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Corporate Governance |
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| During 2008, the Company fully complied with the principles as set out in the Code on Corporate Governance Practices in Appendix 14 to the Rules Governing the Listing of Securities (the ?Listing Rules?) on The Stock Exchange of Hong Kong Limited (the ?Hong Kong Stock Exchange?) and reached or even exceeded the best recommended practices in the Code on Corporate Governance Practices in certain aspects. The corporate governance condition of the Company is hereby reported as follows: |
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| Shareholders and General Meeting |
For years, apart from committing itself to the operation and expansion of its businesses in order to attain appropriate returns for shareholders, the Company also provides details on the Company's operations management and relevant information to shareholders in a timely and accurate manner through a variety of channels and methods, including: convening and holding general meetings in strict compliance with the Company?s articles of association (the "Articles of Association"), the Listing Rules and relevant regulations stipulated by the Securities and Futures Commission (the "SFC"), and timely announcing relevant information to shareholders on an irregular basis according to the requirements of the domestic or international listing rules. During the reporting period, the Company held a total of two general meetings and a professional lawyer was invited to each general meeting as a witness to ensure all shareholders were treated equally and exercised their rights adequately.
The Company has also established specific divisions to assign specific staff to handle relevant work and receive visitors, with contact numbers published to answer phone enquiries at any time. In addition, the Company's website has been set up to provide updates and past results on the Company, as well as the management organisation of the Company, so as to facilitate a comprehensive understanding of the Company by shareholders and investors. |
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| Directors and the Board |
Pursuant to the Articles of Association, the board of the Company (the "Board") comprises 15 directors (the "Directors"), including five independent Directors. Members of the Board are equipped with various experience, ability, expertise and judgment (see the profiles of the members of the Board as set out in this annual report for details) appropriate for the Board. Directors of the Company consist of experts in power-related technology and management, experts in finance and scholars. Each of them has extensive experience and acumen and is open-minded.
The Directors fully understood their responsibilities, powers and obligations, and managed to discharge their duties with truthfulness, fiduciary and diligence. In order to enhance the decision-making mechanism, increase the scientific nature of decision-making and improve the quality of substantial decisions, the Board has established three specialised committees, namely the Audit Committee, the Strategy and Development Committee and the Remuneration and Appraisal Committee, with detailed working rules devised for the respective committees. The convenors of the three specialised committees are independent Directors. In particular, independent Directors make up for a majority in the Audit Committee and the Remuneration and Appraisal Committee.
During the reporting period, the Board held 16 meetings. The convocation and voting procedures complied with the regulations stipulated by the Articles of Association and the "Rules of Proceedings for Board Meetings". |
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During the reporting period, the independent Directors and members of the Audit Committee of the Board were engaged in the preparation of the Company's 2008 annual report. For the 2008 annual results and financial position, the Company had written communications with the independent Directors and the Audit Committee members. Based on the annual audit working plan negotiated and confirmed with the accountants, the Audit Committee tracked and monitored the entire process of the annual audit. After the accountants issued the preliminary auditors' opinions, the Company held an Audit Committee meeting and an independent Directors' meeting, in which the independent Directors and the Audit Committee members communicated with the Company's senior management and accountants regarding the Company's 2008 annual results and financial statements and the work of the accountants, forming relevant opinions and resolutions as a result.
The Remuneration and Appraisal Committee of the Board conducted assessment on the discharge of duties and the completion of annual results by the Company's Directors, supervisors and senior management in accordance with the relevant requirements of the "Work Regulations for the Remuneration Committee of the Board? of the Company, and made suggestions on the remuneration management of Directors, supervisors and senior management for 2009.
The Strategy and Development Committee of the Board reviewed the progress of the Company's investment projects and the Company's development strategy framework in accordance with the relevant requirements of the "Work Regulations for the Strategy and Development Committee" of the Company and made suggestions on the Company's future development.
The Company has adopted a code of conduct regarding Directors' securities transactions on terms on less exacting than the required standards set out in the "Model Code for Securities Transactions by Directors of Listed Issuer" (the "Model Code") as set out in Appendix 10 to the Listing Rules.
Having made specific enquiry of all Directors, the Directors have confirmed that they have complied with the Model Code in 2008. |
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| Supervisors and the Supervisory Committee |
| The Company's Supervisory Committee (the "Supervisory Committee") comprises four members, of which two are supervisors representing the staff. The membership and composition of the Supervisory Committee comply with the requirements of the laws and regulations. Supervisory Committee members shall exercise their supervisory duty as mandated by the laws, regulations, the Articles of Association and the rights granted by the general meeting, and shall be accountable to the general meeting, in order to ensure that shareholders' interests, the Company's interests and the staff's lawful interests are not violated. During the reporting period, the Supervisory Committee held six meetings and attended all Board meetings and Audit Committee meetings. Through various channels and methods, the Supervisory Committee carried out regular inspections on the Company's finances and substantial matters, as well as supervising the lawfulness and compliance of the Directors, the President and other senior management members in discharging their duties. |
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| Chairman and Chief Executive Officer |
| The positions of Chairman (chairman of the Board) and President of the Company are held by two different persons respectively. Mr. Zhai Ruoyu and Mr. Cao Jingshan are the Chairman and the President of the Company, respectively. The power of the Chairman and the President is expressly provided in the Articles of Association. The main duties of the Chairman include presiding over the general meetings, convening and presiding over Board meetings and reviewing the status of the implementation of the Board?s resolutions. The main duties of the President include: (1) to take charge of the production and operation management of the Company, and coordinate the implementation of the Board resolutions; (2) to coordinate the implementation of the Company's annual operation plans and investment proposals; (3) to formulate the plan for establishing the Company's internal management institutions; (4) to lay down the Company's fundamental management system; (5) to formulate the fundamental constitution of the Company; (6) to propose the appointment or dismissal of the Vice President and person in charge of finance; and (7) to appoint or dismiss other officers that are not appointed or dismissed by the Board and so forth. |
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| Non-executive Directors |
The Company has a total of 13 non-executive Directors, it is provided in the Articles of Association that the term of appointment of Directors (including non-executive Directors) shall not exceed three years and Directors are eligible for re-election and re-appointment. Any new Director will take office only after being elected and approved at the general meeting.
As stipulated by the regulations of the state supervisory department, the consecutive terms of services of independent non-executive Directors (i.e. independent Directors) shall not exceed six years. The Articles of Association has not expressly provided that the Directors would retire in rotation once every three years.
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| Remuneration of Directors |
During the Year, the Company and the remunerations of the executive Directors and senior management of the Company followed a salary system primarily based on positional salary. In accordance with the decision of the Board, the annual remuneration for each independent non-executive Director was RMB 60,000 (after tax). The remunerations for other non-executive Directors of the Company were determined by their respective salary systems as provided and paid by their respective affiliated entities. The Board has established the Remuneration and Appraisal Committee, which comprises five Directors with independent Directors making up more than half of the membership.
The major duties of the Remuneration and Appraisal Committee include: to examine the criteria for the appraisal of Directors and managers, to conduct the appraisal and make recommendations, to examine and review the remuneration policy and plans of the Directors and senior management (as the Company did not enter into service contracts with executive Directors, thus the duties of the Remuneration and Appraisal Committee did not include the approval of the terms for the service contracts of executive Directors). In March 2009, the Remuneration and Appraisal Committee held a meeting to review the performance and level of remuneration for executive Directors and senior management of the Company in 2008. The composition and level of remuneration were disclosed in this annual report. The attendance of the committee members at meetings is as follows:
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| Nomination of Directors |
It is provided in the Articles of Association that Directors are elected and formed by the general meeting of the Company with each term of appointment not exceeding three years and are eligible for re-election and re-appointment. The Board has yet to set up a nomination committee. Any change to the composition of the Board will be initiated through the Board, for which the Board will publish biographies of candidates recommended before the general meeting on the basis of recommendations of the shareholders and a review of the candidates' experience, so that all shareholders will be fully aware of the background of the candidates and exercise the power of the shareholders to elect the Directors.
During the Year, based on the recommendation by shareholders, the Board agreed to nominate Mr, Cao Jingshan and Mr. Li Hengyuan as executive Director and independent non-executive Director of the Company, respectively.
After the approval at the 2007 annual general meeting, they took office as Directors with effect from 30 May 2008.
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| Auditors' Fees |
| During the Year, the audit service fee payable to PricewaterhouseCoopers Zhong Tian CPAs Limited Company and PricewaterhouseCoopers, the Company's domestic and international auditors, amounted to approximately RMB13.831 million. On the twenty-third meeting of the sixth session of the Board convened on 30 March 2009, an additional audit service fee for 2008 of RMB 1.11 million was agreed. The non-auditing service fee amounted to approximately RMB 820,000. Such non-auditing service fee was mainly for carrying out professional services on the Company's issue of medium-to-short-term bonds. |
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| The Audit Committee |
The Audit Committee (the "Audit Committee") under the Board comprises five Directors, of whom more than half are independent Directors. Major duties of the Audit Committee include: to supervise the Company's internal audit system and its implementation; to facilitate the communication between internal and external audit parties; to review the Company's financial information and periodic disclosures; to review the Company's internal control system; and to propose the appointment or replacement of external audit firms. The Company's Directors, supervisors, chief financial manager, other senior management members and external auditors of the Company are invited to attend the Audit Committee meetings.
During 2008, the Audit Committee held 16 meetings. Conscientious audits of the Company's interim and annual results and related financial matters as well as the Company's internal control system were conducted. It also duly assessed the auditors' work. The Audit Committee is of the view that the Company's internal control systems were effectively implemented, have achieved remarkable and have effectively controlled the production and operation risks of the Company. Meanwhile, the Audit Committee has proposed to the Board to reappoint PricewaterhouseCoopers Zhong Tian CPAs Limited Company and PricewaterhouseCoopers as the Company's domestic and international auditors respectively for 2009. The re-appointment will become effective subject to the approval at the 2008 annual general meeting.
During the Year, the attendance by the Audit Committee members at the committee's meetings is as follows: |
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| Internal Control of the Company |
From the perspectives of business management, job functions management and job positions management, the Company established basic corporate management systems such as the internal control system for financial management, the financial and accounting system, the internal audit system, the administrative management system, the information management system and the production management system.
With its development, the Company's business has also moved from purely coal-fired power generation as at the beginning to diversified power sources and operations, with involvement in aspects such as nuclear power, railways and coal mines. Accordingly, in order to enhance the Company?s internal control system and to effectively prevent risks, during the reporting period, the Company has examined its relevant existing internal control systems and made amendments and additions to the existing internal control systems, mainly setting out or amending a series of systems or guidelines including the management guidelines for purchase and tendering of the Company's equipment and materials for project construction, the management guidelines for the Company's property insurance, the management guidelines for the Company's coal-fired power production costs, the management guidelines for the Company's prepayments, and the management guidelines for the Company's production and tendering. These systems and guidelines cover different aspects of the Company including human resources, property and materials; production, supply and sales; and decision-making, implementation and supervision. Such systems and guidelines substantiate the Company's internal management system and effectively assure the Company's regulated operation and legal operation.
As to organisational structure, the Company has established the Supervision and Auditing Department, with a comprehensive and effectively operating internal audit system. During the reporting period, a focus was put on the implementation of the internal control with regard to the Company's internal audit work with major inspections conducted on assets, materials and supplies management, contract management and connected transactions. Reports on the inspections and supervision of the Company?s internal control are submitted to the Audit Committee of the Board on a regular basis. Meanwhile, several specialised task forces on aspects such as financial budgeting, bidding and tenders, and emergency incidents were established at the management level to assist the Company's President to make major decisions and to devise risk-prevention proposals in daily operations. Implementation of the Company's various management systems and an effective operation of the decision-making system facilitated by the Company's specialised committees serve a function of risk-prevention and assure the normal production and operation of the Company.
The Board has conducted a review of the effectiveness of the internal control system of the Company and its subsidiaries during the reporting period.
Pursuant to the relevant requirements of the Shanghai Stock Exchange, the Board published the "Self-assesment Report on the Company's Internal Control". For details, please refer to the website of the Shanghai Stock Exchange (www.sse.com.cn).
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