CG and Business Ethics (2024)

6. The Board of Directors, Management and Corporate Secretary

6.1 Board Composition

Structure of the Board of Directors

PTTEP employs a one-tier system to structure its Board of Directors. The Board is comprised of no more than 15 members. Independent Directors must account for at least half of the existing Directors. There must be at least three Directors who are outsiders from the private sector. There is one Executive Director who is the Chief Executive Officer. All Directors must have the required qualifications and must not possess any prohibited characteristics in accordance with relevant laws and regulations. Director candidates must be reviewed and considered by the Nominating and Remuneration Committee.

PTTEP Independent Directors must annually review and certify their independence. Independent Directors are the Company’s Directors who meet the qualification criteria and who do not have any questionable characteristics prohibited by law. They must also have additional qualities as stipulated by the PTTEP’s definitions, which are stricter than the law as follows:

An Independent Director must hold no more than 0.5% of the total voting shares of PTTEP Group, associate companies, major shareholder or controlling person, including shares held by persons related to that Independent Director.
An Independent Director must not be or have been an executive director, employee, advisor earning regular monthly salary or the controlling person of PTTEP Group, associate companies, same-level subsidiaries, major shareholder or controlling person, unless the foregoing status has ended for at least two years prior. In this regard, such prohibited characteristics are to exclude cases where an independent director used to be a government official or advisor of a governmental agency, and who is a major shareholder or the controlling person of the Company.
An Independent Director must not be a person who is related by blood or legal registration as the father, mother, spouse, sibling and child, including spouse of a child, other Directors, Management, major shareholder, controlling person or person to be nominated as director, Management or controlling person of the Company or its subsidiaries.
An Independent Director must not have or have had a business relationship with PTTEP Group, associate companies, major shareholder or controlling person that may interfere with independent discretion, which includes not being or having been a significant shareholder or the controlling person of any person having a business relationship with PTTEP Group, associate companies, major shareholder or controlling person, unless such foregoing relationships have ended for at least two years prior.
The ‘business relationship’ in the previous paragraph includes normal business transactions, rental or lease of real estate, transactions related to assets or services or granting or receipt of financial assistance through receiving or extending loans, guarantees, providing assets as collateral, and any other similar actions, which result in the Company or the counterparty being subject to indebtedness payable to the other party in an amount starting from three percent of the net tangible assets of the Company or from twenty million baht or more, whichever amount is lower. In this regard, the calculation of such indebtedness shall be in accordance with the method for calculating the value of related party transactions under the Notification of the Capital Market Supervisory Board Re: Rules on Execution of Related Party Transactions, mutatis mutandis. In any case, the consideration of such indebtedness shall include the indebtedness incurred during the period of one year to the date of establishing the business relationship with the related person.
An Independent Director must not be nor ever have been an auditor of PTTEP Group, associate companies, major shareholder, or controlling person, and not being a significant shareholder, controlling person, or partner of the audit firm which employs the auditor of PTTEP Group, associate companies, majority shareholder, or controlling person, unless the foregoing relationship has ended for not less than two years prior.
An Independent Director must not be or have been a provider of professional services, which includes serving as a legal advisor or financial advisor being paid with a service fee of more than two million baht per year by PTTEP Group, associate companies, majority shareholder, or controlling person, and not being a significant shareholder, controlling person, or partner of such provider of professional services, unless the foregoing relationship has ended for not less than two years prior.
An Independent Director must not undertake any business of the same nature and in significant competition with the business of the Company or its subsidiaries, or not being a significant partner in a partnership, or an executive director, employee, advisor earning regular monthly salary, or holding more than one percent of the voting shares of another company that undertakes a business of the same nature and in significant competition with the business of the Company or its subsidiary.
An Independent Director must not be a director who is appointed as the representative of directors of the Company, major shareholder, or shareholder who is a connected person of a majority shareholder.
An Independent Director must not have any other characteristics that cause the inability to express independent opinions on the business operation of the Company.

After being appointed an Independent Director with the characteristics in accordance with (1) to (9) aforementioned, the independent director may be assigned by the board of directors to make a decision on the business operation of PTTEP Group, associate companies, same-level subsidiaries, major shareholder or controlling person in the form of collective decision.

The definitions in regard to Independent Directors are in line with the definition prescribed in related Notification of the Securities and Exchange Commission Re: Determination of Definitions in Notifications relating to Issuance and Offer for Sale of Securities.

Board Diversity

Structure of the Board of Directors considers its diversity in various aspects of gender, race, or any other differences. This is in order to have an appropriate and balanced structure that contains expertise with skills, knowledge, and experience in various fields that are necessary for the petroleum exploration and production business. Moreover, the diversity of the Board is reviewed regularly in order to ensure the appropriateness and balance of all required fields to be consistent with the changing state business.

Consecutive Terms and Limit on the Number of Listed Companies in which a Director Holds a Position

PTTEP allows each Director or Independent Director to serve on the Board for no more than nine consecutive years. Any Director who has served on the Board for nine consecutive years will not be considered for another term.

PTTEP allows a Director to serve in a director position for no more than three listed companies.

Retirement of Director

The Director of PTTEP must have all the required qualifications, must not possess any prohibited characteristics in accordance with relevant laws and regulations, and must not be older than 70 years of age. When a Director turns 70, he/she is no longer permitted to serve as a Director and is required to inform PTTEP about his/her retirement in writing.

6.2 Selection of Directors and Chief Executive Officer

The Company’s Nominating and Remuneration Committee seeks Directors in line with the Good Corporate Governance Principles of PTTEP Group. The Committee will prioritize and consider candidates with the skills, experience, profession and specific qualifications that complement those of the other members of the Board and that are necessary for PTTEP Group’s petroleum exploration and production businesses. This is done to attain the Board of Directors that will bring the greatest benefits to PTTEP Group. The potential of a conflict of interest that might arise from any Director is also taken into account.

When there is a vacancy on the Board of Directors, the Company’s Nominating and Remuneration Committee is tasked with seeking and nominating people who are qualified to be a Director. The Committee looks for candidates from the list of those serving on state enterprise boards compiled by the State Enterprise Policy Office and listens to the opinions of major shareholders. The Committee also considers those nominated by minority shareholders to be Directors at shareholders’ meetings in line with the criteria set by PTTEP. Qualifications of PTTEP Directors need to be reviewed and certified annually.

The election of PTTEP Directors to replace those that have completed their term must be approved at an annual general shareholders’ meeting. Each candidate must receive a majority of votes from attending and voting shareholders. In the event that the number of candidates exceeds the number of Directors to be elected, PTTEP’s Articles of Association prescribes that candidates be ranked based on the number of votes received, and those with the highest votes are chosen to fill the number of available vacancies. PTTEP gives shareholders the right to nominate Director candidates before an annual general shareholders’ meeting, where shareholders are informed in advance.

In an election of a replacement for a PTTEP Director who leaves his/her position without completing their term, the Board of Directors might elect a replacement to fill the vacancy in line with the Company’s Articles of Association. The replacement Director must have an approval from at least three-quarters of the remaining Directors. The replacement Director will hold office for the remaining term of the Director for whom he/she replaces.

In selecting the Chief Executive Officer of PTTEP, the Board have power to appoint the Chief Executive Officer who shall be selected to be a Director upon vacancy of directorship. The Company’s Nominating and Remuneration Committee will screen candidates and then nominate qualified candidates to the Board. The Board will then resolve the appointment based on candidates’ leadership, skills, experience, profession and other specific qualifications in various aspects.

6.3 Roles of the Board of Directors and Management

Segregation of Duties between the Board of Directors and Management

The Board of Directors and Management have different important roles. The PTTEP Board of Directors oversees and appoints high-level Management to manage the operations of PTTEP Group, follows up on and evaluates the performance of Management to ensure the highest benefits for PTTEP Group, and ensures that operations are carried out to achieve the stated goals. The Board’s key role is oversight but not to become involved with day-to-day operations, which are the Management’s responsibility. In this manner, there is a balance between the role of oversight and the role of carrying out day-to-day operations. Management is responsible for managing operations in line with the direction set or assigned by the Board. Management must also report the results of operations to the Board regularly.

Segregation of Duties between the Chairman and President and Chief Executive Officer

The election of Chairman will be selected from members of the PTTEP Board of Directors. The election of the Chairman is prioritized from Independent Directors. The Chairman, who is the policy leader, is not the same person as the Chief Executive Officer who is the Management leader. The Chairman is not involved in day-to-day operations. In this manner, there is a clear separation of the duties and responsibilities, which leads to a balance of power in operations. The PTTEP Chairman’s duties and responsibilities are as follows:

Supervise the Board to perform its duties with efficiency, in accordance with Board Performance Target, shareholder’s expectations, and independency from the management.
Determine agendas for the Board’s meetings.
Be the Chairman at the Board’s and the shareholders’ meetings and ensure that all of the Company’s directors carry out their duties as stipulated in the CG&BE, and promote CG&BE as the Company’s culture.
Support and ensure constructive relations between directors and management.

The PTTEP Chief Executive Officer by contrast, is responsible for running the Company within the framework and the power authorized by the Board as stated in the Company’s regulations.

Important Roles of the Board of Directors

6.4 Authority and Responsibilities of the Board of Directors

In order for the PTTEP Directors to play their role clearly and efficiently, and to achieve PTTEP Group’s five goals of “growth, prosperity, stability, sustainability and dignity”, the Board of Directors has stipulated that the following matters are under its authority which are in accordance with relevant laws, the Company’s objectives and Articles of Association, the resolutions passed by the shareholders and the Board of Directors, and the principles of accountability, duty of care, and duty of loyalty.

The Board of Directors ensures that operations are carried out in accordance with the Good Corporate Governance and Business Ethics of PTTEP Group. The Directors are leaders and must set a good example in practicing, giving advice, communicating and educating personnel on the Good Corporate Governance and Business Ethics of PTTEP Group, and act as role models for other organizations.
The Board of Directors reviews and approves vision, mission and corporate values of PTTEP Group and ensure that they will be executed successfully and efficiently
The Board of Directors considers and approves the PTTEP Group’s strategic plan, business direction, targets, workforce structure, and other significant operations, including regularly monitoring and reviewing operation results to ensure that they are in line with the approved strategic plan, business direction, targets and policies as planned with emphasis on agility and applicability to allow the management to effectively and efficiently manage the business, while considering any impact on safety, security, health, environment, innovation and technology, as well as responsibility to the society.
The Board of Directors ensures that there are adequate and effective internal controls including having in place the regulations, clear and appropriate processes, a reliable and standardized accounting system and financial reporting, appropriate and adequate risk management, efficient compliance oversight and monitoring programs.
The Board of Directors reviews and approves significant transactions that create obligations for PTTEP Group in line with relevant laws and the Company’s regulations, policies, rules or authority.
The Board of Directors reviews conflicts of interest carefully and transparently, and reports to the Company about its own stakes and of those related parties. The Board also prevents any misappropriation of corporate assets and inappropriate transactions with individuals connected with the Company.
The Board of Directors sets clear and appropriate regulations, ensures that financial reports are trustworthy with up-to-date appropriate standards, and ensures that there is an efficient internal control system and appropriate risk management.
The Board of Directors ensures that audits are performed effectively by internal and external auditors.
The Board of Directors ensures that communication and the disclosure of information about various issues to stakeholders are accurate and completed in a timely manner.
The Board of Directors ensures that all stakeholders are treated fairly and equally.
The Board of Directors approves and appoints experts in various professions to obtain in-depth information or advice for the Company on any issues that have significant impact on the PTTEP Group’s businesses, financial status or reputation
The Board of Directors reviews and approves the Board’s performance targets and evaluates its own performance, and that of the Chairman and each sub-committee.
The Board of Directors reviews and approves the Chief Executive Officer’s performance agreement, evaluates their performance and sets their compensation in accordance with their performance. In addition, the Board ensures that PTTEP has efficient processes in place for evaluating the performance of high-level Management.
The Board of Directors appropriately authorizes the Chief Executive Officer to manage the operations of the Company, so that they remain in line with the Company’s strategic plans, business directions, goals and policies. The Board also ensures that there is appropriate oversight and efficient monitoring and evaluation.

The PTTEP Directors are allowed, as necessary and appropriate, to request documents, advice and services related to the Company’s operations from Management, as well as from experts from external independent advisers. PTTEP is responsible for expenses incurred from such actions.

6.5 Meetings

1. Meeting Schedules

The Board of Directors sets meeting dates for each year in advance so that the Directors can arrange their time to attend. Usually, the Board meets once a month and holds additional meetings to discuss important issues as necessary. In addition, the Board holds at least one meeting a year without the involvement of Management. The Independent Directors hold meeting as appropriate to provide suggestions and opinions in important matters that might be beneficial to the Company, shareholders and minority shareholders. This will help the Board undertake its duties more efficiently. The results of such meetings will be shared with the Chief Executive Officer.

2. Meeting Agendas

The Chairman, the Chief Executive Officer, and the Company Secretary jointly set meeting agenda items based upon business requirements. Each PTTEP Director is allowed to propose important issues to be included in agendas.

Meeting information must be prepared using the correct format dictated by the Company. It must be completely adequate to be used in decision-making, must specify details about each proposed issue, and must be submitted to the PTTEP Directors at least seven days before a scheduled meeting date to allow Directors sufficient time to study it and prepare for the meeting. Additionally, information about any issue that cannot be disclosed in writing will be discussed in the meeting. The Directors must keep meeting information confidential in order to prevent leakage of confidential information related to PTTEP Group, and only use it carefully within the scope of their duties and responsibilities.

3. Meeting Attendance, Quorum and Protocol

Each PTTEP Director must attend every meeting. If they are unable to attend a meeting, they must inform the Company in writing. Any PTTEP Director that misses three meetings consecutively without appropriate reasons will be dismissed as a PTTEP Director. The Company will report the meeting attendance of each Director in the Company’s annual report.

At each PTTEP Board meeting, at least half of all Directors are needed to form a quorum. In order to pass a resolution on an agenda item, there must be a quorum of Directors in the meeting room, and a majority of votes of the attending Directors is needed. If any Director opposes a passing of a resolutions, such dissent must be recorded in the meeting minutes.

During the meeting, the PTTEP Chairman sets the time for each proposed issue and the discussion about it, gives each Director a chance to participate, and encourages Directors to freely express their opinions. He collates opinions expressed and summarizes the resolutions passed by the Board. Each Director has the duty and freedom to ask questions, express opinions, or support or oppose the majority view bearing in mind the best interests of the shareholders and stakeholders. In the event that a Director or his related parties is shown to have a conflict of interest with any of the agenda items, he must proceed as follows:

Inform the Chairman or those in attendance immediately.
Abstain from expressing an opinion and voting on the agenda item and leave the meeting room when the issue is discussed to allow the other Directors to express their opinions freely. An exception can be made if the other Directors vote unanimously to allow the Director to stay in the meeting room to provide information for the agenda so that the Board can deliberately make a decision. However, the Director is not allowed to vote or make a decision on an issue having conflict of interest.
During the meeting, the Board has the power to see or examine related documents and ask the Management, individuals related to the issue, or any individual it sees fit, to attend the meeting to provide additional information.

4. Resolutions and Minutes of Meeting

Resolutions passed by the Board come into effect immediately unless the Board resolves otherwise. The Company Secretary must submit a copy of the minutes of meeting to every Director within 14 days after the meeting date so that the Board can review it for accuracy, prior to getting approval at the next meeting. The Chairperson of the meeting is required to sign the minutes after they are approved. The Directors’ opinions, questions and explanations discussed in the meeting are to be completely and accurately recorded and securely stored for the purpose of a reference at a later date.

6.6 Establishment of Sub-Committees

The PTTEP Board of Directors appoints PTTEP Directors with appropriate expertise as members of the four sub-committees, namely (1) the Audit Committee, (2) the Nominating and Remuneration Committee, (3) the Risk Management Committee and (4) the Corporate Governance and Sustainable Development Committee. The combination, qualifications, duties and responsibilities of each sub-committee are clearly set out in its charters.

6.7 Performance Assessment

1. Performance Assessment of the Board of Directors, Sub-Committees and the Chairman of the Board of Directors

The PTTEP Board of Directors must assess its performance annually against the Board Performance Target and the Performance Evaluation Form, equally weighted. This is to verify the performance of the Board and to review both the accomplishments and problems or difficulties that occurred during the year. The Performance Evaluation Form consists of the followings:

1.1
Self-Evaluation (Individual Performance)
1.2
Cross-Evaluation (Individual Performance)
1.3
Overall Board Performance Evaluation
1.4
Sub-Committee Performance Evaluation
1.5
Chairman Performance Evaluation

The PTTEP Board of Directors tasks the Nominating and Remuneration Committee with creating the Performance Evaluation Form, and proposing the Board Performance Target to the PTTEP Board of Directors. PTTEP summarizes the performance evaluation results including suggestions for the PTTEP Board of Directors which are used to improve efficiency and performance of the Boardroom and publishes them in the annual report.

2. Performance Assessment of the Chief Executive Officer

The PTTEP Board of Directors requires that a performance assessment of the PTTEP Chief Executive Officer be carried out annually. The Nominating and Remuneration Committee is tasked with performance assessment of the Chief Executive Officer against the Performance Evaluation Form created by the Nominating and Remuneration Committee and the Performance Agreement determined by the Corporate Key Performance Indicators (KPIs) for each year. This is to ensure that a system of checks and balances is in place and the performance of the Chief Executive Officer can be measured to see if short-term and long-term goals are achieved.

6.8 Remuneration for Directors and Determination of Remuneration for Executive Officers

1. Director Remuneration

The PTTEP Board of Directors and sub-committees receive remuneration consisting of monthly salary, meeting attendance fee and bonus which are paid in accordance with the resolutions passed at shareholders’ meetings. The Nominating and Remuneration Committee performs an annual review on the remuneration scheme based on the appropriateness and following factors: the performance of PTTEP Group, the performance of Board of Directors and sub-committees, scope of responsibilities, and the practices of listed firms in the same industry. The remuneration of each Director is disclosed in the Company’s annual report. Board or committee members involved in Management, namely the Chief Executive Officer and those below them, who serve as a member on sub-committees, are not paid for their services.

2. High-level Management Remuneration Determination

The Nominating and Remuneration Committee determines the criteria or method for establishing the salary structure for PTTEP high-level Management by comparing the criteria, method, payout rates and survey results of salaries of leading companies in the petroleum industry, and takes into account the relevant duties and responsibilities. The remuneration scheme is tailored to ensure that it could motivate them and reflect their performance both short-term and long-term.

The Chief Executive Officer annually reviews and ensures the appropriateness of the merit adjustment for each high-level Management position based on individual performance assessment results, the Company’s performance and achievement of pre-determined targets based on the functional KPIs.

In the annual report, PTTEP discloses the remuneration as well as the number of securities held by each of its high-level Management persons to promote transparency and PTTEP Group’s practice of the Good Corporate Governance.

6.9 Board Performance Improvement

1. Orientation for New Directors

1.1
New Directors are provided with the Company’s information from the Chief Executive Officer and PTTEP high-level Management, summarizing the nature of business, business directions, knowledge and techniques of petroleum exploration and production, relevant rules and regulations, the Good Corporate Governance and Business Ethics of PTTEP Group, and any other information that is necessary and beneficial for efficiently undertaking the Director’s roles.
1.2
New Directors are given a copy of the PTTEP Director’s Manual, which contains essential information such as strategic plans, relevant rules and regulations, and the Good Corporate Governance and Business Ethics of PTTEP Group, which will be beneficial for efficiently undertaking the Director’s roles. The PTTEP Director’s Manual is updated regularly so that it can be used as a reference.
1.3
New Directors visit the PTTEP Group’s facilities as appropriate so that they can better understand the business. The visits are also beneficial to for efficiently undertaking the Director’s roles.

The Director who is also elected as the Chairman of the Board also attends a briefing on how to perform the Chairman’s duties efficiently and how to conduct Board and shareholders’ meetings.

2. Training

PTTEP encourages its Directors to continuously develop themselves and seek knowledge and understanding about the business and their duties by facilitating Director attendance at various training courses, arranging briefings and presentations to give useful information, and providing updates about Director’s responsibilities pursuant to relevant laws and the good corporate governance principles which will be beneficial for efficiently undertaking the Director’s roles. PTTEP is responsible for the training expenses incurred.

3. Performance Assessment

4. Indemnity

PTTEP indemnifies the Directors who correctly perform work under their scope of responsibilities or according to the duties that should be performed. This work/duty must not involve any fraudulent or dishonest act, or intentional omission to perform a duty, or involve any gross negligence, which aims to ensure that the Directors perform their duties to the best of their ability. This protection covers all types of lawsuits both those occurring in Thailand and overseas throughout the prescription period of the matter that has been claimed or alleged.

5. Right to Access Information and Management, and Right to Hire External Adviser

The PTTEP Board of Directors has the right to request that a high-level Management person appear before the Board to provide an explanation or give details or an additional report. If opinions from an external adviser are deemed necessary, the Board also has the right to appoint an external adviser who will provide information and give opinions in regard to the Board’s performance of duties. Any expenses incurred will be borne by PTTEP.

6.10 Code of Conduct of the Board of Directors

Besides leading by example in accordance with the Good Corporate Governance and Business Ethics of PTTEP Group, Directors are expected to undertake duties under the highest ethical standards. They must act or undertake duties with integrity and care for the best interests of the Company and stakeholders. The Directors’ Code of Conduct is as follows:

A Director must perform duties in compliance with the law, the Company’s objectives and the Articles of Association, shareholders’ resolutions, the Good Corporate Governance and Business Ethics of PTTEP Group, and the Directors’ Code of Conduct.
A Director must oversee operations in the best interests of current stakeholders and those of the future, and protect the reputation of PTTEP Group.
A Director must oversee operations with honesty and integrity, and must remain strictly neutral in Politics, and must not be biased or influenced by any political forces.
A Director must not hold a stake in any organization that does business with PTTEP Group, or in an organization that competes directly or indirectly with PTTEP Group.
A Director must oversee operations in a manner that avoids any conflict between their own interests and that of PTTEP Group. This is to ensure that the Director’s oversight is transparent and effective. To avoid a conflict of interest, a Director must abide by the following rules:
1. 5.1)
  A Director must not exploit their position as a Director for their own benefits.
2. 5.2)
  A Director must not misuse the Company’s confidential or inside information. When they are no longer a Director, they must not disclose any proprietary and confidential information or documents of PTTEP Group.
3. 5.3)
  A Director must not hold a directorship in any company competing with PTTEP Group.
4. 5.4)
  A Director must not have a personal stake in a contract entered into by PTTEP Group.
5. 5.5)
  A Director must not accept a gift, representation or other benefits. In the event that a refusal to accept is not appropriate, or the item cannot be returned to the giver, the Director must report it as indicated in Business Ethics of PTTEP Group.
6. 5.6)
  Director must oversee operations with care and must not create an obligation that might later come into conflict with their duties.
7. 5.7)
  A Director must not directly or indirectly gain inappropriate benefits from doing their works.
8. 5.8)
  A Director must perform their duties, including when attending Board meetings, to the best of their abilities and in the best interests of PTTEP Group.
9. 5.9)
  A Director must not be the owner or a significant shareholder of any business that is in the same industry as, competes with, or has a business relationship with PTTEP, either for their own or others’ benefits. In addition, the Director must not have a family member who is a director or a shareholder of such a business.
10. 5.10)
  A Director must not act in any way or manner that has negative effects on the Company or benefits any individual or juristic person, either for their own or others’ benefits.

6.11 Company Secretary

The Company Secretary plays an important role in efficiently coordinating both internally, among parties such as the Chairman, the Chief Executive Office and Management, and externally, among parties such as shareholders and regulatory authorities. The Company Secretary and secretary of the Board of Directors are appointed by the Board of Directors. The Company Secretary is responsible for giving advice to the Board of Directors and Management on the laws and regulations with which the Company must comply. The Company Secretary also provides information about situations related to Good Corporate Governance, ensures that the work of the Board of Directors and sub-committees is carried out smoothly and efficiently in accordance with the applicable laws and regulations, and the Good Corporate Governance and Business Ethics of PTTEP Group. The Company Secretary is responsible for holding the meetings of the Board, sub-committee and shareholders, preparing and keeping PTTEP Group’s important documents such as agendas and minutes of the Board and shareholders’ meetings, Annual Registration Statements, annual reports, register of Directors, and related notices submitted to regulatory authorities. The Company Secretary also arranges orientations for new Directors and promotes knowledge and understanding of Good Corporate Governance and Business Ethics of PTTEP Group to Directors, Management and Employees.