The weak global economic conditions and an increasingly competitive container shipping sector has hit the bottom lines of shipping and transportation companies across the world, but effective corporate governance helped Neptune Orient Lines Limited (NOL) steer its course through the waves of this challenging business climate.
A strong partnership between NOL’s board and its management ensured operational efficiency and rigorous cost management for this shipping and transportation group, which handles about three million 40-foot equivalent units (FEUs) across 160 ports worldwide.
“We believe maintaining the highest standards of corporate governance and transparency is the first step to safeguarding the future of our stakeholders and enhancing shareholder value,” says NOL Group President and CEO Mr Ng Yat Chung
Over the years, NOL’s commitment to corporate transparency has been recognised by various industry watchdogs. In October 2015, the Securities Investors Association Singapore (SIAS), awarded the Group the winner for the Most Transparent Company in the industrial category of the SIAS Investors’ Choice Awards. Since 2013, NOL has also been ranked in the top 15 of the Governance and Transparency Index, an annual assessment conducted by the National University of Singapore’s Centre for Governance, Institutions and Organisations, and the national financial daily, The Business Times.
Embracing board diversity and independence
Key to NOL’s resilience is a boardroom that fosters diversity. Out of 10 directors on the NOL board, nine are independent members. This current team of 10 balances quantity and quality by allowing for innovation and creativity without compromising efficient and effective decision-making. In fact, NOL was also presented with the Diversity Award under the 16th SIAS Investors’ Choice Award – Singapore Corporate Governance Award in October 2015.
Each non-executive director’s tenure of service is limited to nine years to allow for continuous renewal within the board. During this period, directors attend training programmes, conferences and seminars to keep abreast of the changing laws and regulations, as well as the latest developments in the industry. In addition, a nomination committee from within the board reviews the competencies of these directors every year to ensure that they possess the skills and experiences relevant to the company’s operations.
Recognising that board neutrality is vital to providing a higher level of corporate governances to shareholders, NOL assesses the independence of its directors annually and also asks that they report any relationship that is likely to affect their independent judgment.
Board members are also given a say in how the board should be run. Every two years, NOL sends questionnaires to the directors for their feedback on issues such as the board’s composition and processes, as well as their own development and management. They are also asked to appraise one another’s effectiveness.
Strategic decision-making and risk management
NOL has six board committees – Executive (Exco), Nominating, Audit, Executive Resource & Compensation, Enterprise Risk Management and Approval – each of which has direct access to the management and the authority to examine issues in their purview. Each board committee’s duties, authority and accountabilities are clearly stated in the terms of reference and the board reviews them regularly to ensure they are relevant and adequate to meet the expected governance standards.
The Exco, for example, works closely with management to provide strategic directions and oversees its commercial, financial and investment transactions.
Another important committee is the Enterprise Risk Management committee, which reviews and recommends the type, degree and boundaries of risk NOL should take to meet its corporate objectives, as well as ensures adequate resources for risk management. Risk is to be both undertaken and mitigated to achieve business goals and NOL has identified four types: strategic, regulatory, financial and operational.
The committee regularly assesses strategic risks, such as a volatile economic environment, competitive landscapes and evolving customer demands, so that the Group can respond adequately. It is also on the lookout for regulatory risks, including changes in national laws and industry regulations, which can have large financial and operational impacts on the company. Every quarter, the Group takes stock of financial risks by checking on its financial obligations and liquidity risk position. Finally, the company also monitors and controls operational risks in the day-to-day running of the company in order to minimise potential disruptions in business.
Engaging shareholders with good communications
NOL has a dedicated investor relations team to keep in regular contact with its various stakeholders. In 2014 alone, the team facilitated more than 160 meetings with more than 260 investors and analysts. These range from one-on-one meetings to conferences, as well as regular roadshows. Since 2009, the group has also adopted an electronic voting system at shareholder meetings, so that attendees can observe the voting process live. The results are also announced on the Singapore Stock Exchange’s website after the meetings.
“We build on good relations with our stakeholders, including the investor community, to communicate the company’s strategic direction and financial performance with transparency and integrity,” says Mr Ng
To cater to the media upon the announcements of the second quarter/half-year and year-end financial results, the senior management team holds briefings through a live webcast to ensure outreach. As a global-minded company with stakeholders from around the world, information about NOL shares, financial reports, earning presentations, performance webcasts as well as other details of its activities are also accessible via the company website.
NOL promotes clear communication and cooperation between the board, management and shareholders as it believes their mutual understanding of the Group’s objectives will bring long-term health and overall success of the business.