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The Board has established the following committees (all chaired by Independent Non-executive Director or Non-executive Director) with defined terms of reference, which are on no less exacting terms than those set out in the Corporate Governance Code of the Listing Rules:
Each Committee has authority to engage outside consultants or experts as it considers necessary to discharge the Committee's responsibilities. Minutes of all committees meetings are circulated to all Board members. To further reinforce independence and effectiveness, all Audit Committee members are Independent Non-executive Directors, and the Nomination and Remuneration Committees have been structured with a majority of Independent Non-executive Directors as members since 2003.
The Nomination Committee was established in August 2001 and is chaired by an Independent Non-executive Director. Its written terms of reference cover recommendations to the Board on the appointment of Directors, evaluation of board composition, assessment of the independence of Independent Non-executive Directors, the management of board succession and monitoring the training and continuous professional development of directors and senior management.
The Audit Committee was established in 1998 to review the Group's financial reporting, internal controls and corporate governance issues and make relevant recommendations to the Board. The Committee has been chaired by an Independent Non-executive Director since 2003 and all Committee members are Independent Non-executive Directors. All Committee members possess appropriate professional qualifications, accounting or related financial management expertise as required under the Listing Rules.
The Committee's review covers the audit plans and findings of internal and external auditors, external auditor's independence and performance, provision of non-audit services by our external auditor, the Group's accounting principles and practices, goodwill assessment, listing rules and statutory compliance, connected transactions, internal controls, risk management, treasury, financial reporting matters (including the interim and annual financial reports for the Board's approval) and the adequacy of resources, qualifications and experience of staff of the Company's accounting and financial reporting function as well as their training programmes and budget.
Following international best practices, the Committee conducts a review of its effectiveness at least once in every two years by going through a detailed audit committee best practices checklist as against the Committee's current practices. Based on the results of the latest assessments, the Committee believes it is functioning effectively and further enhancements and changes in practice are decided to be made.
The Committee also ensures proper whistle-blowing arrangements are in place by which employees can report any concerns, including misconduct, impropriety or fraud in financial reporting matters and accounting practices, in confidence and without fear of recrimination for fair and independent investigation of such matters and for appropriate follow-up action. Under the Group's Guidelines on Whistle-blowing / Reporting of Concerns, employees can report these concerns to either Senior Management or the Group Chief Compliance Officer. Any shareholders or stakeholders can also report similar concerns by writing in confidence to our Group Chief Compliance Officer at the Company's business address in Hong Kong.
External Auditor's Independence
In order to further enhance independent reporting by the external auditor, part of our Audit Committee meetings are attended only by Independent Non-executive Directors and external auditor. The Committee also has unrestricted access to external auditor as necessary.
A policy on provision of non-audit services by the external auditor has been established since 2004. Under this policy, certain specified non-audit services are prohibited. Other non-audit services require prior approval of the Audit Committee if the fee exceeds certain pre-set thresholds. These permitted non-audit services may be engaged only if they are more effective or economical than those available from other service providers and will not constitute adverse impact on the independence of the external auditor.
In addition, the external audit engagement partner is subject to periodical rotation of not more than 7 years. The Company has enforced a policy that subject to prior approval by Audit Committee, no employees or former employees of external auditor, can be appointed as director or senior executive of internal audit or finance function in the Group, within 12 months preceding their employment by the external auditor.
Prior to the commencement of the audit of the Company's accounts, the Committee receives written confirmation from the external auditor on its independence and objectivity as required by the Hong Kong Institute of Certified Public Accountants.
Risk Management and Sustainability Committee
The Risk Management and Sustainability Committee was established in August 2001 and is chaired by the Honorary Chairman. Its written terms of reference include offering recommendations to the Board on the Group's risk management and internal control systems, and review of the Group's practices and strategies on corporate responsibility and sustainability. The Committee reports to the Board in conjunction with the Audit Committee.
The scope of review of the Committee covers receivables management, credit risk management, inventory management, goodwill assessment, tax compliance issues, litigation exposures, acquisitions and integration, other operational and financial risk management as well as corporate responsibility and sustainability.
The Remuneration Committee was formed in 1993 and is chaired by an Independent Non-executive Director. The Committee's responsibilities as set out in its written terms of reference include approving the remuneration policy for all Directors and senior executives, and the grant of share options to employees under the Company's Share Option Scheme. It annually reviews the Group's remuneration policy.