from them.
3.5.2 The board should set and publicly disclose criteria limiting the number of director positions directors can hold simultaneously in other companies, and should consider the effectiveness of directors who hold multiple board seats. The number of companies of which a person can simultaneously be a director should be appropriate to the nature and types of businesses involved but should not exceed five listed companies.
3.5.3 The board should ensure reporting and public disclosure of directors assuming or holding positions at other companies.
3.5.4 The board should ensure that the company’s policies prohibit and prevent a director from creating a conflict of interest with the company, including by using the company’s assets, information or opportunities for his or her own benefit, as a result of having or taking a director or management position, or having or creating vested interests, both directly and indirectly, in other companies. Information about a director’s other directorships and positions should be reported to shareholders, as appropriate.
3.5.5 Each director should attend not less than 75 percent of all board meetings in any whole financial reporting year. Principle 3.6The board should ensure that the company’s governance framework and policies extend to and are accepted by subsidiaries and other businesses in which it has a significant investment as appropriate.
3.6.1 The board should ensure that the company’s governance framework and policies extend to its subsidiaries, including written policies relating to:
(1) The authority to appoint subsidiary directors, executives, or others with controlling power. Generally, the board should have the authority to appoint those persons, except that for smaller operating subsidiaries, the board may delegate this authority to the chief executive officer.
(2) The duties and responsibilities of subsidiary directors, executives and others with controlling power. They are to oversee the subsidiaries’ operations to ensure compliance with applicable law and standards, and the subsidiaries’ policies. If the company’s subsidiary has investors other than the company, the board should require the company’s appointed representative to perform his/her role in the subsidiary’s best interest and consistent with the governance framework and policies of the company.่
(3) The subsidiary’s internal control systems are effective and that all transactions comply with relevant law and standards.
(4) The integrity and timely disclosure of the material information of the subsidiary, including its financial information, related party transactions, acquisition and disposition of assets and other important transactions, capital increases or decreases, and termination of a subsidiary.
3.6.2 For businesses that the company has or plans to hold a significant investment in (such as between 20 percent and 50 percent of shares with voting rights), other than subsidiaries, the board should ensure that shareholder agreements or other agreements are in place to enable the company’s performance monitoring and participation in the businesses’ management, including for approval of significant transactions and decisions. This is to ensure that the company has sufficient, accurate, and timely information for the preparation of its financial statements that conform with relevant standards. Principle 3.7The board should conduct a formal annual performance evaluation of the board, its committees, and each individual director. The evaluation results should be used to strengthen the effectiveness of the board.
3.7.1 The board’s, committee’s and individual directors’ performance evaluation should be conducted at least once a year to facilitate consideration and improvement of the board’s performance and effectiveness and resolution of any problems. Assessment criteria and process for the board’s, committees’ and directors’ performance should be systematically set in advance.
3.7.2 The annual assessment of the performance of the board and committees as a whole and on an individual director level should be based on self-evaluation, or alternatively, on cross-evaluation together with self-evaluation. The criteria, process, and results of the evaluation should be disclosed in the annual report.
3.7.3 The company should appoint an external consultant to assist in setting guidelines and providing recommendations for a board assessment at least once every three years. This information should be disclosed in the annual report.
3.7.4 The evaluation results should be used for ensuring that the directors collectively possess the right combination of knowledge, skills, and experience. Principle 3.8The board should ensure that the board and each individual director understand their roles and responsibilities, the nature of the business, the company’s operations, relevant law and standards, and other applicable obligations. The board should support all directors in updating and refreshing their skills and knowledge necessary to carry out their roles on the board and board committees.
3.8.1 The board should ensure that newly appointed directors receive a formal and proper induction and all information relevant to their responsibilities and performing their duties, including details about the company’s objectives, the nature of the business, and the company’s operations.
3.8.2 The board should ensure that directors regularly receive sufficient and continuous training and knowledge development.
3.8.3 The board should have knowledge and understanding of relevant law and standards, and other applicable obligations, risk factors, and the company’s business environment. The board should receive accurate, timely and clear information, including timely and regular updates.
3.8.4 The board should disclose in the annual report training and knowledge development of the board. Principle 3.9The board should ensure that it can perform its duties effectively and have access to accurate, relevant and timely information. The board should appoint a company secretary with necessary qualifications, knowledge, skills, and experience to support the board in performing its duties.
3.9.1 The board’s meeting schedule and agenda should be set in advance and each director should receive sufficient notice to ensure attendance.
3.9.2 The number of board meetings should be appropriate to the obligations and responsibilities of the board and nature of the business, but the board should meet at least six times per financial year. If the board meetings are not held monthly, the board should receive a report on the company’s performance for the months in which the board does not hold a board meeting, so that it can monitor management and company performance continuously and promptly.
3.9.3 The board should have a mechanism that allows each board member and management to propose the inclusion of relevant items on the meeting agenda.
3.9.4 Meeting documents should be sent to each director at least five business days before the meeting.
3.9.5 The board should encourage the chief executive officer to invite key executives to attend board meetings to present details on the agenda items related to matters that they are directly responsible for, and to allow the board to gain familiarity with key executives and assist succession planning.
3.9.6 The board should have access to accurate, relevant, timely and clear information required for their respective roles from the chief executive officer, company secretary, or designated executive. If necessary to discharge their responsibilities, the board may seek independent professional advice at the company’s expense.
3.9.7 Non-executive directors should be able to meet, as necessary, among themselves without the management team to debate their concerns and report the outcome of their meeting to the company’s chief executive officer.
3.9.8 The board should appoint a company secretary with the necessary qualifications, knowledge, skills, and experience for performing his/her duties, including providing advice on corporate governance, legal, regulatory and administrative requirements, preparing board meetings and other important documents, supporting board meetings, and coordinating the implementation of board resolutions. The board should disclose the qualifications and experience of the company secretary in its annual report and on the company’s website.
3.9.9 The company secretary should receive ongoing training and education relevant to performing his/her duties. The company secretary is also encouraged to enrol on a company secretary certified programme.
Ensure Effective CEO and People Management
Principle 4.1The board should ensure that a proper mechanism is in place for the nomination and development of the chief executive officer and key executives to ensure that they possess the knowledge, skills, experience, and characteristics necessary for the company to achieve its objectives.
4.1.1 The board should establish, or assign the nomination committee to establish, the criteria and procedures for nomination and appointment of the chief executive officer.
4.1.2 The board should ensure that the chief executive officer appoints knowledgeable, skilled, and experienced key executives. The board or the nomination committee together with the chief executive officer should establish the criteria and procedures for nomination and appointment of key executives.
4.1.3 To ensure business continuity, the board should ensure that development and succession plans for the chief executive officer and key executives are in place. The board should annually request reporting on the implementation of the development and succession plans from the chief executive officer.
4.1.4 The board should promote continuous development and education of the chief executive officer and key executives that is relevant to their roles.
4.1.5 The board should establish set clear policies and guidelines for the chief executive officer and key executives serving or wishing to serve as a director in other companies. The policies should set out permissible appointments and the permissible number of companies in which they are allowed to simultaneously serve as a director. Principle 4.2The board should ensure that an appropriate compensation structure and performance evaluation are in place.
4.2.1 The board should ensure that the compensation structure rewards individual performance, incentivises the chief executive officer, key executives, employees and staff at all levels to act in support of the company’s objectives and values, and fosters long-term commitment by aligning incentives with future company performance through:
(1) appropriate combination of salary and other short-term compensation (such as bonus), and long-term compensation (such as employee stock ownership plan participation),
(2) ensure that the individual total compensation takes into account industry standards and company performance, and
(3) predetermined and communicated performance evaluation criteria.
4.2.2 Non-executive directors are responsible for determining the total compensation of, and performance evaluation criteria for the chief executive officer. The non-executive directors should:
(1) ensure that the chief executive officer’s performance evaluation is based on pre-determined criteria that have been communicated to the chief executive officer in advance. The performance evaluation criteria should incentivise the chief executive officer to perform his/ her duties in support of the company’s objectives, values, and long-term sustainable value creation,
(2) perform, or delegate to the remuneration committee, the annual performance evaluation of the chief executive officer. The chairman or a designated senior director should communicate the results (including development areas) of the performance evaluation to the chief executive officer.
(3) approve total annual compensation of the chief executive officer, taking into consideration the performance of the chief executive officer and other relevant factors.
4.2.3 The board should approve the performance evaluation criteria and overall compensation structure of key executives. In addition, the board should ensure that the chief executive officer evaluates the performance of key executives based on clear and predetermined performance evaluation criteria.
4.2.4 The board should ensure that clear and predetermined performance evaluation criteria are in place for all employees and staff throughout the company. Principle 4.3The board should consider its responsibilities in the context of the company’s shareholder structure and relationships, which may impact the management and operation of the company.
4.3.1 The board should understand the company’s shareholder structure and relationships, and consider their impact on the control over the company, including written and non-written family agreements, shareholder agreements, or group company policies.
4.3.2 The board should ensure that the company’s shareholder structure and relationships do not affect the board’s exercise of its duties and responsibilities, including in relation to succession planning, in the best interest of the company.
4.3.3 The board should oversee that information is properly disclosed when there are any conditions that have an impact on the control over the company. Principle 4.4The board should ensure the company has effective human resources management and development programmes to ensure that the company has adequate staffing and appropriately knowledgeable, skilled, and experienced employees and staff.
4.4.1 The board should ensure that the company is properly staffed, and that human resources management aligns with the company’s objectives and furthers sustainable value creation. All employees and staff must receive fair treatment.
4.4.2 The board should ensure that the company establishes a provident fund or other retirement plan, and require management to implement a training and development programme for employees and staff that promotes financial literacy, including on retirement savings, and educates employees and staff on life path investments that are suitable for their age and risk appetite.