Nomination and Remuneration Committee Terms of Reference

In adherence to the call by the Government for self governance, the Malaysian Code on Corporate Governance first issued in March 2000 and subsequently revised in 2007 (“Revised Code”) set out principles and best practices for good governance aimed at increasing the efficiency and accountability of Boards to ensure that the decision making process is not only independent but is seen as independent.

Further, the Corporate Governance Guide issued by Bursa Malaysia Berhad emphasises that strong business ethics, sound policy and procedures and effective and efficient monitoring systems with proper checks and balances are the ingredients of good corporate governance.

The objectives of the Nomination and Remuneration Committee are as follows:

Nomination

1. The Nomination and Remuneration Committee is responsible for recommending to the Board for approval the appointments of new members of the Board, Board Committees and Chief Executive Officer (CEO) and their re-appointments (where applicable).
2. The Nomination and Remuneration Committee is responsible for reviewing and approving the appointment of the Group’s key management personnel as may be determined by the Nomination and Remuneration Committee from time to time.
3. The Nomination and Remuneration Committee reviews and makes recommendations to the Board on succession planning.

Remuneration

1. To set the policy framework and to make recommendations to the Board on all elements of the remuneration, terms of employment, reward structure and fringe benefits for Executive Directors, the Managing Director, CEO and other selected top management positions with the aim to attract, retain and motivate individuals of the highest quality.
2. To ensure that the remuneration policy is competitive and consistent with Dagang NeXchange Berhad Group’s culture, objectives and strategy.

1. The Revised Code recommended that a committee of Directors composed exclusively of Non-Executive Directors, a majority of whom are independent, be given the responsibility of:
   • proposing new nominees for the Board and for assessing Directors on an on-going basis; and
   • recommending remuneration of Executive Directors, the Managing Director and other selected top management positions of the Company and its wholly-owned subsidiaries.
2. The members of the Nomination and Remuneration Committee shall elect a Chairman from among themselves who is not an Executive Director or employee of Dagang NeXchange Berhad or any other companies within Dagang NeXchange Berhad group. All members of the Nomination and Remuneration Committee, including the Chairman, will hold office only so long as they serve as Directors of Dagang NeXchange Berhad.
3. Members of the Nomination and Remuneration Committee may relinquish their membership in the Committee with prior written notice to the Company Secretary and may continue to serve as Director of Dagang NeXchange Berhad. The Nomination and Remuneration Committee will review and recommend, to the Board for approval, another director to fill up such vacancies.
4. The Nomination and Remuneration Committee of Dagang NeXchange Berhad shall be appointed by Dagang NeXchange Berhad’s Board of Directors via a Board Resolution and shall compose of at least three (3) members of whom a majority shall be Independent Non-Executive Directors.

The following are the main duties and responsibilities of the Committee collectively. These are not exhaustive and can be augmented if necessary by the overall Board.

Specific responsibilities in relation to nomination matters

1. Examine the size of the Board with a view to determine the number of Directors on the Board in relation to its effectiveness and ensure that at every annual general meeting, one-third of the Directors for the time being shall retire from office. A retiring Director shall be eligible for re-election. Every Director, including the Managing Director, shall be subject to retirement at least once in every 3 years.
2. Assist the Board in reviewing on an annual basis the appropriate balance and size, required mix of skills, knowledge, experience, diversity and other qualities, including core competencies which Non-Executive Directors should bring to the board and disclose the same in the Annual Report, the Non-Executive Directors participation and in establishing procedures and processes towards an annual assessment of the effectiveness of the Board as a whole and contribution of each individual Director and Board Committee member.
3. When a vacancy exists or when it is considered that the Board would benefit from the services of a new Executive Director with particular skills, the Committee selects one or more candidates with the appropriate expertise and experience. The Committee may use the services of a professional recruitment firm and will then make its recommendation on the candidates for submission to the Board for approval.
4. In developing its procedures on appointments to the Board and making its recommendations to the Board, the Committee will take account of the need for the Board to operate on an open and transparent appointment process. This will normally include public advertisement but will not exclude direct approach being made to individuals who may be suitable or organisations that may be able to advise.
5. For the appointment of a Chairman, the Committee should prepare a job specification, including the time commitment expected. A proposed Chairman’s other significant commitments should be disclosed to the Board before appointment and any changes to the Chairman’s commitments should be reported to the Board as they arise.
6. Recommend suitable orientation, educational and training programmes to continuously train and equip the existing and new Directors.
7. Recommend to the Board, candidates for all directorships proposed by the Managing Director and, within the bounds of practicability, by any other senior executive or any director or shareholder to be filled by the shareholders or the Board and Directors to fill the seats on the Audit, Nomination and Remuneration or other Committees. A job description/specification for the new Directors should be drafted before identifying possible candidates. Candidates should be evaluated against this specification.
8. Assess annually the effectiveness of the Board as a whole, the committees of the Board and the contribution of each individual director based on the process implemented by the Board.
9. Recommend to the Board suitable candidates for the role of senior Independent Director.
10. Assist the Board annually in reviewing the performance of the Senior Management of the Company and its wholly-owned subsidiaries. The Senior Management includes the Managing Director/Chief Executive Officer, Chief Operating Officer, Senior General Manager and other officers with grade L3 and above.
11. Give full consideration to succession planning for Directors and other Senior Management positions in the course of its work, taking into account the challenges and opportunities facing the Company, and the skills and expertise needed on the Board in the future and in relation thereto make recommendations to the Board concerning the succession plans for both Executive and Non-Executive Directors and in particular for the Chairman and Managing Director/Chief Executive Officer.

Specific responsibilities in relation to remuneration matters

1. Set, review, recommend and advise the policy framework on all elements of the remuneration such as reward structure, fringe benefits and other terms of employment of Executive Directors, the Managing Director and the Chief Executive Officer.
2. Advise the Board on the performance of the Executive Director, Managing Director and/or Chief Executive Officer and an assessment of his/her entitlement to performance related pay. The Committee also should advise the Executive Director, Managing Director and/or Chief Executive Officer on the remuneration and terms and conditions (and were appropriate, severance payments) of the senior staff (defined as the small group of staff who report directly to the Executive Director, Managing Director and/or Chief Executive Officer).
3. Represent the public interest and avoid any inappropriate use of public funds when considering severance payments for senior staff. The Committee should also exercise care to avoid determining a severance package that in public opinion might deem to be excessive.
4. Review the history of and proposals for the remuneration package of each of the Company’s committees.
5. Ensure that contractual terms on termination, and any payments made, are fair to the individual, and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.
6. Oversee any major changes in employee benefits structures throughout the Company or Group.

1. The Nomination and Remuneration Committee removes from the Managing Director, the general responsibility for constituting the Board. The Committee should not have the delegated power from the Board to implement its recommendations but should be obliged to report its recommendations back to the full Board for its consideration and approval. This is in recognition of the importance of chemistry within the Board and the need for Board membership to be endorsed by all or the majority.
2. In carrying out its duties and responsibilities, the Committee will in principle have full, free and unrestricted access to Dagang NeXchange Berhad’s records, properties and personnel. The Nomination and Remuneration Committee may use the services of professional recruitment firms to source for the right candidate for directorship or sought independent legal or professional advice whenever necessary on any matters within its terms of reference.

The Committee may also obtain the advice of external consultants on the appropriateness of remuneration package and other employment conditions if required.

3. The Committee will review the compensation of Executive Directors, the Managing Director and/or Chief Executive Officer and recommend appropriate adjustments to the Board of Directors for their approval. Executive Directors shall abstain from the deliberations and voting on decisions in respect of their remuneration package.

The remuneration and entitlements of the Non-Executive Directors including the Non-Executive Chairman shall be a matter to be decided by the Board of Directors as a whole with the Director concerned abstaining from deliberations and voting on decisions in respect of his individual remuneration.

1. It is good practice for the Nomination and Remuneration Committee to hold a minimum of at least two (2) meetings in a year. The Committee will meet as required and report to the Board after each meeting. The number of committee meetings held a year and the details of attendance of each individual member in respect of meetings held should be disclosed annually.
2. The Company Secretary shall be responsible for preparation of agenda in consultation with the Chairman, and distribution to all the members the papers to be deliberated at the meeting.
3. The meeting(s) shall be chaired by the Chairman of the Committee and the quorum for the meeting shall comprise at least three (3) members with a minimum of two (2) Independent Non-Executive Directors. In the absence of the Chairman, an alternate chairman will be appointed amongst the members present at the meeting who shall be an Independent Non-Executive Director.

The Chairman also has the discretion to call for additional meetings at any time. All recommendations and findings of the Nomination and Remuneration Committee are submitted to the Board of Directors for approval.

4. The Managing Director (if not a member of the Nomination and Remuneration Committee) and/or other appropriate officers may be invited to attend where their presence is considered appropriate as determined by the Nomination and Remuneration Committee Chairman. The Committee may invite the attendance of any expert or consultant to advice in any particular relevant area as and when required.
5. The Company Secretary shall be in attendance at each Nomination and Remuneration Committee Meeting and record the proceedings of the meeting and a copy each shall be distributed to each member of the Nomination and Remuneration Committee. The minutes shall be kept as statutory record of Dagang NeXchange Berhad upon adoption by the Committee Members and notation by the Board.

The following are the main duties and responsibilities of the NRC Chairman. These are not exhaustive and serve merely as a baseline:

1. Helps the Committee fulfill the goals it sets by assigning specific tasks to members of the Committee and identifies guidelines for the conduct of the members and ensures that each member is making a significant contribution.
2. Looks to the Company Secretary for guidance to the committee on what their responsibilities are under the rules and regulations to which they are subject and how those responsibilities should be discharged. The compliance advice should extend to embrace all laws and regulations and not merely the routine filing requirements and other administrative requirements of the Companies Act.
3. Provides a reasonable time for discussion at the meeting. Organises and presents the agenda for regular or special committee meetings based on input from members and ensures that all relevant issues are on the agenda. In addition, the Chairman should encourage a healthy debate on the issue and bring to the committee a healthy level of scepticism and independence.
4. Provides leadership to the committee and ensures proper flow of information to the committee, reviewing adequacy and timing of documentation.
5. Ensures that all members are enabled and encouraged to play their full part in its activities. This includes making certain that all members receive timely, relevant information tailored to their needs and that they are properly briefed on issues arising at committee meetings.
6. Secures good corporate governance and ensures that members look beyond their committee function and accept their full share of responsibilities of governance materials in support of management’s proposals. Given the importance and particular nature of the Chairman’s role of the committee, in principle it should be separated from that of the Managing Director.
7. Manages the processes and working of the committee and for ensuring that the committee discharges their responsibilities. Appropriate procedures may involve the committee meeting on a regular basis without the presence of management.
8. Ensures the working of the committee and committee’s full discharge of its duties.
9. Ensures that every committee resolution is put to a vote to ensure that it is the will of the majority that prevails.

Each committee member will be expected to:

1. Provide individual independent opinions to the fact-finding, analysis and decision making process of the committee, based on their experience and knowledge.
2. Consider viewpoints from the other committee members; make decisions and recommendations for the best interest of the Board collectively. Keep abreast of the latest corporate governance guidelines in relation to the Nomination and Remuneration Committee and the Board as a whole.
3. Continuously seek out Best Practice in terms of the processes (selection of Directors etc) utilised by the Nomination and Remuneration Committee, following which these should be discussed with rest of the committee for possible adoption.
4. Meet with potential candidates (or a shortlist thereof) and wherever possible recommend them to meet with Board members.
5. Arrange for periodic reviews of the terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.