Sustainability Development Roadmap for Listed Companies

Transcription

1 Sustainability Development Roadmap for Listed Companies Social Sustainability Corporate Sustainability Confidence for Shareholders As of May

2 Contents Background of SD Roadmap Current Status Trends and Issues Roadmap Action Plan 2

3 Background of the Sustainability Development Roadmap In 2004, the National Corporate Governance Committee approved a plan outlining policies and measures that had yielded a considerable CG improvement. Review of the plan is now required to ensure its consistency with the current global conditions. Increasing attention has been given to Corporate Social Responsibility (CSR). There is a growing number of foreign investors and companies that are concerned to take company s CSR policies and activities into consideration when making their investment decision and suppliers selection. Source: UN PRI More awareness of global warming, natural resources depletion, severe and frequent natural disasters, social inequality, and corruption is evident in Thailand. The impact can occur at all levels: global, national as well as corporate; it is therefore necessary that all must participate in alleviating the problems. In December 2013, the SEC Board has approved the Sustainability Development Roadmap outlining processes that aim not only to improve corporate sustainability but also enhance environmental and social sustainability as a whole. The roadmap is part of the SEC Strategic Plan

4 From Corporate Governance to ESG for Sustainability Development Aim Building confidence for shareholders. Developing SD for all stakeholders, which subsequently leads to social sustainability. Rationale Return - strategy - innovation - risk management CG Economic Sustainability Development Emphasis on credibility to shareholders Social Environment N.B. In practice, the terms CSR, ESG and SD are often used interchangeably. Include all stakeholders 4

5 International Standards & Initiatives on ESG - The ten Principles covering 1) Human Rights 2) Labour 3) Environment 4) Anti-Corruption - Participants are voluntary to be signatory. - Signatory commits to issuing annual COP (Communication on Progress) on progress made in implementing the 10 principles otherwise, delisted - 10,000 participants from 145 countries. -Known as the World s largest voluntary corporate responsibility initiative - Guidelines on Sustainability Reporting that provide information on strategies, operations, governance, management, and positive and negative ESG bottom line. - latest guidelines GRI-G4-5,753 organisations worldwide esp. large listed companies have adopted the GRI for their sustainability reporting. - Voluntary recommendations for responsible business conduct for multinational enterprises. Not regulation nor protectionist measures. - Cover 6 topic areas: 1) Disclosure 2) Employment 3) Environment 4) Anticorruption 5) Consumer Interests 6) Science and Technology - 30 OECD member states and 9 nonmember states support the use of the guidelines. - A voluntary guidance standard for all organisations containing 7 core subjects: 1) organisational governance 2) human rights 3) labour practices 4) environment 5) fair operating practices 6) consumer issues 7) community involvement and development - Thai Industrial Standards Institute encourages business entities to adopt ISO Likely to become certified standard. - A framework for sustainability reporting that integrates company sustainable development and strategies. - The framework highlights the disclosure of company s various capitals, namely 1) financial capital 2) manufactured capital 3) intellectual capital 4) human capital 5) social and relationship capital and 6) natural capital -Officially launched in December 2013, with100 organisationsparticipated the pilot programme. 5

6 ESG Trend in other Countries: Proactive Role of Institutions Introduction of Several Standards & Initiatives Financial Institution Investor Stock Exchange EPFI (The Equator Principles Financial Institutions) Initiated in The principles provide a globally consistent governance model to assess and manage environmental and social risk in financing. Currently, there are 78 financial institutions from 34 countries officially adopting the principles. UNEP FI (The United Nations Environment Programme Finance Initiative) A global partnership between UNEP and the financial sector. Over 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance TISCO and BKI are members from Thailand. PRI (Principles for Responsible Investment) Established in A UN-supported initiative that includes an international network of investors working together to put the six Principles for Responsible Investment into practice, with a goal to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. Currently, there are just over 1,000 signatories with total AUM of USD 35 trillion. SSE Initiative (Sustainable Stock Exchanges Initiative) introduced by the UN Secretary-General Ban Ki-Moon in It is a platform for exploring how stock exchanges can enhance corporate transparency and performance on ESG issues and encourage sustainable investment. At present, there are 9 partner stock exchanges, namely, NYSE Euronext, NASDAQ OMX, BSE, ISE, NIGSE, WSE, BOVESPA, JSE and EGX 6

7 CG and CSR Principles Corporate Governance 1. The Rights of Shareholders and Key Ownership Functions 2. The Equitable Treatment of Shareholders 3. The Role of Stakeholders in Corporate Governance 4. Disclosure and Transparency 5. The Responsibilities of the Board (OECD Principles of Corporate Governance, 2004) Corporate Social Responsibility 1. Good Corporate Governance 2. Fair business conduct 3. Anti-corruption 4. Human rights 5. Equitable treatment of labours 6. Accountability to customers 7. Support environmental responsibilities 8. Community and social development 9. Innovation and its promotion 10. Sustainability Reporting (CSRI, Stock Exchange of Thailand Guidelines for Social Responsibility) 7

8 Corporate Social Responsibility (CSR) 1. CSR after Process Project / Social Activity/ Philanthropy 2. CSR in Process* (main objective) Embedded in core business process Business Enterprise 3.CSR as Process Social Enterprise Social Enterprise 8

9 Corporate Sustainability Development Trends & issues including social and environmental changes Identify Stakeholders need Key factors, such as product development, production process, etc. should be included. Reporting International Accepted Standards, for instance, GRI and Integrated Report are used as a guide. Strategies and ESG should be related and KPIs identified. Operations Formulate Strategies Select the development level: compliance, do it better, or differentiate oneself. KPIs are identified for every strategy. CSR in-process: Fairness and Impacts 9

10 Summary of the SD Roadmap CG in substance Board and executives drive the company to achieve its performance with good governance and sustainability in real practice. CSR in process Responsible to social and environmental concerns that embedded in day-to-day business operation. Change agent that influences others to respect CSR. Anticorruption in practice Firm commitment not to initiate or facilitate any corruption practices. Become a role model for others in the Thai business sector. Social Sustainability Corporate Sustainability Confidence for Shareholders 10

11 Current Status 11

12 Shareholding Structure Most of listed companies have controlling shareholders. Family businesses in Asia, 2011 India 67% Philippines 66% Thailand 66% Singapore 63% Malaysia 62% Indonesia 61% Hong Kong, China 62% South Korea 58% Chinese Taipei 35% China 13% Source: Credit Suisse, 2011 Asian Family Businesses Report Top 50 companies = 76.5% of total market capitalisation (as of 2013) Majority of listed companies = SMEs Avg. free float = 47% (139 companies have > 50%) Prevalence of concentrated ownership: 66% of listed companies are family-owned, while 14% are SOEs. Benefit Managers are major shareholders, which helps align the interests of management and shareholders, long-term commitment and more adaptive to competition. Challenges Often received poor CG score from international assessments. Tunnelling and lack of sustainability and succession planning remain concerned issues. Alternative framework/model of CG should be suggested. 12

13 International CG Assessment Reports have ranked Thailand top in ASEAN and third in Asia. Key challenges remain, for example, the board responsibilities category. CG Watch market scores : 2007 to Hong Kong (67) 1. Hong Kong (67) 1. Singapore (69) The World Bank s CG ROSC Thailand receives higher scores than regional averages in every category. 2. Singapore (65) 2. Singapore (65) 2. Hong Kong (66) 3. India (56) 3. Japan (57) 3. Thailand (58) 4. Taiwan (54) 4. Thailand (55) 4. Japan (55) 5. Japan (52) 5. Taiwan (55) 5. Malaysia (55) 6. Korea (49) 6. Malaysia (52) 6. Taiwan (53) 7. Malaysia (49) 7. India (49) 7. India (51) 8. Thailand (47) 8. China (49) 8. Korea (49) 9. China (45) 9. Korea (45) 9. China (45) 10. Philippines (41) 10. Indonesia (40) 10. Philippines (41) 11. Indonesia (37) 11. Philippines (37) 11. Indonesia (37) Source: 1. ACGA, September The World Bank Report on the Observance of Standards and Codes (ROSC) : Corporate Governance Country Assessment Thailand, January Thai IOD 2013 ASEAN CG Scorecard : average score of top100 Thai listed companies is higher than those of the regional counterparts. 13

14 Enforcement and CG culture need to be improved. Corruption tarnishes overall CG in Thailand. CG Watch Report 2012 Comments 1. Non-financial reporting is more of form than substance. 2. Enforcement remains inefficient. Number of cases settled in court is comparatively lower than cases filed by the SEC. 3. Limited progress on the amendment of laws. 4. SEC s and SET s website should be more accessible, and all data available in English. 5. Uncertainty remains with regard to the impact of the private sector s anti-corruption practices. 14

15 Although CG in Thailand is remarkably improved, smaller companies do not seem to have fared as well as larger ones. In general, there is an increase in average CG scores and reduction in the number of companies receiving 3 logos. Evaluation questions are now changed to the yes/no question type-the same method employed by the ASEAN CG Scorecard. However, listed firms find that there are too many questions (200+ questions). Companies with excellent and very good scoring (4-5 logos) are companies with market capitalisation over 3,000 million baht. Companies receiving below good scoring (less than 3 logos) mostly are the SMEs. 15

16 The CGR latest result shows that SMEs generally received lower score than their larger peers. CGR Result 2013 Source : Thai IOD

17 CGR 2013 The Role of Stakeholders and Board Responsibilities categories received comparatively low average scores. CG Score by Category CGR 2013 ASEAN CG Scorecard (2012) Average Overall A. Rights of Shareholders B. Equitable Treatment of Shareholders 15 0 C. Role of Stakeholders D. Disclosure and Transparency E. Board Responsibilities 17

18 Treatment of Shareholders: AGM Evaluation produced good but levelling off result. Information disclosure before AGM remained weak listed companies received score of 100%. 14% of listed companies received score of less than 70%. Assessment questions only reviewed standard agenda items. No specific questions were asked regarding the quality of information disclosure of important agenda items. 18

19 ESG/CSR/SD There are 333 listed companies on the DJSI World; 3 of which are Thai listed companies. Meanwhile, there are 81 companies on the DJSI Emerging Markets including one Thai listed company. In 2014,there are 31 Thai listed companies that have passed the initial assessment criteria, and are eligible for the Sustainability Assessment. Dow Jones Sustainability World Index Dow Jones Sustainability Emerging Markets Index USA UK Switzerland Germany France Australia Spain Canada South Korea Japan others Thailand Brazil China Taiwan South Africa Colombia India Thailand Mexico Malaysia Chile Philippines Turkey 3 Thai listed companies are SCG, PTT and PTTGC. They account for 0.16% of the total weight. N.B. as of Mar (Source: Only one company, TOP, is included in this index, it accounts for 2.78% of the total weight. 19

20 ESG/CSR/SD Majority of listed companies still consider CSR as a philanthropic or charitable activity, which is in fact known as CSR after process. The importance of ESG, its related risks, and strategies for sustainability are yet to be completely realised. Q: How relevant is sustainability to your business? Extremely relevant Very relevant somewhat relevant not relevant source: PWC, Pulse check on sustainability, Feb

21 Survey Result of ESG Disclosure 21

22 ESG/CSR/SD Following the SEC s CSR guidelines (2006), the Corporate Social Responsibility Institute (CSRI) has further enhanced CSR of listed companies by: issuing guidelines for social responsibilities, guidelines for sustainability reporting (based on the GRI) and guidelines for various industry groups. organising seminars and CSR Awards event (76 listed companies participated the event in 2013). supporting listed companies in preparing their sustainability reports and listing on the DJSI. developing the SET SI. The CSRI 3-year plan ( ) aims to raise the standard of CG and CSR practices to the internationally accepted level. In addition to supporting listed companies and developing the SET SI, as mentioned above, CSRI promotes the concept of Socially Responsible Investment (SRI) to investors. In 2013, SEC has published a notification on the compulsory disclosure of CSR policies and activities (effective from 2014). Prior to the notification, only 33 companies, mostly the large ones, have already published their CSR reports. 22

23 Anti-Corruption The Corruption Perceptions Index (CPI) 2013 of the Transparency International (TI) Thailand received a score of 35 out of 100 and ranked 102 nd out of 176 countries. Private Sector leading force in reducing corruption. The Anti-Corruption Thailand (ACT) and the Private Sector Collective Action Coalition Against Corruption (CAC) (the latter was initiated by the Thai IOD). 309 signed the Declaration of Intent Only 14 are CAC s certified members 35 out of 65 Securities/ Inv. Mngt 140 out of 562 listed companies 15 out of 20 commercial banks 119 business enterprises The Anti-Corruption Thailand campaigns, watchdog group, signing integrity pact with the public sector for large procurement contracts. Many listed firms are still reluctant to stop bribery, with concern that this might hinder their business progress and competitiveness. The SEC has issued guidelines on the disclosure of anti-corruption policy and procedures, and encouraged the institutional investors to ask questions about these policy and procedures at the AGMs. 23

24 Trends & Issues 24

25 OECD s Corporate Governance Developments The OECD Principles of Corporate Governance - an internationally accepted standard, first released in 1999 and last revised in A further review starts in 2014 with the objective of conclusion within one year. The review is expected to include the role of board in governing company subsidiaries (the issue is already addressed and included in the requirement of the annual registration statement (Form 56-1) disclosure). Asian CG Roundtable a regional forum for promoting CG practices. The Roundtable analyses policy options particularly for companies in the region with concentrated ownership structure (many of them are family-owned, state-owned, or with subsidiaries) Priorities are: 1. Effective enforcement: related-party transaction, ownership & control disclosure, and fiduciary duties. The Roundtable is working on the following best practices Legal frameworks though converge, different interpretation remains Structure and responsibilities of the regulator and law enforcement agencies Roles of regulatory authorities: supervising, monitoring, and penalising Enforcement action / practices disclosure Court and justice system Cross-border enforcement 25

26 OECD s Corporate Governance Developments 2. Board Independence Board Member Nomination and Election report, 2012 Recommendations Transparent, fair, formal and empowered board nomination & election process (SEC and SET have not imposed the requirement of nomination committee establishment) Facilitating participation of all shareholders and widening the pool of qualified candidates Enhancing transparency and board evaluation 3. Related party transactions: RPT Guide on Fighting Abusive Related Party Transactions in Asia, Thailand has generally completed key areas as recommended in the report. Regulations on RPT is currently under review. 4. Studies on CG Development Some studies have found that given insufficient knowledge and understanding of corporate landscape, and the complexity of the equity market with various types of shareholders, the public sector was uncertain with regard to its authoritative and legal enforcement roles. Other studies have suggested that each investor s investment policy and business model affect their economic incentives level, which in turn determine their interest in the company s CG policies and practices. By imposing regulation on the investors to encourage more of their concern on the topic may prove to be costly and ineffective. It was recommended that the dynamics and culture of each company should be sustained and communication with stakeholders fostered. 26

27 Corporate Governance in other Countries Securities Commission Malaysia has published a Corporate Governance Blueprint 2011 that includes Shareholder Right Role of Institutional Investors The Board s Role in Governance Disclosure and Transparency Role of Gatekeepers and Influencers Public and Private Enforcement Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) Say on Pay - a firm's shareholders have the right to vote on the remuneration of executives, in addition to information disclosure and the establishment of remuneration committee. Companies realise the value of integrating Governance, Risk and Compliance (GRC) as an approach to enhance business value through improving operational decision making and strategic planning, in addition to the emphasis on checks and balances. 27

28 CG Progress in Thailand: IOD s CG priorities Source: Dr. Bandid Nijathaworn s speech at the National Director Conference

29 Progress on ESG 29

30 Development of ESG International level It is believed that if social and environmental impacts were easily measurable, ESG could be successfully developed. However, some issues, such as quality of life, are hard to measure and take some time to evident the outcome. The International Federation of Accountants (IFAC) is in the process of developing an information disclosure standard. Some issues remain to be discussed. Given the pervasive social issues, many businesses have already adopted the Creating Shared Value or the Strategic CSR approach. In 2011, Thailand ratified the United Nations Convention against Corruption (UNCAC), which commits the country to ratifying, implementing and monitoring of the UNCAC framework (more than 170 countries have ratified the UNCAC). In order to promote corporate social responsibility, one of the objectives of the ASEAN Socio-Cultural Community (ASCC) Blueprint is to encourage the business sector to include CSR initiatives in the corporate agenda. The CSR Club, the Thai Listed Companies Association, the ASEAN Foundation and business groups from four countries have jointly established the ASEAN CSR Network to serve as a venue for supporting and exchanging experiences and knowledge on CSR to the member countries in the region. 30

31 Development of ESG National Level The Cabinet Resolution on 12 Oct and the National Committee for Promotion of Social Welfare have assigned the Ministry of Social Development and Human Security to develop a CSR Strategic Plan to be submitted to the cabinet in Ministry of Industry has initiated the Green Industry Project with the purpose to promote environmental sustainability in the industry sector. The participation to the Project is divided into 5 levels as follows: Level 1 "Green Commitment" - a commitment to reduce the environmental impact, and communicate the commitment within the organisation. Level 2 "Green Activity" - an activity to reduce impact on the environment. Level 3 "Green System" - the systematic approach to environmental management that involves the monitoring, assessment, and review process to ensure continuous development. This also includes receiving well-recognised awards and environmental certifications. Level 4 "Green Culture" the organisational culture that encourages all members of the organisation to take into consideration and responsibility to the environment, and to follow best green practice as part of their day-to-day work life. Level 5 "Green Network" the commitment to the environment throughout the supply chain. Companies encourage their partners are to participate the Green Industry Project. Source: 31

32 Sustainability Development Roadmap 32

33 Purpose: To develop a sustainability development roadmap that meets the expectations of listed companies, investors, and the capital market. Expectations of Listed Companies Credibility, good performance, and sustainability Recognising firm-specific characteristics Practical legal laws and regulations Economies of scale and competitiveness Expectations of Investors Credibility Return Viability Sufficient and timely information Good communication Director/ Executive Board/ Company Gatekeeper SEC Related Organisations Shareholder/ Investor Major Shareholder Controller Employee Challenges Audit committee Sub-committee Company Secretary Financial Adviser Auditor Reporter 1. Good CG evaluation results, but these largely reflect form over substance. 2. Minor progress for SMEs. Assessment results show rather poor achievement for family business. 3. Information dissemination before AGM must be improved. 4. Enforcement, board responsibilities, CSR and anti-corruption are areas that require further development. Information Disclosure Approval of important transactions Approval for issuance of securities Audit of unfair business conduct Trends SET IOD AIMC/ASCO/TIA Law enforcement agencies MOC/ MOF 1. Emphasis on strategies, policies, risk management, and checks and balances. 2. Requirement of effectiveness enforcement Institutional Inv. Retail Investor Foreign Investor Potential investors General public 3. Corporate sustainability significantly depends on ESG 4. Increase of bribery enforcement in other countries 33

34 Sustainability Development Roadmap Self Disciplines 2. Promoting corporate social and environmental responsibility 3. Fostering commitment on anti-corruption practices 1. Enhancing CG accountability of the board 4. Strengthening the roles of investors 5. Strengthening the roles of gatekeepers Market Disciplines 8. Building SEC as a sustainable organisation 6. Continuously improving information disclosure 7. Increasing enforcement's efficiency and effectiveness Present Next 5 years Regulatory Disciplines 34

35 1. Enhancing CG Accountability of the Board 1.1 Developing CG Frameworks Small and medium companies Survey the requirement of company vs. investor. Publish CG guidelines for SMEs. Communicate with listed companies (already in progress by the SET). Other listed companies: review the consistency of CG Code with OECD Principle (2014) and SD principles (2016). State-owned enterprises: analyse CG principles for SOE and publish additional guidelines (if necessary). 1.2 Enhancing Board Independence Review the criteria on board size, qualification, responsibilities of independent director and of audit committee. Review requirements of board nomination and selection, and director pools. Increase communication channels with audit committee: seminars, newsletters, AC corner on website. Reviewing the audit committee guidelines. Identify cases that require the disclosure of audit committee s or each director s comments, for instance, RPTs. 1.3 Strengthening the board s role in strategic plan formulation and risk management The issue is already addressed and included in SET s CG principle 2012, ASEAN CG Scorecard, and IOD s CGR. Information about self assessment, the board s role in strategic plan formulation and risk management should be fully disclosed. 35

36 1. Enhancing CG Accountability of the Board 1.4 Strengthening driving forces to foster good CG. Develop CG Gateway as a knowledge portal. Develop company profiles and compiling CG indicators. Promote the use of ASEAN CG Scorecard evaluation. Revise the CGR criteria to ensure its consistency with the reviewed CG Framework Guide to CG best practices (in addition to legal requirement) Guidelines : SET s CG Principles 2012 IOD s director & company secretary training Guidelines, handbooks, and checklist Board Practices Comply or Explain disclosure IOD publishes CGR results. Disclose the results of ASEAN Scorecard Assessment CG / SD Gateway Produce company profiles & CG / CSR indicators 36

37 2. Promoting Corporate Social and Environmental Responsibility Aim To encourage companies in pursuing the three levels of CSR development through capital market mechanisms. Compliance / Do no harm Integrated business & SD strategies Implementation of Creating Shared Value approach 2.1 Strengthening driving forces for good CSR practices. CSRI s guidelines CSRI and TIA training/ coaching Awards CG / SD Gateway Company Operation Listed companies should disclose CSR information in their annual reports, and continuously improve their CSR development level (more detail in section 6.1). In any case that company is found irresponsible to social and environment (or violation) - listed company must disclose info. and provide explanation - IPO company must, first and foremost, settle the issue. Produce company profiles & CG / CSR indicators 37

38 2. Promoting Corporate Social and Environmental Responsibility 2.2 Fostering the Integrated SD Strategies Larger company: CSRI and SET advise listed companies in producing reports that are in line with the GRI standard, and support them in the DJSI Index listing. SME: introduce a simpler framework, for instance, the Ministry of Industry s Green Industry. Encourage listed companies to improve their employees skills and financial literacy. Support SET in the development and launch of the SET SI in 2016, and in becoming a partner of the Sustainable Stock Exchanges Initiative. Introduce some new criteria to listed companies, for example, (1) A business review that includes environmental and social issues (UK Company Act, 2006). (2) Requirement of shareholder resolution for projects that have social and environmental impact (US Company Law). 2.3 Encouraging Business Sector to Support Social Enterprise Encourage the business sector to support social enterprises in finding sources of finance and enhance their management skills. Rationale There is a growing number of social enterprise established in various forms, organisation, community, and private firm. They are, however, limited to access to capital, and lack of management and development skills. Many listed companies and investors, on the other hand, have already been involving in charitable causes. Thus, it will be beneficial if there exists a method that could bring about their collaboration. 38

39 3. Fostering Commitment on Anti-Corruption Practices Aim Firm commitment not to initiate or facilitate any corruption practices. Become a role model for others in the Thai business sector. Target 60% of listed companies 3.1 Strengthening driving forces to good anti-corruption practices. IOD s CAC IOD and TIA Training Anti-corruption questions included in CGR Assessment Company Operation Listed companies should disclose anticorruption information in their annual reports. Letter of Commendation. Encouraging listed, securities, and asset management companies to become CAC certified members. Monitor their implementation CG / SD Gateway Produce company profile & anti-corruption progress indicators 39

40 3. Fostering Commitment on Anti-Corruption Practices 3.2 Encouraging investors to consider investing in listed companies with anti-corruption policies and procedures. Liaise with the institutional investors, for instance, the Association of Thai Securities Companies and Association of Investment Management Companies, to monitor and enquire about the company s anti-corruption action at the Annual General Meetings (starting in 2014) and to publish some guidelines on the exercise of voting rights. Work with the Thai Investors Association in defining a set of appropriate questions for the Protection of Shareholder Rights volunteers to ask at the company s Annual General Meetings. Co-operate with the Investment Analysts Association and Association of Thai Securities Companies in placing emphasis on the company s anti-corruption policy in their analyst reports. 3.3 Developing standards for the Financial Advisor on the due diligence practices that address the IPO company s anti-corruption-related issue/news. The Financial Advisor should advise the company on clarification or information disclosure about any anti-corruption-related issue/news that could significantly impact the company. 40

41 4. Strengthening the Roles of Investors 4.1 Promoting investment in a company with CG & CSR policies and practices Encourage the institutional investors to actively consider CG and CSR to support their investment decisions. They should also be encouraged to use their voting rights and ask questions at the AGMs. Advise the institutional investors on the development of an investment code, based on the UK Stewardship Code (2012) and UN Principles for Responsible Investors (UNPRI). Encourage the analysts to include CG / CSR indicators in their analyst reports. Encourage the retail investors to invest in mutual funds and listed companies with excellent CG/CSR policies and practices, for instance, those on the SET SI. 4.2 Enhancing the roles of the Thai Investors Association (TIA) Review the AGM Checklist manual to include the quality of information disclosure and the SD operational process. Encourage the TIA to actively comment on any of the company s important items and issues. Provide relevant training courses to the Protection of Shareholder Rights volunteers. 4.3 Examining legal mechanisms that protect the investors rights Review mechanisms that accommodate the investors with their compensation demand, for example, the Securities Investors Association Singapore s methods of monitoring listed companies. Follow up the enactment of the Class Action law (currently, under the Senate s consideration) Follow up the amendment (such as E-voting /E-proxy clauses) of the Public Limited Companies Act. 41

42 5. Strengthening the Roles of Gatekeepers Company/ Board Information Approved Items Gatekeepers Information Approved Items Investor/ Regulator 5.1 Company Secretary 5.2 Investor Relations 5.3 Financial Advisor 5.4 Auditor Increase the qualification of company secretary with the requirement of company secretary certification. Support the promotion of the Thai Company Secretary Club to become an association. Support the Thai Listed Companies Association/ universities curriculum development. No qualification is presently required of the investor relations agents. Organise training programmes and forums for exchanging experiences among the IR members. Disclosure of the qualification of the investor relations agencies. Organise trainings on CG, CSR and Anticorruption topics to the Financial Advisor. Develop standards on due diligence practices that include CG, CSR, and anti-corruption issues. Promote independence of the Auditor. Issue guidelines on the non-audit services. 42

43 6. Continuously Improving Information Disclosure 6.1 Requirement of information disclosure to encourage listed companies to continuously improve their CSR practices. Set step-up targets to consistently raise the level of SD disclosure. Develop SD progress indicators to be included in the company profiles. Encourage listed companies to prepare & activities. annual report by integrating normal business operations and SD strategies. Consider the issuance of guidelines to account for social and environmental impact. 6.2 Improving the disclosure of non-financial items Disclosure of present CSR policies Disclosure of ESG/SD related risks. SD is included business strategies. Integrated business & SD strategies. Monitor and advise listed companies on the disclosure of non-financial items (CG/CSR/Corruption/MD&A) as required in the revised annual registration statement (Form 56-1). Further improve the followings: ownership structure guidelines for risk factors to be more in line with the SD concept. relevant ratios for each business sector/ industry (co-operating with the Investment Analysts Association) Improve information disclosure in the notice to call shareholder s meeting to ensure sufficient information for shareholders to make voting decisions, and strengthen the board s fiduciary duty in providing opinions to shareholders

44 6. Continuously Improving Information Disclosure 6.3 Supporting the full adoption of IFRS Current Status of the IFRS Adoption: 32 standards are already published in Royal Government Gazette; 18 draft standards are interpreted, and a few are under review by the Federation of Accounting Professions. Challenges of the full adoption: According to section 34 of the Accounting Professionals Act B.E.2547, the accounting standard must be made in Thai language, however, the translation of IFRS has proved to be a lengthy and resource-intensive process. Some requirements of IFRS are impracticable. A few countries have also encountered the translation issue. They have therefore declared that the full adoption must be conformed to the promulgation procedures in that country. Possible Solutions Request the Federation of Accounting Professions to consider the full adoption to be conformed to the promulgation process. Prepare the full adoption guidance for listed companies. Provide communication channels, such as C1 IOSCO for sharing experiences and obstacles to the full adoption. 44

45 7. Increasing Enforcement's Efficiency and Effectiveness Monitor& Prevent Wrongdoing Improve RPT and acquisition/divestiture rules with emphasis on the board s roles and opinions as preventive measures for wrongdoing. Develop an alert system to monitor more promptly any possible wrongdoing. Improve the SEC s market surveillance system. Inspection of Offences Improve evidence management system. Co-operate with other financial regulators and other law enforcement agencies. Legal Proceedings Appropriate Punishment Utilise measures under the Anti-Money Laundering Act to increase effectiveness and expedite enforcement process. Consider leveraging untrustworthy characteristics of directors as minimum sanction on top of the normal criminal proceedings. Closely co-operate with related agencies. Consider utilising the Stock Exchange s authority stated in the sections of the Securities and Exchange Act. Expedite the amendment process, and add sections on civil sanction, elements of offence, and evidence. Communicate to the Public Improve disclosure of enforcement information in press release and on the SEC s website. Ensure its accessibility and straightforward and concise contents (the OECD will publish some guidelines in 2014). Consider disclosing enforcement on director, company, and management criminal and administrative sanctions in a package to foster compliance and culture in companies. 45

46 8. Building SEC as a Sustainable Organisation Background/ Rationale Given the SEC has required listed companies to adhere to CG, CSR in-process and anticorruption policies and practices, the SEC must also adhere to the same requirements in order to strengthen its role as a sustainable organisation. However, to ensure appropriateness of good governance for the SEC, the Public Sector s Good Governance principles should also be considered. As an important enabler of the capital market, the SEC should continuously develop itself into a sustainable organisation in order to achieve its core mission in supporting the sustainability development of the capital market. In 2012, the SEC initiated a policy to publish an SD report. The SEC itself attempted to publish its own SD report by adopting the GRI guidelines. During the report preparation process, it was found that: the SEC s operational processes are actually considered as CSR-as process activities. However, many of these activities have not been systematically rationalised for coherent operational processes and understanding throughout the organisation. experts in the field have given feedbacks that the report should contain one key element of SD, which is the analysis of the impacts of the ESG factors on stakeholders, and how to incorporate these factors into the strategic plan formulation process in order to meet the stakeholders requirements. some of the SEC s operational processes and activities are in themselves socially responsible processes. However, appropriate KPIs for performance measurement and improvement are not identified for many of these activities. 46

47 Sustainability Development Roadmap Rationale CG in substance Governance arrangements that ensure achievement of defined objectives with integrity and robust risk management that meet the standards of - CG for Listed Companies - GG for Public Organisations - IOSCO CSR in process Duly exercise authority with competence and responsibility to stakeholders and society CSR as process Sustainable Development Develop capital market to fuel social and economic development for sustainable well-being of the citizen. Anti-corruption in practice A corruption-free entity Not involved in giving and receiving unlawful gains - CAC and COSO standards 47

48 5-Year Action Plan 8.1 Promoting and Communicating the concept of SD throughout the Organisation. Define SD policy and principles for SEC as a public identity. Strengthen code of conduct and business practices to ensure fulfillment of stakeholders needs and expectation with accountability and integrity by: issuing regulations exercising monitoring and administrative power imposing enforcement leveraging other measures to empower stakeholders and strengthen market discipline (e.g.) education, incentive schemes, etc. Communicate and build capacity of employees. Embed SD into SEC culture. 48

49 5-Year Action Plan 8.2 Reviewing SEC s governance framework Update CG codes for SEC to ensure consistency with international standards for CG, SD framework, good governance for public sector and other Thai governance standards. Revise codes of conduct for commissioners and officers to heighten the standards on managing conflicts of interests receiving and offering gifts (already completed) 8.3 Ensuring a corruption-free entity Conduct corruption risk assessment by using the CAC s anti-corruption procedures to improve the SEC s procedures to ensure good practices beyond corporate standard. Review procurement rules and practices to ensure efficiency and compliance with government standard. Report annual progress and outcome, based on GRI s anti-corruption indicators. Anti-Corruption KPIs (refer to the GRI) Percentage and total number of business units analysed for risk related to corruption. Key corruption risks. Percentage of directors, executives, employees and suppliers acknowledged and trained in organisation s anti-corruption policies and procedures. Actions taken in response to incidents of corruption, such as terminate a contract with a corrupt supplier. 49