Corporate Governance

Challenges, Risks, and Impacts

Thaioil Group has encountered challenges in corporate governance, driven by changes in the business landscape. These include business transformation for operational expansion into international markets, alongside evolving laws and regulations that significantly impact and intensify the conduct of business. Hence, Thaioil Group has prioritized the governance principles as a guideline to prevent unethical pursuits of benefits and adapt to forthcoming changes and business transformations.

Commitments

Thaioil Group firmly believes that adhering to the principles of good corporate governance and business ethics are cornerstones for conducting an efficient, transparent, and accountable business. This fosters fairness for all stakeholders, yielding maximum benefits for shareholders, and ensuring sustainable business operations.

Management Approach and Performance

Management Approach 

Thaioil Group adheres to the principles of good corporate governance as a fundamental cornerstone in conducting business, serving as a strong foundation for fostering integrity, transparency, and enhancing organizational efficiency. This core principle is integral to driving sustained success and growth.

Board Governance and Composition

In order to maximize the benefits derived from the dedication and commitment of the Board members in performing their duties efficiently, the Company has determined the maximum number of the Board members according to the requirement of the listed company on the Stock Exchange of Thailand to not exceed three companies. This count includes the members serving on behalf of the Company.

The Board of Directors consists of at least 5 members but not more than fifteen (15) members. At least half of the total number of directors must have a registered address in Thailand. Directors may or may not be shareholders of the Company and must not exceed 70 years of age. The Board of Directors is appointed by the shareholders at the annual general meeting or appointed by the Board itself in the case of a vacancy occurring outside the annual meeting. Furthermore, the Board of Directors must include independent directors, comprising at least one-third of the total number of directors, with a minimum of three (3) individuals. Currently, the Company has more independent directors than required by law.

Board of Directors 

The Board of Directors consists of a minimum of five (5) and a maximum of fifteen (15) members as stipulated in the Company's bylaws. The Board delegates the Nomination and Remuneration Committee to perform the duties of recruiting and selecting directors and top executives in the event of vacant positions.

The composition of the Board of Directors must include a sufficient proportion of independent directors that are capable of overseeing and balancing the workings of the Board and the operations of the management. The Board of Directors must comprise at least one-third of independent directors with a minimum of three (3) individuals.

The qualifications of the Board of Directors comprise individuals with capability, credibility, and general acceptability. There must be diversity in skills, knowledge, and expertise, encompassing energy/ petroleum/ petrochemicals, engineering, accounting/ finance, law, economics, political science/ social sciences, security, information technology/ digital, business management/ organizational management/ corporate governance, as well as science/ innovation/ environmental aspects. The Board must include individuals with a minimum of three (3) directors who are knowledgeable about the Company's business, at least one (1) director in law, and at least one (1) director in accounting/ finance. Additionally, the Board Skill Matrix is prepared in a structured table displaying the skills, knowledge, and expertise of the Company's Board of Directors.

Independent Director’s Qualification  Thaioil has clearly defined the qualifications of independent directors, which are aligned more rigorously than those set by the Securities and Exchange Commission's (SEC) guidelines and the criteria used for evaluation in the Dow Jones Sustainability Indices (DJSI).

Board Election Process Thaioil has established criteria for the Board’s election and appointment procedures in compliance with legal requirements and pertinent criteria as outlined in the Corporate Governance (CG) manual. The Directors must hold qualifications that comply with laws and regulations, considering experience, knowledge, and skills that benefit the business. The criteria, in addition, opened to the diversity of gender, race, ethnicity, nationality, or country of origin. The Company also values directors’ diversity of expertise and has developed a Board Skill Matrix aligned with business strategies to assist in the selection process. This ensures the Board possesses diverse expertise aligned with Thaioil's business strategy. The Company conducts a search for suitable candidates from the State Enterprise Directors' Pool compiled by the State Enterprise Policy Committee and the list of professional directors in the Thai Institute of Directors Directory (IOD Chartered Director), which collates individuals with knowledge, abilities, and expertise in various domains. Furthermore, Thaioil’s regulation stipulates that the Board should consist of a minimum of five (5) and a maximum of fifteen (15) directors. The Board of Directors, comprising those who are generally recognized and capable, will be elected by shareholders at the annual general meeting. Each year, a certain number of Board members completed the term as required by the Company’s Articles of Association (AOA); however, they may be re-nominated and re-elected on an individual basis upon receiving majority votes of the shareholders who attend the meeting and casting their votes.

Directors’ Remuneration Board of Directors appoints the Nomination and Remuneration Committee (NRC) to perform the duties of considering, reviewing and proposing a remuneration framework. This Committee evaluates and recommends compensation that aligns with the responsibilities of the Directors, the Company's performance, the overall economic situation, and benchmarking against similar companies within the industry. The objective is to set the remuneration package at a level that is motivating and competitive. Subsequently, The NRC will then make a proposal to the Board for endorsement before submission to the Annual General Meeting of Shareholders (AGM) for consideration and approval.

Roles and Responsibilities of the Board of Directors

The Board of Directors and the executives are dedicated to upholding the principles of good corporate governance. This commitment is reflected in Thaioil Group’s mission statement: “To enrich stakeholders’ well-being and deliver sustainable returns built upon innovation, technology and resilient portfolio with top class management and accountable corporate governance”. To ensure the effective oversight, the Board of Directors has established four (4) Board-committees, including the Audit Committee, the Nomination and Remuneration Committee, the Corporate Governance and Sustainability Committee, and the Risk Management Committee. These Board-committees are responsible for scrutinizing various aspects within their designated scopes as assigned by the respective committees. They also regularly report their activities and outcomes to the Board meetings for continuous review and oversight.

The Board-committees must possess qualifications that comply with the defined laws and regulations. The Company has defined the qualifications, terms, duties, and responsibilities, reporting scope, and performance evaluation for each Board-committee in a dedicated Board-committee charter.

In 2023, the Board of Directors played a pivotal role in overseeing, reviewing, and monitoring the progress of the conduct of business, which can be summarized as follows:

• • Monitored progress of various projects related to good corporate governance (CG), corporate social responsibility (CSR), and sustainability (SD), including the management of arising complaints. In addition, the Board provided continuous guidance and directives to the management team for progress updates.

The List of Director and Independent Director’s Qualification

Board Composition as of 31^st January, 2024

Remarks: (1) Board’s meeting attendance was reported for the year ended as of 31^st December 2023.

Board’s Performance Evaluation

Thaioil conducts the annual performance evaluations of the Board of Directors in accordance with the principle of good corporate governance. These evaluations are categorized into four parts, which are 1) Evaluation of the overall performance of the Board of Directors, 2) Self-Evaluation of individual board members, 3) Peer-Evaluation of other board members, and 4) Evaluation of the performance of the Board-Committees (the board members of each Board-Committee are required to evaluate the performance of the Board-committees in which they serve only). In addition, the Company has established the policy to conduct a comprehensive assessment of the Board’s performance by independent assessors every three (3) years. This process aims to incorporate received feedback and suggestions to enhance the Board’s practices and operations. In 2023, the Corporate Governance and Sustainability Committee approved the appointment of an independent consultant, PricewaterhouseCoopers ABAS Ltd, to conduct the performance evaluations of the Board of Directors.

Board Diversity Policy

Thaioil’s nomination criteria stipulate that directors must hold qualifications that comply with laws and regulations, considering experience, knowledge, and skills that benefit the business, and diversity of gender, race, ethnicity, nationality, or country of origin. Thaioil also values directors’ diversity of expertise and has developed a Board Skill Matrix aligned with business strategies to assist in the selection process. Names of qualified directors are considered from the State Enterprise Policy Office’s (SEPO) Director’s Pool and the Thai Institute of Directors Association’ Pool of professional directors (IOD Chartered Directors). 

Board’s Skill Matrix  

Thaioil has created a Board Skill Matrix, illustrating essential skills, knowledge, and expertise aligned with the business strategy, such as energy, petroleum and petrochemicals, accounting and finance, information technology and digital, innovation, and the environment. The Board should include at least three (3) members with knowledge of the Company's business, at least one (1) member in law, and at least one (1) member in accounting and finance. Additionally, the Board should consist of independent directors, constituting no less than one-third of the entire Board and no fewer than three (3) members.

Board Expertise, as of 31^st January 2024

• • 7 out of 13 directors are listed in Director Pool System of State Enterprise Policy Office (SEPO).
• • 7 independent directors and non-executive directors (excluding the CEO and President) possess energy, petroleum, and petrochemicals education with work experience.

Furthermore, the Company specifies that independent directors must maintain independence from major shareholders or groups of major shareholders and from the Company's management, possessing adequate access to the Company's financial and business information, as well as other related businesses. This aims to encourage the freedom of expression and opinions to protect minor shareholders’ interests and regularly attend Board meetings. Additionally, the Company has a policy to promote development and continuous trainings for all directors. This includes participation in training courses offered by the Thai Institute of Directors Association (IOD) or other seminars relevant to the business. In 2023, the Company's directors participated in various trainings provided by the IOD, for instance:

• • Role of the Chairman Program Course (RCP 53/2023)
• • Director Accreditation Program Course (DAP 204/2023)
• • Risk Management Program for Corporate Leaders Course (RCP 31/2023)
• • Director Certification Program Course (DCP 343/2023)
• • Director Certification Program Course (DCP 336/2023)

Furthermore, the Company conducts the annual performance evaluations of the Board of Directors in accordance with the principle of good corporate governance. These evaluations are categorized into two parts, which are 1) the Board of Directors and Board-Committees Assessment, and 2) Individual Self-Assessment and Peer Assessment. Additionally, the Company establishes a policy to conduct a Board performance assessment every three years by independent assessors. This process aims to incorporate feedback and suggestions to enhance the performance of the Board of Directors.

Success Metrics of Chief Executive Officer

Thaioil Group has established sustainability performance indicators in the fiscal year 2023, which are linked to the remuneration of the Chief Executive Officer (CEO), President, and Sustainability Development Steering Committee. The sustainability performance is also reflected in the Corporate Key Performance Indicators cascaded to all levels of employees in relevant departments. This helps to ensure that the predefined goals are achieved in terms of Environment, Social, and Governance (ESG) management. The components are shown as below:

Part 1) Corporate Key Performance Indicators (KPI) Achievements (70%)

Thaioil Group indicates the Key Performance Indicators under the principle of balance scorecard that are aligned with the direction of “Time to TOP UP”. The Key Performance Indicators are divided into three dimensions as follows:

1) 45% of performance in Business as Usual, such as

• • Net Operating Profit
• • Return on Invested Capital (ROIC) 7-Year Average, and ROIC compared with peers in the same industry
• • Total Recordable Case Frequency (TRCF) and Process Safety Event Tier 1 and Tier 2
• • Operational Availability
• • Energy Efficiency and GHG Intensity

2) 30% of performance in Strategic Initiatives

3) 25% of performance in Strategic Enablers & Sustainability, such as

• • Investment Grade Credit Rating
• • Human Capital Index
• • Learning Organization
• • Stakeholder Engagement (Customer, Community, and Investor)
• • Dow Jones Sustainability Indices: DJSI

Part 2) Leadership Competency (30%)

The assessment of the leadership competency of the CEO and President is conducted in six areas, namely building shared vision, organizational management aligned with strategic plan, risks management, team management toward the highest productivity, ability to coach and mentor, and building personal excellence.

Sustainability performance is assessed by using performance indicators across three areas of balance scorecard and leadership competency.

Management Ownership

Thaioil has established guidelines for the Company's share ownership to encourage the Chief Executive Officer (CEO), the President, and the Executive Vice President, to own shares in the Company to the extent of 5 to 7 times of their annual base salary. This initiative is aimed at fostering motivation among executives to work in consideration of the shareholders' benefits and to drive the Company towards long-term sustainable business growth, alongside earning the trust of shareholders.

In 2024, the holding of Company’s share ownership by the Company’s executives, including spouses or cohabiting partners, and underage children is reported in the 2023 Annual Report (Form 56-1 One Report)

Update : February 2024

Independent Director’s Qualification Criteria