By Bryan Harris – Chief Internal Auditor & Risk Officer, Aluminium Bahrain B.S.C. (Alba)
Aluminium Bahrain B.S.C. (Alba), Bahrain’s flagship industrial company, owns and operates one of the largest aluminium smelters in the world, together with significant assets in power generation, water desalination and calcining production. Its products are considered to be of the highest quality and are sold across the MENA region, Europe, Asia and North America.
Alba has had a dual listing on the Bahrain Bourse and on the London Stock Exchange since 2010. This required significant changes to its corporate governance structure as well as processes to ensure compliance with the various regulatory bodies. Also, in 2010, Bahrain’s Ministry of Industry and Commerce and the Central Bank of Bahrain issued a new Corporate Governance Code modelled on leading international codes. Alba was a leading adopter and the changes of this Code. The changes in the company over the past seven years arising from these events, led by a rejuvenated board of directors and executive management team, have been transformation for the company.
Speaking on Alba’s corporate governance journey, it’s chairman Shaikh Daij Bin Salman Bin Daij Al Khalifa said: “We pride ourselves on the open and transparent manner in which Alba operates. We are also grateful for the efforts undertaken by our board of directors and executive management to protect the rights of our valued shareholders as well as safeguard the company’s values.”
Governance and expansion
The construction of Alba’s sixth potline for its aluminium smelter, together with an additional 1,792 MW power station, has recently begun, with a planned capital expenditure of approximately $3billion. When completed in 2019, it will boost per-annum production by 540,000 metric tonnes, bringing its total production capacity to 1.5 million metric tonnes per year, making Alba the world’s largest single-site aluminium smelter.
The sheer size of this mega-project has resulted in the need to demonstrate sound corporate governance, a well-established corporate social responsibility programme, and project governance and transparency to a wide variety of stakeholders – namely, shareholders, lenders, commercial partners and regulatory authorities, as well as the local community.
Developing clear guidelines
Since March 2011, Alba’s board of directors has presented a comprehensive annual corporate governance report at each shareholders’ meeting. This report, also available on Alba’s website, sets out the company’s compliance with the code and with the additional guidelines, along with transparently providing explanations for areas of non-application and required disclosures. New charters were also developed for the board and its sub-committees to ensure that their powers and activities were aligned with best international practices.
Clear levels of authority were developed to ensure that key decisions are taken at the appropriate level, and clear budgeting, performance management and industry benchmarking tools were put in place to ensure transparency and clear line of sight on critical areas, such as product pricing and raw material costs.
The chief internal auditor and risk officer reports independently to the board and board audit committee and has authorisation to review any aspect of Alba’s controls. A board-approved code of conduct, on par with leading international codes of ethics, was developed and launched to all employees and communicated to all suppliers.
“We pride ourselves on the open and transparent manner in which Alba operates. We are also grateful for the efforts undertaken by our board of directors and executive management to protect the rights of our valued shareholders as well as safeguard the company’s values”
The code of conduct provides a set of expectations and guidelines to all those working for and with Alba and ensures that we uphold the highest standards of integrity and personal conduct in our business and professional activities and when dealing with colleagues, vendors, customers, contractors, government agencies and the public. Compliance with the code of conduct is monitored by Alba’s Integrity Task Force, comprising the chief internal auditor and risk officer, legal manager and the director of administration, which reports directly to the board audit committee. Monitoring tools include an independently operated confidential hotline and reporting system that provides for reporting in multiple languages by phone and intranet 24 hours a day, every day. This hotline enables Alba employees, contractors and commercial partners to report in confidence any breaches of Alba’s code of conduct, such as frauds and other matters that could potentially prove damaging to the company. Alba’s development and roll-out of the code of conduct and confidential employee reporting system was used as a best practice case study in a Pearl Initiative and University of Cambridge study on transparency and ethics in the Middle East.
The board and its three sub-committees – the board audit committee, the nomination and remuneration committee and the executive committee – conduct annual self-evaluations to review their independence and performance as well as identify areas of improvement. A process has been implemented to identify and report directors’ and executives’ ownership and trading of the company shares.
The company has issued policies on key persons dealing/insider trading and has established quarantine periods for the trading in Alba shares. Alba’s investor relations (IR) department proactively develops investor relations products and tools aligned with international best practices. Relevant communications are posted on the company’s website, including quarterly IR presentations, a financial calendar and toolkits. Alba’s IR department was declared the best company for investor relations in Bahrain at the Middle East Investor Relations Society (ME-IR) Annual Conference and Awards 2016.
Alba has also implemented an enterprise risk-management framework where it sets out the principles, policies and procedures for the identification, evaluation, treatment and monitoring of the key risks that Alba faces, enabling resources and effort to be focussed on those areas that are the most critical. It was designed to be consistent with leading international standards on enterprise risk management, including ISO 31000. The resulting high-level risks and the status of required mitigating actions are reviewed by the audit committee regularly and by the full board periodically.
Alba published its first Sustainability Report in 2016 where it featured three dimensions for the company performance – economic, environmental and social – for the year ending 31 December 2016. The Sustainability Report covers the significant environmental, economic and social aspects of the company’s business and highlights its sustainability performance and strategies for integrating sustainable development principles into its operations and services.
An important milestone for Alba, the report was developed for 2016 was developed to share Alba’s journey using the internationally recognised sustainability reporting framework from the Global Reporting Initiative (GRI).
Alba’s ambitious Line 6 Expansion Project mentioned above, is one of the largest brownfield projects in the region. The Line 6 Expansion Project, in compliance with the Equator Principles and the International Finance Corporation (IFC) Performance Standards, will develop and implement a comprehensive stakeholder engagement plan (SEP). The objective of Alba’s SEP will be to provide a technically and culturally appropriate approach to consultation, disclosure and understanding of the Line 6 Expansion Project to the stakeholders in a timely manner. The SEP will also make provision for stakeholders to have an opportunity to voice their opinions and any concerns through a formal grievance mechanism system that may influence project decisions.
Alba believes in upholding the highest standards of ethical and professional behaviour in everything it does. While Alba follows the Corporate Governance Code of Bahrain and the Corporate Governance Module of the Central Bank of Bahrain, we continue to assess our standards and practices against other international codes, such as the UK Corporate Governance Code. Although Alba is not required to comply with it (having only a standard listing on the London Stock Exchange), Alba’s board of directors and management are keen to review any gaps as well as identify and implement any valuable improvements.
About the Author:
Bryan is a Chartered Accountant with 22 years of experience, most of which has been spent in international leadership roles in Internal Audit, Enterprise Risk Management, Strategy & Planning, Financial Management, Performance Management and Compliance & Ethics. Most of his career has been in the Energy, Oil & Gas, Aluminium and Telecoms industries, and he also worked for two of the ‘big 5’ accounting & auditing firms earlier in his career. He has worked extensively in the UK, Europe, the US, Africa and the Middle East, and has gained deep exposure to corporate governance, acquisitions & divestments and change management.