Corporate Governance

The Board of Directors of Scicom (MSC) Berhad acknowledges the importance of good corporate governance in protecting and enhancing the interest of shareholders. As such the Board is committed towards adherence to the principles, recommendations and best practices set out in the Malaysian Code on Corporate Governance (“MCCG” or the “Code”) 2017 issued by the Securities Commission Malaysia.

The Board recognises the importance of corporate governance and conscientiously strives to attain high business ethics and governance in conducting the day-to-day business affairs of the Company and its group of companies (the “Group”), so as to safeguard and enhance shareholder’s value, which includes protecting the interests of all stakeholders.

The Board believes that good corporate governance adds value to the business of the Group and will ensure that this practice continues. The Board of Directors believes in playing an active role in guiding the Management through its oversight review while at the same time steer the Group’s business direction and strategy.

The Board is pleased to set below the Corporate Governance Statement (the “Statement”) on how the Group has applied the Principles of the Code and the extent of compliance with the Principles and Best Practices advocated therein.

The Board comprises of competent individuals with specialised skills and knowledge providing clear and effective leadership to the Group. The
Board is responsible for charting the strategic direction of the Group as well as over-seeing the conduct, performance, risk management and internal
controls of the Group’s business activities. In order to ensure a constantly well-balanced Board, careful consideration is given when selecting and
balancing the composition of Independent and Non-Independent Directors.

The Board has a formal schedule of matters requiring its decision as detailed below:

  • Reviewing and adopting the Group’s strategic direction, as proposed by the Group Chief Executive Officer (“Group CEO”). All approved strategies
    will then be communicated down to respective Heads of Departments for implementation;
  • Reviewing the adequacy of significant risks presented by the Audit and Risk Management Committee (“ARMC”) and in ensuring the implementation
    of appropriate measures to manage these risks;
  • Reviewing the adequacy and integrity of the Group’s systems of internal control and management information, including ensuring that a sound
    risk management framework, reporting framework and systems for compliance with applicable laws, regulations, directives and guidelines are
    in place;
  • Reviewing, approving and monitoring the implementation of the Group’s strategic business plans;
  • Assessing and evaluating the Group’s business and operational performance so as to ensure that the Group is on track with the strategic direction
    as approved by the Board;
  • Approving significant policies that may have a material impact on the Group’s business activities;
  • Approving the Group’s annual budget which includes all major capital expenditure and all new investment activities;
  • Reviewing the Group’s financial performance and position on a quarterly basis;
  • Reviewing other significant matters that may have a material impact on the Group;
  • Reviewing succession planning including appointments, determination of compensation levels and replacement of senior management staff; and
  • Reviewing strategies promoting sustainability in ensuring that the Group operates its business through good processes and policies which are
    applied by competent and responsible employees.

The Board currently has nine (9) members comprising:
• Two (2) Non-Independent Non-Executive Directors;
• One (1) Non-Independent Executive Director; and
• Six (6) Independent Non-Executive Directors.

This is in compliance with Paragraph 15.02 of the Main Market Listing Requirements of Bursa Securities (the “Listing Requirements”) which requires
at least one third (1/3) of the Board to be comprised of Independent Directors.

A brief profile of the Directors is included in the Board of Directors – Profiles as set out on pages 16 to 26 of the Annual Report.

The Board is well-balanced and comprises highly respected professionals of various backgrounds and industries which are relevant to the Group’s
business activities. The Directors’ wide ranging experience and expertise provide the Group with the strategic thinking which is vital for the Group’s
success.

The Board believes that both genders are to be given fair and equal opportunity and any new appointments to the Board shall be based solely on
merit, experience, qualifications and other attributes. Currently, there are two (2) female Directors on the Board.

The Board is satisfied with the level of independence demonstrated by the Directors during the financial year and their ability to act in the best
interest of the Group.

Recommendations of the Code provide that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. However,
an Independent Director may continue to serve the Board subject to the Independent Director’s re-designation as Non-Independent Non-Executive
Director. In the event the Board intends to retain the Director as independent after a cumulative term of 9 years, justification from the Board and
shareholders’ approval at the general meeting are required.

Dr. Nikolai Dobberstein and Mr. Loh Lee Soon, being Independent Non-Executive Directors had exceeded the term of 9 years during the financial
year. In compliance with the Code, the shareholders of the Company during the Fourteenth (14th) Annual General Meeting held on 7th November
2016 re-elected the named Directors to continue in office as Independent Non-Executive Director until the conclusion of the next Annual General
Meeting.

The independent Non-Executive Directors provides the necessary checks and balances in the Board’s exercise of their functions by facilitating an
independent evaluation of the Board’s decisions and decision making process. During any decision-making process, the majority view of the Board
will be duly considered whereby no single Board member can dominate its decision-making process.

None of the Non-Executive Directors participate in the Group’s day-to-day management activities. The Independent Non-Executive Directors play
a pivotal role in ensuring corporate accountability and provide an essential source of impartial and professional advice and judgment to safeguard
the interests of the Group and its stakeholders.

In order to achieve a balance of power and authority, there is a clear division of responsibility between the Chairman of the Board and the Group
CEO, via the appointment of separate Board members to hold respective positions.

The Chairman is primarily responsible for ensuring the Board’s effectiveness, along with other areas as detailed below:

  • Ensuring proper balance in the Board’s membership, subject to the approval of the shareholders and other members of the Board;
  • Ensuring that all relevant issues are included in the Board meeting agendas;
  • Ensuring that all Directors, both Executive and Non-Executive, are enabled and constantly motivated to play their role to the fullest of their
    abilities. This includes ensuring that the Board members, particularly the Non-Executive Directors, continuously receive timely and relevant
    information tailored to their needs, and are properly briefed on issues arising, if any, during the Board meetings; and
  • Ensuring that the Executive Director constantly looks above and beyond his management function, and fully accepts his responsibilities in the
    area of corporate governance.

The Group CEO is responsible for the day-to-day running of the Group’s business, and ensuring that the Group’s policies and strategies as approved
and adopted by the Board are implemented with the assistance of the Senior Management Team (“SMT”).

The Company has in place a Board Charter that sets out, amongst others, the responsibilities, authorities, procedures, evaluation and structure of the Board and Board Committees as well as relationship between the Board with its management and shareholders. The Board Charter is reviewed and updated periodically. The principal functions of the Board are as follows:

  • Ensuring that the Company’s goals are clearly established and strategies are in place for achieving them;
  • Ensuring that the Group has appropriate risk management process including adequate control environment, systems for compliance with
    applicable laws and regulations, and controls in areas of significant risks identified;
  • Reviewing and approving major corporate strategies, plans and annual budget;
  • Monitoring the performance of the corporate strategies;
  • Approving capital expenditure, capital management and acquisitions/divestments;
  • Monitoring the performance of management in the implementation of strategies and policies.
  • Approving the recruitment, appointment, promotion, confirmation and termination of service, as well as the remuneration package, and
    compensation and benefits policies and the terms and conditions of Key Management Positions;
  • Determining the general composition of the Board (size, skill and balance between executive directors and non-executive directors) in order to
    ensure that the Board consists of the requisite diversity of skills, experience, gender, qualification, and other core competencies required;
  • Approving a framework of remuneration for directors, covering fees, allowances, and benefits-in-kind (directors of all boards and committees);
  • Ensuring that the Board is supported by a suitably qualified and competent Company Secretary;
  • Ensuring that the Board members have access to appropriate education and training programmes to keep abreast of the latest developments
    in the industry, and as may be prescribed by the regulatory authorities from time to time;
  • Approving the Group’s financial statements (and ensuring the reliability of the same) as well as the interim dividend and recommend the final
    dividend to shareholders;
  • Ensure that there is an appropriate succession plan for members of the Board and senior management; and
  • Ensure that the Group adheres to high standards of ethics and corporate behaviour including transparency in the conduct of its business, and
    Directors are required to comply with the Directors’ Code of Best Practice.

To facilitate efficient management, the Board has approved authority to the management for certain specified activities through a clear and
formally defined Limits of Authority (“LOA”), which is the primary instrument which governs and manages the business and operations decisions in
the Group. Whist the objective of the LOA is to empower Management, the key principle adhered to the formulation of the LOA is to ensure that a
system of internal controls and checks and balances are incorporated therein. The LOA is implemented in accordance with the Group’s policies and
procedures and in compliance with the statutory and regulatory requirements. The LOA is periodically reviewed and updated to ensure relevance
to the Group’s operations.

The Board meets at least quarterly to, inter alia, approve the quarterly announcements to Bursa Securities, statutory financial statements, the
Group’s business plans, and also to review the Group’s financial performance and standing. Additional meetings are convened as and when
necessary to deliberate on urgent matters.

Board meetings are scheduled in advance to facilitate Directors to plan ahead and to maximise participation. The agenda and a full set of Board
papers are distributed at least one week prior to Board meetings to ensure that Directors have sufficient time to read and prepare for discussion at
the meetings.

During the current financial year, four (4) Board meetings were held and all the Directors except for Puan Mahani Binti Amat and Encik Rashid Bin
Mohd Yusof who were both appointed to the Board on 15th June 2017, attended the four (4) meetings.

Minutes of Board meetings which include a record of the decisions and resolutions of the Board meetings are maintained by the Company Secretary.
The Directors have full access to the advice and services of the Company Secretary who is responsible for ensuring that Board meetings procedures
are adhered to. The Company Secretary also advises the Board on matters relating to corporate compliance with relevant laws and regulations
affecting the Board and the Group, as well as best practices on governance.

The Directors have full, unrestricted and timely access to all information and direct access to the SMT to enable them to discharge of their responsibilities.
The Board is provided with the meeting agenda and Board papers at least five (5) working days in advance of the Board meeting date. This enables
the Directors to have sufficient time to review the Board papers and seek clarification or further details from the management or the Company
Secretary before each meeting to ensure preparedness for the meeting. Access to the Board papers by the Directors is done through a collaborative
software which allows the Directors to securely access Board documents electronically.

Any Director may request matters to be included in the agenda, Urgent papers may be presented and tabled at the meetings under supplemental
agenda.

Where applicable, briefings and presentations by management or relevant external consultants are also held at Board meetings to advise the Board
and provide relevant information and clarification for informed decision making by the Board.

In addition, the Directors have unrestricted access to the advice and services of the Company Secretary and are regularly updated on new statutory
and regulatory requirements relating to duties and responsibilities of the Directors. All the Directors, whether collectively as a Board or in their
individual capacity, may seek independent professional advice at the expense of the Company in carrying out his or their duties respectively.

The Company’s Articles of Association require at least one third (1/3) of the Board members to retire by rotation at the Annual General Meeting
(the “AGM”), and also for all the Directors to retire once every three (3) years, of which the Directors will then be eligible to offer themselves for
re-election.

 

All the Directors have complied with the Mandatory Accreditation Programme as prescribed by Bursa Securities. The Directors are also encouraged
to, and have attended various conferences and seminars which are conducted both in-house and by external parties, in order to enable them to
effectively discharge their duties, as well as keep abreast of the industry, regulatory and other related developments. The seminars and training
courses attended by the Directors during the financial year are as listed below:

 

In order to enhance the Board’s effectiveness as well as to comply with certain fiduciary duties, the Board has delegated the following responsibilities
to standing committees, which operate within clearly defined terms of reference. The respective committees are detailed below:

  • • Audit and Risk Management Committee
    The ARMC composition, terms of reference and summary of activities is included in the Audit and Risk Management Committee Report as set out
    on pages 71 to 75 of this Annual Report.

 

  • Nomination and Remuneration Committee
    The Nomination and Remuneration Committee (“NRC”) was formed on 12 May 2010 and is responsible for proposing candidates for directorship
    and assessing the directors on an ongoing basis. The composition of the NRC complies with the requirements of paragraph 15.08A of the Main
    Market Listing Requirements (“MMLR”). In addition, the NRC assesses the contribution of individual Board members, the effectiveness of the Board
    and the Board Committees.

The NRC is responsible in determining the remuneration of the Directors and senior management staff so as to ensure that the Company attracts, retains and motivates the Directors and senior management staff of the quality needed to manage the business of the Group effectively. The remuneration scheme is reflective of the individual Director’s and senior management staff’s experience and level of responsibilities. In addition, the remuneration for the Executive Director and senior management staff is structured to link remuneration and rewards to corporate and individual performance.

The members of the NRC are as follows:

  • Dr. Nikolai Dobberstien – Independent Non-Executive Director
  • Dato’ Mohd Salleh Bin Hj Harun – Non -Independent Non-Executive Director
  • Loh Lee Soon – Independent Non-Executive Director
  • Karen Goonting - Independent Non-Executive Director

The NRC met once during the financial year to review the Board’s structure, evaluation of Director’s performances and to review the remuneration of the Executive Director and senior management staff. The members attended all the meetings.

The Executive Director does not participate in any way in determining the individual remuneration package of the other Directors. The remuneration and benefits of the Non-Executive Directors is determined by the NRC with the individual Directors concerned abstaining from deliberating and voting on their own remuneration. The Company pays its Directors annual fees, which are approved by the shareholders. The NRC reviews the performance of the Managing Director and considers the Board’s proposed bonus and increment for the year.

The NRC considers and recommends new appointment to the Board. In discharging this duty, the NRC will address the suitability of an individual by taking into consideration the individual’s skills, knowledge, expertise and experience, professionalism and integrity.

In accordance with the Memorandum and Articles of Association of the Company, at least one third of the Directors shall retire from office each year at the Annual General Meeting and all Directors shall retire from office once at least in each three (3) years but shall be eligible for re-election. The Companies Act 2016 has removed the age limit and the re-appointment of Director who is over 70 years to be subject to shareholders’ approval at each Annual General Meeting.

The Board currently does not adopt any policy on boardroom diversity, such as gender and age. The Board is of the view that while it is important to promote diversity, the normal selection criteria of a Director, based on effective blend of competences, skills, experience and knowledge in areas identified by the Board, should remain a priority so as not to compromise on capabilities, experience and qualification.

The NRC is responsible to assist the Board to assess the effectiveness of individual Directors, the Board and the Board committees. The Board effectiveness evaluation is performed annually with the objective to enhance its effectiveness, strength and to identify areas that need improvement.

The assessment is divided into four (4) sections as follows:

  1. Board and Board Committees Evaluation
  2. Assessment of Character, Experience, Integrity, Competence and Time Commitment
  3. Assessment on Mix of Skill and Experience
  4. Evaluation of Level of Independence of a Director

The main criteria set out in the abovementioned sections are as follows:

  • Skills and experience of individual directors.
  • Roles and responsibilities of the Board and individual directors.
  • Time commitment in deliberation and participation in the Board and Board committee’s meetings.
  • The level of independency for the Independent Directors’ participation and deliberation on issues put before the Board.

During the financial year ended 30 June 2017, the effectiveness evaluation was conducted on the Board, Board Committees and individual Directors.

The Board is responsible for determining the remuneration scheme for its individual members. The annual fees payable to Non-Executive Directors are presented to the shareholders at the AGM for their approval. The Executive Director however, does not participate in any way when determining his remuneration package.

A summary of the Directors’ remuneration for the financial year ended 30 June 2017, distinguishing between the Executive and Non-Executive Directors is as shown below:

(i) Financial Reporting

The Board aims to convey a balanced and understandable assessment of the Group’s performance and prospects in its quarterly announcements, annual reports and other public reports to the shareholders. The Board retains the responsibility for the preparation of the Group’s and Company’s financial statements. The Directors are required by the Companies Act 2016 to prepare the Group’s and the Company’s statutory financial statements with all material disclosures, to ensure the accuracy and completeness, in compliance with Malaysian Financial Reporting Standards and International Financial Reporting Standards, as well as the rules and regulations under the said Act. In order to properly achieve this, the ARMC assists the Board in over-seeing the Group’s financial reporting process and the quality of its financial reporting.

The Statement by Directors pursuant to Section 251(2) of the Companies Act 2016, in relation to the preparation of the financial statements is set out on page 149 of the Annual Report.

 

(ii) Risk Management and Internal Controls

The Board continues to maintain and review its risk management process and internal control procedures to ensure a sound system of risk management and internal control to safeguard shareholder’s investments and the assets of the Company and the Group.

In discharging its duties in ensuring the effectiveness of the Group’s systems of risk management and internal control, the Board has entrusted this responsibility to the ARMC. The scope and results of the ARMC’s review are detailed in the Statement on Risk Management and Internal Control as set out on pages 65 to 70 of the Annual Report.

 

(iii) Relationship with Auditors

The Board, through the ARMC, has a professional and transparent relationship with both the Group’s internal and external auditors.

Internal Auditors

The internal auditors report directly to the ARMC and has unrestricted access to the ARMC. The internal auditors are tasked to independently review the effectiveness of the risk management process and internal controls of the Group. The internal auditors attend the ARMC meeting quarterly to present their audit observations, recommendations and report on the status of corrective actions implemented by Management. The minutes of the ARMC meetings are tabled to the Board for information and serve as useful references, particularly if there are pertinent issues that any Directors wish to highlight or seek clarification on.

External Auditors

The ARMC and the Board place great emphasis on the objectivity and independence of external auditors in providing relevant and transparent reports to the shareholders. The ARMC undertakes an assessment on the independence of the external auditors annually. The Board has obtained assurance from the external auditors on their independence in discharging their duties throughout the conduct of the audit engagement. The external auditors attend the ARMC meeting twice during the financial year to discuss their audit plans, fees, audit findings and their review of the Company and the Group financial statements,

Disclosure of non-audit fees is included under Additional Compliance Information as set out on page 156 of the Annual Report.

Other facets of the relationship between the ARMC and both the internal and external auditors are elaborated in the Audit and Risk Management Committee Report as set out on pages 71 to 75 of the Annual Report.

The Group is committed to the highest standard of integrity and accountability in the conduct of its businesses and operations. In striving to conduct its affairs in an ethical, responsible and transparent manner, the Group provides an avenue for all employees and stakeholders of the Group to disclose any improper conduct within the Group vide the implementation of the Group’s whistleblowing policy.

The whistleblowing policy establishes the Group’s position in encouraging employees and other stakeholders to raise genuine concerns about possible improprieties in matters relating to financial reporting, compliance and other malpractices or misconduct that may have occurred. The whistleblowing channels are established to help employees and other stakeholders raise concerns directly to either of the two designated Independent Directors who are members of the ARMC without fear of reprisals or retaliations.

The identity of the whistleblower is kept confidential and protection is accorded to the whistleblower against any form of reprisal or retribution. Any concerns raised will be investigated by the two Independent Directors and a report and update will be provided to the Board for review and ascertain further action(s) as appropriate.

The Company Secretaries are appointed by the Board and attend all Board and Board Committee meetings. They are responsible for providing Directors with advice on compliance and corporate governance issues.

The Board has unrestricted access to the advice and services of the Company Secretaries. The Company Secretaries plan an advisory role to the Board in relation to the Company’s constitution, Board’s policies, procedures and compliance with the relevant regulatory requirements including codes or guidance and legislations.

(i) Communication between the Company and its Investors and Other Stakeholders

Annual Report

The Annual Report is a vital source of information for shareholders, investors and the general public. Information on the Group’s business performance, financials and its management are disclosed in the Annual Report. The contents of the Annual Report are continuously enhanced to take into account the latest development in the area of corporate governance and regulatory requirements. The complete printed version of the Annual Report is sent to every shareholder. An online version of the Annual Report is also available on the Group’s corporate website.

 

Announcements to Bursa Securities

Announcements on quarterly financial results, circulars and other general announcements are made via Bursa LINK in full compliance with regulatory authorities’ disclosure requirements and is also made available on the Group’s corporate website.

 

Investor Relations

The Board recognises the importance of keeping shareholders and investors informed of the Group’s business and corporate developments. The Board’s primary contact with major shareholders is via the Executive Director/Chief Executive Office and the Chairman, who have regular dialogue with institutional investors and deliver presentations to analysts periodically.

The objective is to provide updates on the Group’s financial performance, corporate developments as well as to discuss strategic matters and address issues that the institutional investors and analysts may have with respect to the business or operations of the Group.

 

Company Website

The Corporate website for the Group can be accessed by the public at www.scicom-intl.com. It archives all corporate and financial information made to the public, such as the quarterly announcement of the financial results of the Group, announcements and disclosures made pursuant to the disclosure requirements as set out in Bursa Malaysia Main Market Listing Requirements and other corporate information on the Group.

The corporate information section is also on the website where information such as profile of Directors, Board Charter, Code of Conduct and Terms of Reference for ARMC and NRC are made available to the shareholders and public.

 

(ii) The Annual General Meeting and Communication with Stakeholders

The AGM is the principal forum for dialogue and communications, and also offers an opportunity for the Board and the SMT to interact with the shareholders. During the AGM, the Chairman, other Board members, SMT and Group’s external auditors are available to respond to any questions and queries as raised by the shareholders. Where appropriate, the Chairman will endeavour to provide the shareholders with written answers to any significant questions which cannot be readily answered during the AGM.

Shareholders are encouraged to participate in the proceedings and pose questions about the resolutions proposed and the Group’s business operations and to raise questions with regards to the Group as a whole as well as to discuss any other important matters with the Board. During the AGM there is a presentation by the Group CEO on the Group’s financial presentation. During the AGM the Chairman will invite shareholders to raise questions pertaining to the audited financials and other items.

The Annual Report also plays an important part in disseminating information related to the Group’s financial performance, and operations and activities throughout the financial year. In accordance with the MCCG guidelines the Company will be sending the Notice of Annual General Meeting Twenty Eight (28) days prior to the holding of next year’s Annual General Meeting.

Statement of Compliance with the Best Practices of the Code The Group is committed to achieving high standards of Corporate Governance throughout the Group and to the highest level of integrity and ethical standards in all its business dealings. The Board considers that it has complied throughout the financial year with the Best Practices as set out in the Code.

This Statement is made in accordance with the resolution adopted by the Board at its meeting held on 25 August 2017.

Policy Statement

SCICOM is committed to promote and maintain high standards of transparency, integrity, accountability and ethics as well as good Corporate Governance practices in the conduct of its businesses and operations.

In line with these core values, SCICOM has made available an avenue for all employees and members of the public to disclose any improper conduct or malpractice committed or about to be committed to/within SCICOM Group at the earliest opportunity and to provide protection to persons making such disclosure.

 

Scope of the Policy

The scope of whistleblowing under this Policy includes:

  • Incidents of fraud, corruption or bribery;
  • Money laundering;
  • Abuse of power;
  • Conflict of interest;
  • Theft or embezzlement;
  • Misuse of Company’s property or information;
  • Breach of applicable laws and regulations;
  • Breach of SCICOM’s policies, procedures and other codes of conduct;
  • Situations which pose a danger to health, safety or any individual or significant danger to the environment;
  • Any other wrongdoing the nature of which is subject to SCICOM’s absolute discretion.

This Policy does not apply to employment issues which are to be dealt with in accordance with SCICOM’s Employee Grievance Procedure.

 

Whistleblowing Procedure

All disclosures are to be made in accordance with the SCICOM Whistleblowing Procedure as provided under this Policy.

 

Anonymity of Whistleblower

A Whistleblower is encouraged to identify himself/herself and provide contact information in his/her disclosure. Anonymous disclosures may impede an investigation and prevent SCICOM from providing the Whistleblower with the necessary protection as the Company will not know who you are.

Irrespective of this, anonymity will be maintained as permitted by law or the Whistleblower indicates that he/she no longer wishes to remain anonymous.

 

Protection to Whistleblower

A Whistleblower will be accorded the protection of confidentiality, to the extent reasonably practicable and as permitted by law. In addition, a Whistleblower who is a SCICOM employee will be protected against any adverse or detrimental actions as a result of making a disclosure under this Policy. Such protection is accorded even if the investigation later reveals that the Whistleblower was mistaken as to the facts, the rules or procedures involved.

 

Withdrawal of Disclosure Made

A Whistleblower may request the withdrawal of his/her disclosure. Such request shall be in writing in accordance with the SCICOM Whistleblowing Procedure.

SCICOM reserves the right to proceed with investigation of a disclosure even if it is subsequently withdrawn by the Whistleblower.

 

Investigation and Reporting

All disclosures will be investigated promptly by a person/party as directed by SCICOM’s Audit and Risk Management Committee (‘ARMC’). The ARMC has the authority to:

  • Determine the legitimacy of a disclosure received;
  • Direct further action;
  • Ensure all reasonable steps have been taken for a fair and unbiased investigation regarding a disclosure; and
  • Decide on the necessary action to be taken based on recommendation outlined in the investigation report.

 

Notification

The Whistleblower will be notified of the outcome of his/her disclosure.

 

This Policy may be amended from time to time.

 

Scicom's Whistleblowing Procedure