Article 5: Board Responsibilities

Corporate Governance Principles

 

Article 5: Board Responsibilities

1. Board Structure


Board Composition

The Board must be qualified, capable, accountable, and generally-accepted and must not have prohibited characteristics specified by the Public Company Limited Act. Thaioil set a policy for the Board’s diversity in genders, skills, professions, and specializations, namely, industrial, engineering, science, financial, business management, economic, legal, political science, social science and security. The Board must consists of Independent Directors of at least one-third of all Directors and the number must be at least three.  Independent Directors must also be fully qualified by the requirements of the Capital Market Supervisory Board as well as Thaioil’s Independent Directors’ qualification which is in consistent and stricter than the requirement of the Capital Market Supervisory Board.

To assure that the Board devotes their time and effort to perform their duties for the highest benefit of the Company, the Board established a policy on the number of listed companies that the Directors can serve, Thaioil’s Directors can serve no more than 3 listed companies.

 


Director Nomination Criteria

In selecting and considering an appropriate Director candidate, Thaioil invited minor and major shareholders to nominate a candidate, which must obtain an approval from Thaioil’s Board. The Directors must be fully qualified with the Public Company Limited Act and in compliance with Thaioil’s regulations, in which Thaioil will not bring diversity factors such as gender, race, ethnicity, country of origin or nationality as Directors’ qualification restrictions. Thaioil also values independence of the Directors, their conflict of interest, and their expertise. Thaioil developed Board Skill Matrix in accordance with the Board Diversity Policy to create a wide range of expertise in line with Thaioil’s strategic directions. Thaioil also searched and selected qualified Directors through the State Enterprise Policy Office’s Directors Pool and the IOD Chartered Directors.

To appoint Directors to replace those who have completed their terms

Thaioil provides an opportunity for shareholders to propose qualified Director candidates, in accordance with relevant laws and Thaioil’s requirements, via Thaioil’s website well before the AGM meeting. Afterward, the Nomination and Remuneration Committee selects and proposes to the Board for consideration of the names of qualified candidates prior to the Shareholders’ approval in the AGM. After the Board’s endorsement, the list of qualified candidates is proposed to the AGM to approve the election by majority votes, whereas one shareholder has one vote per share. Shareholders may exercise all the votes they have to elect one or several persons as Director or Directors, however, they cannot divide their votes to any person in any number. Moreover, Thaioil also provides an opportunity for shareholders to vote for individual Director to allow shareholders to choose the candidate of their choice.

To appoint Directors in case of vacancy due to reasons other than expiration of term

The Nomination and Remuneration Committee considers criteria and nominates qualified persons, in accordance with the law and regulations, to fill the vacant posts and proposes them to the Board for consideration. With votes of no less than three-fourths of the remaining Directors,  a selected Director will serve only the remainder of the term of the replaced Director.

The appointment of Director as Board-Committees’ Member

The Nomination and Remuneration Committee considers qualified Director as a Board-Committee Member to fill vacancies. This must be done in accordance with the Board-Committee Charters. The names of selected Directors are to be proposed to the Board for consideration and approval.

Independent Directors Qualification

The Board of Directors must comprise of sufficient number of independent directors to inspect and balance the performance of the Board and the operation of Management team. Independent directors on the Board must represent at least one-third of all directors and must not be less than three directors. Independent directors must have all the qualifications required by the Capital Market Supervisory Board which are:

1. Holding shares not exceeding 0.5 percent of the total number of shares with voting rights of the Company, its parent company, subsidiary, affiliate, major shareholder or controlling person, including shares held by related persons of such independent director.

2. Neither being nor used to be an executive director, employee, staff, advisor who receives salary, or controlling person of the Company, its parent company, subsidiary, affiliate, same-level subsidiary company, major shareholder or controlling person, unless the foregoing status has ended not less than two years prior to taking the independent dictatorship.

3. A person who is related by blood or by legal registration as father, mother, spouse, sibling, spouse, child, including the child's other executive directors of the person with authority will be nominated as directors to manage or control the Company or its subsidiaries.

4. Never have a business relationship with the Company, its subsidiaries, associates and shareholders in a way that may interfere with their independent judgment, including not being or having been a shareholder, or have control of those who have a business relationship with the Company, its subsidiaries, associates and shareholders or those with the control of the Company unless it is clear that it has been for no less than 2 years. Concerning the business relationship in the first paragraph, the transaction trade was made to operate as normal, including rental or Lease Property Transaction, or providing or receiving financial assistance with the guarantee of a loan or assets as collateral. As a result, the Company or both parties have the obligation to pay to the other party at least 3 percent of the net tangible assets of the Company or from 20 million baht to whichever amount is lower. The calculation of debt such as the method of calculating the value of the transaction by the Capital Market Supervisory Board shows the criteria for the transaction relative to the value of such debt shall include debt incurred during the 1-year period prior to the business relationship with the person.

5. The person must not be or have been an auditor of the company, its parent, subsidiaries, affiliates, shareholders, major or have the control of the Company and be a significant shareholder, the one in control or partner of the SEC, the auditors of the company, its parent, subsidiaries, affiliates, shareholders, major or have the control of the Company affiliated, unless the person has been removed from office for no less than 2 years.

6. The person must not be or have been a provider of any other professions. This includes serving as legal counsel or financial advisor which has been charged in excess of 2 million baht per year from the company, its parent, subsidiaries, affiliates, and shareholders, major or have the control of the Company. Also, the person must not be the shareholders who have the control or a partner of the service provider firm unless it is clear that it has not been so for no less than 2 years.

7. The person must not be a director appointed to represent the Board of Directors, the major shareholders, or shareholders who are related to the major shareholders and compete with the business of the company or its subsidiaries.

8. The person must not operate the same conditions and in competition with respect to the Company's or its subsidiaries or partnerships that are implied in partnership or as part of a management employee or consultant of the salary or holding more than 1 percent of the total number of shares with voting rights of the company. The operation must not be the same or compete significantly with The Company or its subsidiaries.

9. The ability to comment freely about the operations of the Company will not be prevented in any way.

10. Independent Director of the Company shall hold office for a maximum of two consecutive terms.

To be promoted to Director who is not an executive, the opportunity to discuss freely must be allowed in order to receive feedback comments to improve the performance of the Company as well as guidelines for development of the corporate governance. The Company has set a meeting of at least one time per year and committee meetings without management at least one time per year.

2. Remuneration for Directors and CEO/President

Remuneration for Directors

It is Thaioil’s policy to compensate Directors reasonably to motivate and retain quality Directors, or at levels comparable to industrial practices. Directors’ compensation is linked to each Director’s performance and responsibilities as well as Thaioil’s performance and benefits to the shareholders. Directors tasked with greater responsibilities are paid more accordingly, and the Chairman of the Board and Chairman of the Board-Committees may likewise receive higher compensation than others. The Nomination and Remuneration Committee sets the remuneration principles and payment method, and present it to the Board and the AGM for approval, respectively.  

Compensation for the CEO/President

Each year, the Nomination and Remuneration Committee appraises the CEO/President’s annual performance against the fair goals previously set and agreed with him or her. The Committee then recommends its findings to the Board for endorsement, and the Chairman then informs the CEO/President on the decision. The compensation policy also links the CEO/President’s performance to overall short-term performance and long-term operating performance in line with strategic directions. Additionally, Thaioil utilizes the four dimensions of Balance Scorecard concept: namely, financial, stakeholders, internal business process, and learning and growth, to develop Corporate Key Performance Indicators (Corporate KPI), which is linked to the CEO/President’s Performance. This practice lays a foundation for future business growth to become attractive and comparable to organizations within the same industry, under clear-cut and transparent rules.

 

3. Director’s Performance Assessment

Annually, Thaioil conducts the Board’s performance assessment in three forms, namely:
1. the Individual Director Assessment (self-assessment)
2. the Board and Board-Committees Assessment
3. the Peer Assessment

Thaioil’s appraisal form covers additional significant criteria as follows:
1. Board Policy
2. Board Composition and Qualifications
3. Board Meeting
4. Practices, Roles, Duties, and Responsibilities of the Board, set to assess the preparedness of the Board, risk management and internal control, handling of conflict of interest, financial control and monitoring, selection process, compensation process and performance appraisal.

 

4. Chief Executive Officer and President’s Performance Assessment

Thaioil executed CEO/President’s Performance Assessment each year. The Nomination and Remuneration Committee is in charge of the annual performance assessment of the CEO/President. The Committee is to forward the assessment outcome to the Board for endorsement. The CEO/President’s performance assessment has two parts (each part has a different weight percentage) as follows:

Part 1: Corporate Key Performance Indicators 
Part 2: Leadership Competency

The performance appraisal outcome influences the salary raise for the CEO/President and is to be presented to the Board for further approval.

5. Orientation of New Directors

Thaioil encourages the CEO/President and high-level executives to personally provide information on the nature of Thaioil and Subsidiaries’ businesses along with essential data that are beneficial to the performance of the Directors.  In addition, Thaioil prepares a welcoming package for new Directors to provide essential information including the Board meeting schedule, business overview, business structures, and strategic plans and other information such as the CG and CoC Manual, Board-Committees’ Charters, Independent Director Handbook (for Independent Directors), etc.

 

6. Performance Development of the Board

Thaioil promotes the development of Directors by encouraging Directors to attend trainings conducted by the Thai Institutes of Directors (IOD), other courses and seminars as part of continuous development to support their duties as members of the Board. In addition, Thaioil invites external experts to the Board meetings to share their knowledge and experience with the Directors, and organizes a Board meeting and/or site visit at the Thaioil Refinery to visit and oversee refinery operations as well as to keep track of its performance.
 

7. Board Meetings

Board meetings are scheduled in advance each year so that the Directors can schedule themselves to attend. Normally, Thaioil held Board meetings on the last Friday of every month, totaling 12 Board Meetings per year. Meeting invitations, draft of minutes of the previous meeting, and current meeting documents are delivered to Directors at least 7 days or at least 5 business days in advance of the Board meeting date, with exception to urgent matters. In the Board meetings, high-level executives are invited to attend Board meetings to provide additional relevant information and allow the Board to get to know them, which will be useful for the review of succession plans. During the meeting, Chairman of the Board serves as the Chairman of the Meeting, encouraging all Directors to openly discusses and express their opinions.

The Board sets a policy that requires no less than two-thirds of the total Board in attendance and vote counts to make a quorum, unless where there is an urgent need to conduct a meeting which may otherwise jeopardize Thaioil’s operation, or in the event of an urgent call for a meeting, or any other reasons where the Board deems appropriate.

8. Board-Committees

The Company has appointed a committee under the laws of the Audit Committee, the Nomination and Remuneration Committee, the Corporate Governance Committee and the Risk Management Committee through a process of nomination committee. The compensation the CEO and President's role in risk management committee of the Company is to be studied and considered as important to the effective and efficient performance of the Board and to build confidence among all stakeholders.