Governance Framework
Set out below is our corporate governance framework:
The Board
Board Composition
As at the date of this annual report, the Board comprises a total of seven Directors, as follows:
| Executive Director |
Non-executive Directors |
Independent Non-executive Directors |
| Mr. HE Xi (Chairman of the Board) |
Mr. ZHOU Jie |
Mr. LI Fang |
Mr. GAO Ping (President, the chief
executive of the Company) |
Ms. HUANG Qinghua |
Mr. YAU Ka Chi |
|
|
Mr. HUI Hon Chung, Stanley |
Profiles, roles and functions of the Directors are set out in the section headed “Directors and Senior Management Profiles” in this annual report, and the latest list of Directors and their respective role and function are also published on the websites of the Company and the Hong Kong Stock Exchange.
Board Diversity
The Company acknowledges that gender and other aspects of diversity are important drivers of the Board’s effectiveness that is positively associated with the financial performance of the Company, more effective decision making and better risk management. The Board is satisfied that all present Directors are well experienced and having progressive thinking in leading the Group.
The Board adopted a “Board Diversity Policy” in August 2013 and reviewed the implementation and effectiveness of the policy annually. As to gender diversity of the Board, the initial target of appointing at least one female director was achieved in 2023, i.e. a female gender ratio of 14.3%. It is the intention of the Board to increase the female director ratio to 30% by 2030. The Remuneration and Nomination Committee has adopted measures to ensure the appropriate gender diversity mix of the Board.
In March 2023, the Remuneration and Nomination Committee and the Board approved the nomination of a female Director, Ms. HUANG Qinghua to achieve the Board’s gender diversity target. With the majority of shareholders voted for her appointment, Ms. HUANG Qinghua has become a non-executive Director of the Company with effect from 8 June 2023. Following her appointment, the current Board composition reflects more proper and diverse mix of experience, gender, capabilities, skills and expertise in the following fields that are suitable for and relevant to the Company’s businesses:
The Board Diversity Policy of the Company is summarized as follows:
for identifying suitably qualified candidates to become Board members, it should be based on a number of diverse aspects, including Board members with different background, skills, regional and industry experience, gender and other qualities, that are in balanced and complementary with each other, creating synergy, and enabling the Board to function effectively as a whole.
when reviewing and assessing the composition of the Board, it should be based on the Company’s own business position and management needs from time to time, considering a number of factors, including but not limited to, the above-mentioned background, skills, regional and industry experience, and other factors in order to achieve a reasonable structure that allows the Board to function efficiently.
The Board Diversity Policy is reviewed periodically to ensure it remains in-line with the Company’s culture and values.
The diversity mix of the Board is summarized in the following chart:
Board Independence
For the year ended 31 December 2023, the non-executive Directors (including the independent non-executive Directors) form the majority of the Board. More than one-third of our Board members are independent non-executive Directors who can help the Board to make more effective independent judgment. They are able to make decisions in an objective and professional manner, and to assist the management in formulating the Company’s development strategies. They ensure that the preparation of financial and other mandatory reports by the Board are compiled strictly in accordance with relevant regulations and standards in order to protect the interests of the shareholders and the Company as a whole.
Both the Audit Committee and the Remuneration and Nomination Committee comprise all independent non-executive Directors, and both committees are chaired by an independent non-executive Director. Independent non-executive Directors are entitled to directors’ fees reflecting their membership of the Board committees and additional fees for attendance of meetings. None of these Directors receives remuneration based on performance of the Group, and none of them are entitled to any incentive scheme of the Group.
The Company has confirmed with each of the independent non-executive Directors if there is any subsequent change of circumstances which may affect their independence as regards to each of the factors referred to under Rule 3.13 of the Listing Rules during the year. Each of the independent non-executive Directors has provided written confirmation to the Company confirming that there has been no matter needs to be brought to the attention of the Company and the Hong Kong Stock Exchange which may affect their independence. Having regard to the confirmation as well as the actual contribution that each of the independent non-executive Directors has made, the Board concluded that each of the independent non-executive Directors to be independent.
The Company has a vigorous nomination policy for selection, appointment and re-election procedures and process for Directors. There is no relationship (including financial, business, family or other material/relevant relationship) between the board members, or between the Chairman of the Board and the President (chief executive) of the Company.
The Board has put in place a mechanism for Directors to seek additional independent professional advice in the discharge of their duties to ensure that independent views and input are available to the Board.
Board's Role
The Board is the highest decision-making and managing body of the Company. Having regard to the best interests of the Company and its shareholders, the Board provides leadership and guidance to the Group’s activities. The Board, led by the Chairman, is responsible for, among other things:
promoting the Group’s long-term sustainable development and success, thus delivering value to shareholders;
establishing and approving strategies and objectives of the Group and ensuring that they align with the Company’s culture and values;
approving and monitoring business plans for achieving the Group’s objectives;
approving major investments, mergers and acquisitions, and other material transactions;
overseeing the Group’s risk management and internal control systems;
overseeing the Group’s corporate governance arrangements;
overseeing the Group’s ESG strategies and development;
supervising and administrating the operation and financial position of the Group;
approving result announcements, periodic reports and other disclosures as required in accordance with applicable laws and regulations and the Listing Rules;
approving appointment of Directors and senior management personnel; and
promoting engagement with shareholders of the Company and other stakeholders.
Directly under the Board, there are Board committees that are specifically formed to carry out the above different functions.
Board Committees
In response to the need to further distinguish a clear line of responsibility in handling the ESG related matters at the Board level, a restructuring of the Board committees has been implemented during the year. A new Strategic and Sustainable Development Committee was set up in March 2023 to take over the roles and responsibilities on sustainability-related matters that previously performed by the Risk Management Committee. The new Strategic and Sustainable Development Committee has its written terms of reference clearly set to oversee the ESG development of the Group as a whole, monitors changes in ESG related requirements, supervises the Sustainability Working Committee, and reports regularly ESG related matters to the Board. At the same time, the Sustainability Working Committee has been reassigned as a sub-committee under the Strategic and Sustainable Development Committee.
Following the aforementioned changes, there are currently five committees under the Board, namely (1) Audit Committee, (2) Risk Management Committee, (3) Remuneration and Nomination Committee, (4) Strategic and Sustainable Development Committee, and (5) Executive Committee to implement internal supervision and control on each relevant aspects of the Group.
For further information on the Board committees and their work done in 2023, please refer to the separate reports from each of the Board committees set out in this annual report.
Board Evaluation
The Company acknowledges that regular Board performance evaluations can help building a high-performing Board, which is equipped with the necessary capabilities to anticipate, prepare for and overcome future challenges.
The Board concurs that board evaluation is useful to enhance Directors’ accountability and provide valuable feedback for improving Board effectiveness, maximizing strengths, highlighting areas for further development and evaluating whether the Board is adhering to the Company’s culture and values.
The Board and its committees are committed to regular evaluation of their effectiveness annually, thus to ensure that the Board and management are on the same page, and that the Board, being the prominent authority of the Company, its performance is actually leading the Company on the right track towards its long-term goals.
For 2023, the Board performance evaluation took the form of a questionnaire, which was prepared by the Company Secretary, with inputs from third party stakeholders. The content of the questionnaire will be refined from time to time to ensure that the questions are relevant to the present socioeconomic environment, as well as reflecting on issues identified in previous performance evaluations.
The questionnaire covered the following key areas:
Role, Responsibility and Operation of the Board;
Composition of the Board and Governance Structure;
Function of Board committees;
Conduct and Procedures of Board Meetings;
and Assessment on ESG governance.
Based on the feedback from the Directors, the Board evaluation revealed that they considered and were satisfied with the Board’s performance in the following aspects, including
| (i) |
leading the Company towards meeting its strategic goals;
|
| (ii) |
practices in compliance with the CG Code, the Listing Rules and other laws, rules and regulations applicable to the Company;
|
| (iii) |
calling for a right mix of talent inside the Board (skills, experience, competencies and gender etc.);
|
| (iv) |
functioning of the existing Board committees in assisting the Board with governance of the Company;
|
| (v) |
identification, discussion, and resolution of key issues of the Group; and
|
| (vi) |
integration of ESG factors into the Company’s strategies, operations, investing and risks framework with guidance and oversight from the newly established Strategic and Sustainable Development Committee.
|
The Board evaluation also identified a number of issues that require improvement to enhance the effectiveness of the Board, including (i) the Board’s understanding of the Group’s key new business entities; (ii) reporting materials; and (iii) alignment of focus area between the Board and the management of newly acquired entities. As discussed with the Board, the Directors have made constructive suggestions to the management, summarized as follows:
| |
Findings from the evaluation
|
Recommendations for action |
| 1 |
Improving the Board’s understanding of the key new business segments or new joint ventures of the Group engaging in emerging energy industry (i.e. colored photovoltaic, energy storage, green power transportation, etc.), along with the opportunities and challenges they face. |
Provide update analysis of the operations, market dynamics, and challenges faced by the key new entities within the Group. Arrange the Board to visit their key business sites and hold dialogues with the on-site management and executives to understand the operational status, risks, opportunities and gain direct insights into the emerging energy industry development. |
| 2 |
Major corporate transactions and resolutions endorsed by the Board should be closely kept track of, with regular progress updates and financial analysis provided to ensure alignment with the approved resolutions. Efforts should be taken to ensure the reporting materials presented to the Board for discussion achieve a balance between thoroughness and brevity. |
Management could provide in-depth analysis of the execution status or schedule periodic review meetings to discuss the progress of approved key corporate transactions and resolutions, and that they have been implemented effectively. Precise and concise reporting materials should be delivered to enable the Board to make prompt and informed decisions. |
| 3 |
Greater alignment between the Board’s area of focus and the priorities of the management of the newly acquired entities. |
Implement a system for continuous feedback between the head office and the local management of newly acquired entities to facilitate better alignment of the priorities of the Board, the top- and local-level management. |
At the same time, all independent non-executive Directors have reviewed the performance of the Chairman of the Board and were satisfied with his performance.
Taken into consideration of the above recommendations, the Directors and together with the management have committed to take appropriate actions to further improve the Board’s effectiveness.
Directors’ Appointment, Responsibilities, Delegation and Relevant Proceedings
Appointment and Rotation of Directors
In accordance with the Company’s articles of association, one-third of the Directors (including non-executive Directors with fixed term of three years) shall retire from office by rotation and be re-elected by shareholders at the annual general meetings. In addition, any new appointment to the Board is subject to re-appointment by shareholders at the upcoming general meeting. Every Director (including non-executive Directors), whether or not appointed for a specific term, should be subject to retirement by rotation at least once every three years.
If an independent non-executive Director serves more than nine years, his/her further appointment should be subject to a separate resolution to be approved by shareholders. The documents attached to shareholders accompanying that resolution should include the process used for identifying the individual and why the Board believes the individual should be elected and the reasons why it considers the individual to be independent. If the proposed independent non-executive director will be holding their seventh (or more) listed company directorship, why the Board believes the individual would still be able to devote sufficient time to the Board; the perspectives, skills and experience that the individual can bring the Board; and how the individual contributes to diversity of the Board.
The Company has in place a Nomination Policy setting out the selection and recommendation criteria and the appropriate procedures to be adopted when considering nomination and appointment of suitable candidates for directorship to the Board. Please refer to the section headed “Nomination Policy” in the Remuneration and Nomination Committee Report in this annual report.
Directors Induction
Every newly appointed Directors will receive a comprehensive, formal and tailored induction on the first occasion of his/her appointment, so as to ensure that he/she has a proper understanding of the operations and business of the Company, and he/she is fully aware of his/her responsibilities under the Hong Kong Companies Ordinance and Common Law, the Listing Rules, the applicable rules and other regulatory requirements, and especially the governance policies of the Company.
All Directors are required to disclose to the Company their offices held in public companies or organizations and other significant commitments. Every Director should ensure that he/she can give sufficient time and attention to the Company’s affairs, and make contributions to the Company that commensurate with their role and responsibilities.
All Directors have been given the “Guidelines on Directors’ Duties” and “Working Guidelines for the Board” of the Company and various guides for directors published by the Hong Kong Stock Exchange and Securities and Futures Commission. The Company Secretary continuously updates and keeps the Directors apprised on the latest laws, rules and regulations regarding their duties and responsibilities.
Directors' Continuous Development
Directors’ training is an ongoing process, in order to ensure that their contribution to the Board remains informed and relevant. The Company encourages all Directors to participate in appropriate training programs to develop and refresh their knowledge and skills. During the year under review, all members of the Board have provided their records of training to the Company Secretary for record. Their trainings included attending seminars, webinars and discussion forums, reading briefings and updated materials on current rules and regulations.
Directors' Securities Transactions
The Company has adopted a set of Code of Conduct for Securities Transactions by Directors (“Code of Conduct”), the terms of which are not less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 (formerly known as Appendix 10) to the Listing Rules. Having made specific inquiries to all Directors, all Directors confirmed that they have complied with the Code of Conduct throughout the year 2023.
Directors' Insurance
The Company has arranged appropriate insurance cover on Directors’ and officers’ liabilities in respect of legal actions against its Directors and senior management arising out of corporate activities.
Chairman and President
The division of responsibilities between the Chairman and the President (chief executive) has been clearly established and set out in writing. Under C.2.1 of the CG Code, the role of the chairman and the chief executive should be separate to ensure a balance of power and authority. During the year ended 31 December 2023, the Company strictly complied with C.2.1 of the CG Code. The roles of the Chairman and the President of the Company are separate and are currently assumed by Mr. HE Xi and Mr. GAO Ping, respectively.
Chairman
The Chairman provides leadership for the Board and is responsible for ensuring that all Directors promptly receive adequate information, which must be complete and reliable, and that Directors are properly briefed on issues arising at the Board meetings. He affirms the Board is working effectively and discharging its responsibilities. He also ensures good corporate governance practices and procedures are established, and appropriate steps are taken to provide effective communication with shareholders and those views of shareholders are communicated to the Board.
The Chairman encourages all Directors to make a full and active contribution to the Board’s affairs and take the lead to ensure that it acts in the best interests of the Company. He encourages Directors with different views to voice their concerns, allow sufficient time for discussion of issues and ensure that Board decisions fairly reflect the Board consensus. He promotes a culture of openness and debate by facilitating the effective contribution of non-executive Directors in particular and ensuring constructive relations between executive and non-executive Directors.
President (chief executive)
The President is the chief executive of the Company who has delegated authority from and is accountable to the Board. The President is responsible for managing the Group’s business, implementation of strategies, initiatives and directives set by the Board and coordinating overall business plans and budgets approved by the Board and making day-to-day operational decisions.
Delegation by the Board
The Board delegates certain management and operational functions to the Executive Committee and the management, and reviews such arrangements periodically to ensure that they remain appropriate to the Group’s needs.
The management has overall responsibility for the Group’s daily operations. The Board has established clear responsibilities and authorities for management to ensure daily operational efficiency. It acts within the authority approved by the Board to fulfill the day-to-day management responsibilities and makes timely decisions. With regard to matters beyond its authority, the management will report to the Executive Committee or the Board in a timely manner in accordance with the relevant working guidelines.
Conduct of Board Proceedings and Supply of and Access to Information
Throughout the year under review, arrangements were in place to ensure all Directors were given an opportunity to include matters in the agenda for regular Board meetings. Notice of at least fourteen days was given for a regular Board meeting to give all Directors an opportunity to attend. For all other Board meetings, reasonable notice was also given.
Full Board or committee papers were sent to all Directors at least three days before the intended date of a Board meeting or a committee meeting. Management had supplied the Board and its committees with adequate information and explanations so as to enable them to make an informed assessment of the financial and other information put before the Board and its committees for approval. Management was also invited to join the Board or Board committee meetings where appropriate.
For meetings of the Board, if a substantial shareholder or a Director has a conflict of interest in a matter to be considered by the Board which the Board has determined to be material, the matter must be dealt with by a physical Board meeting rather than a written resolution. Independent non-executive Directors who, and whose close associates, have no material interest in the transaction shall be present at that Board meeting. Any Director who has a conflict of interest must abstain from voting.
During the year under review, minutes of the Board meetings and meetings of Board committees were recorded in detail the matters considered and decisions reached at the meetings. Draft and final versions of minutes were sent to all Directors for their comments within a reasonable time after the Board or Board committee meetings were held. Minutes of the meetings are always kept by our Company Secretary, and the Board and committee members may inspect the documents and minutes of the Board and Board committees at any reasonable time by giving reasonable notice.
At all time, where necessary, the Directors can seek separate independent professional advice at the Company’s expenses so as to discharge his/her duties to the Company. All the Directors are also entitled to have access to timely information in relation to our business and make further enquiries where necessary, and they have separate and independent access to senior management of the Company.
Directors' Attendance Record
In the year 2023, the Company held nine Board meetings, one of which was a non-executive Directors meeting and one was an independent non-executive Directors meeting.
The attendance records of the Directors at Board meetings, Board committees meetings and shareholders’ meetings are as follows:
| Directors |
Board |
Audit Committee |
Risk Management Committee |
Remuneration and Nomination Committee |
Annual General Meeting |
General Meeting |
| Executive Directors: |
|
|
|
|
|
|
| HE Xi (Chairman of the Board and the Risk Management Committee) |
6/7 |
– |
2/2 |
– |
1/1 |
1/1 |
| GAO Ping (President, chief executive) |
7/7 |
– |
2/2 |
1/1(3) |
1/1 |
0/1 |
| |
|
|
|
|
|
|
| Non-executive Directors: |
|
|
|
|
|
|
| ZHOU Jie |
8/8 |
– |
– |
1/1(3) |
1/1 |
1/1 |
| HUANG Qinghua(1) |
5/5 |
– |
– |
– |
– |
1/1 |
| Xu Zuyong(2) |
3/3 |
– |
– |
1/1(3) |
– |
– |
| |
|
|
|
|
|
|
Independent
Non-executive Directors: |
|
|
|
|
|
|
| LI Fang (Chairman of the Remuneration and Nomination Committee) |
9/9 |
2/2 |
2/2 |
2/2 |
1/1 |
1/1 |
| YAU Ka Chi (Chairman of the Audit Committee) |
9/9 |
2/2 |
2/2 |
2/2 |
1/1 |
1/1 |
| HUI Hon Chung, Stanley |
8/9 |
2/2 |
2/2 |
2/2 |
1/1 |
1/1 |
Notes:
(1) Ms. HUANG Qinghua was appointed as a non-executive Director with effect from 8 June 2023.
(2) Mr. XU Zuyong resigned as a non-executive Director with effect from 8 June 2023.
(3) Mr. GAO Ping, Mr. ZHOU Jie and Mr. XU Zuyong were invited to attend the Remuneration and Nomination Committee meeting.
(4) The new Strategic and Sustainable Development Committee was resolved to establish on 23 March 2023 for taking over the roles and
responsibilities on sustainability-related matters that was previously performed by the Risk Management Committee. During the year
under review, the Company was preparing the segregation of duties between the two Board committees, allocating the appropriate
management with relevant skills to supervise the Sustainability Working Committee, and recruiting new staff to implement the
necessary works. The Strategic and Sustainable Development Committee had its first committee meeting held on 16 January 2024.
Executive Committee
The Company established the Executive Committee in 2008. As a committee under the Board, the Executive Committee conducts its work under the guidance of the Board and reports to the Board pursuant to the “Working Guidelines for the Executive Committee” approved by the Board. The chairman of the Executive Committee is served by Mr. HE Xi, the executive Director and the Chairman of the Board. The members of the committee include the executive Directors and all the vice presidents of the Company. It has been delegated with the responsibilities to ensure the effective direction and control of the business and to deliver the Group’s long-term strategies and goals. It advises the Board in formulating policies in relation to the Group’s business operations, monitors the performance and compliance issues of the business, and supervises the management to implement the Board resolutions.
The Executive Committee acts as a bridge for communication and connection between the Board and the management, and plays a crucial role in enhancing the quality of corporate governance as well as strengthening the management efficiency of the Group. It ensures that the Board can timely hear the voices of the operation and management staff and acts timely in respect of material operation affairs of the Group. It meets on a regular basis to review the Group’s activities and discuss management and operational issues.
The Executive Committee held 28 meetings during 2023. The executive Directors, the vice presidents and the senior management of the Company attended the meetings.
Company Secretary
Ms. CHEUNG Siu Lan, secretary of the Company, is an employee of the Company, appointed by the Board, and responsible to the Board. The Company Secretary is responsible for ensuring that the activities of the Board are conducted efficiently and effectively, and the procedures and all applicable laws and regulations are followed. She also supports and facilitates the training and professional development of Directors.
The Company Secretary reports to the Chairman and the Board, provides advice on corporate governance and corporate transactions, and assists the Board in discharging its obligations to shareholders pursuant to the Listing Rules. All Directors may call upon her for advice and assistance at any time in respect to their duties and the effective operation of the Board and the Board committees.
During the year under review, Ms. CHEUNG has attended relevant professional seminars/webinars to update her skills and knowledge. She also completed the ESG Reporting Certification Course arranged by The Hong Kong Chartered Governance Institute and was awarded the said certificate in October 2023. She has complied with the Listing Rules to take no less than 15 hours of relevant professional training in a financial year.
Environmental, Social and Governance
The Board recognizes the growing importance of ESG with the market, shareholders, investors and stakeholders placing increased weighting on the ESG performance of a company. In light of this trend, the Board has decided that it should be proactive in the development and oversight of the Company’s ESG strategy.
The Company has established a comprehensive organizational structure for sustainable development, in which we count on the Sustainability Working Committee to carry out sustainable development matters of the Group, and to report to the Risk Management Committee in the year 2023 and now the Strategic and Sustainable Development Committee and the Board in a timely manner, thereby further promoting the Group’s practices for sustainable development.
The Group conducts climate risk assessment exercise with reference to the Task Force on Climate-related Financial Disclosures, (“TCFD”) recommendations, identifying some of the most material physical and transitional risks, their implications and corresponding mitigation measures. We have been continuously monitoring and disclosing the environmental and climate-related metrics to facilitate a transparent communication with our stakeholders.
The International Sustainability Standards Board (“ISSB”) issued its sustainability standards on 26 June 2023, to provide investors and other stakeholders with a global baseline for corporate disclosure of climate and sustainability related information. In Hong Kong, it is expected that mandatory regulatory reporting requirements based on the ISSB reporting regime would be announced by the Hong Kong Stock Exchange soon. The Group is assessing such disclosure impact and preparing itself with the coordination of internal resources to cope with these new disclosures requirements.
During the year 2023, the Board had reviewed, discussed and approved the Sustainability Report 2022 of the Company as reported by the Risk Management Committee. The Board had ensured all new investment and acquisitions approved last year were in line with the Company’s ESG strategy and ESG-related targets of the Company. The Board’s statement and its engagement in relation to the ESG matters of last year are set out in the Company’s Sustainability Report 2023.
For further information of our ESG strategy, governance approach, management of climate-related risks and progress towards our ESG-related targets, please refer to the full version of the Sustainability Report 2023 of the Company as published on the websites of the Company and the Hong Kong Stock Exchange.
Audit, Internal Control and Risk Management
Financial Reporting
Directors acknowledge their responsibility for preparing the financial statements on a going concern basis, with supporting assumptions or qualifications as necessary. The Company’s financial statements are prepared in accordance with the Listing Rules, Hong Kong Companies Ordinance and also the accounting principles and practices generally accepted in Hong Kong. Appropriate accounting policies are selected and applied consistently; judgments and estimates made are prudent and reasonable.
During the year 2023, all Directors have been given the latest information and briefings about the financial position, changes in the business and the development of the Group on a regular basis. “Letter to the Shareholders” from the Chairman of the Board in this annual report contains a summary of the Group’s performance in this financial year and how the Group will preserve value over the long term and our strategies for delivering the Company’s objectives. The Directors ensured a balanced, clear and understandable assessment of the Group’s performance, position and prospects in annual reports, interim reports, inside information announcements and other disclosures required under the Listing Rules and other statutory requirements.
Risk Management and Internal Control Systems
The Board puts particular emphasis on risk management and strengthening internal control system. In respect of organizational structure, the Company has set up the Strategic and Sustainable Development Committee, the Audit Committee, the Risk Management Committee, the Remuneration and Nomination Committee and the Executive Committee, and there is also a Sustainability Working Committee under the Strategic and Sustainable Development Committee. The principles of the internal control framework of the Company are to strengthen the Company’s internal monitoring and control in accordance with the requirements of the Hong Kong Stock Exchange, continuously improve the Company’s corporate governance structure, build up corporate integrity culture, establish an effective control system, continuously assess the competence of the internal control system and the efficiency of the management through auditing, risk assessments and internal assessments, review identified risk exposures and ensure the effective running of the control system.
The Company has established an Internal Audit Department that has been ensuring the independence of its organization, staffing and work, which is crucial to the Company’s internal controls. In order to actively create a sound internal control environment, the Internal Audit Department provides internal control assessment reports to the management on a regular as well as ad hoc basis. It also reports to the Audit Committee, the Risk Management Committee and the Board at least twice a year on internal control and risk management matters. To minimize risks faced by the Company, the Internal Audit Department evaluates and reviews the Company’s internal control processes to avoid risks and provide a solid foundation for building up an effective internal control system.
The Company has also established an Audit Center with the objectives of standardizing and information-digitalizing internal audit and risk management, the Audit Center provides systematic support to the internal audit and control team, and provides relevant personnel training for the development of the Group.
The Company has comprehensive internal control systems in place, including regulations such as the “Management Regulations for Internal Control”, “Rules for Management Authorization”, “Management Measures for Employees’ Rewards and Punishments”, “Management Measures for Conflicts of Interests”, “Standards for Internal Control”, “Risk Management Regulations” and “Working Measures for Internal Audit”.
While taking into full account the risk management framework requirements of The Committee of Sponsoring Organizations of the Treadway Commission (the “COSO”), the promoter of the National Commission on Fraudulent Financial Reporting, and risk management guidelines set out by the Hong Kong Institute of Certified Public Accountants, the internal control system of the Company also learns from the experience of outstanding management companies and takes into consideration our actual situation and business characteristics in formulating the control framework for assessing the efficiency and competence of the internal control system, which provide a reasonable assurance to ensure the effectiveness of the Company’s operating activities, reliability of its financial reports and compliance of laws and regulations.
Effectiveness of Risk Management and Internal Control Systems
The Board through the Audit Committee and Risk Management Committee has reviewed the efficiency of the internal control system of the Group in aspects such as financial controls, operational controls, regulatory compliance and risk management. The head of the Internal Audit Department provides the “Annual Confirmation of the Effectiveness of the Risk Management and Internal Control Systems”, which is counter-signed by the Risk Management Committee, to the Board. The Directors believe that the risk management and internal control systems are efficient and adequate, and controls the risks that might have impacts on the Company in achieving its goals effectively.
During the year under review, the Company has strictly complied with the relevant provisions of the CG Code regarding risk management and internal control. Leveraging the internal information sharing platform of the Company and the management effectiveness of the Enterprise Resource Planning (“ERP”) system, the Company has driven transformation and upgrade from traditional auditing to information-digitalized auditing, thereby advancing auditing works aided with big data comprehensively.
During the year, key tasks conducted by the Internal Audit Department include the following:
Enhancing audit efficiency to promote high-quality development. We refined project management throughout our entire audit process. Advanced audit planning was carried out to optimize resource allocation, enhance audit procedures, and bolster audit quality control. In our efforts to enhance the accountability system, we ensured that the right responsibilities were assigned to the right individuals and effectively reinforced the concept of corporate compliance in our operations, thereby providing a robust safeguard for the Group’s high-quality development. Through these initiatives, we have effectively achieved a closed-loop management of auditing supervision. This included expanding and enhancing the utilization of audit results and strengthening the function of internal audit as a major overseer and collaborative partner.
Conducting various types of special internal control assessment to support strategic development. We advanced multiple special supervision and internal control tasks in an orderly manner, including the introduction of a three-year comprehensive special internal control assessment. Tailored towards emerging energy industries, the assessment was conducted in stages with different focuses, specifically overseeing and evaluating 9 enterprises that represented our strategic development. This encompassed a special internal control assessment on the Group’s emerging energy businesses, such as energy storage as well as photovoltaic full color micro-coating technologies and products, to enhance their basic management practices. Meanwhile, the Group continued to monitor key aspects such as investment management, procurement management, contract management, corporate governance and system development, with an aim to strengthen the internal control requirements during its corporate development and improve the quality of internal controls by promoting rectifications after the assessments.
Strengthening risk prevention capabilities and improving risk management mechanisms. We prioritized risk identification and assessment, monitored the progression of significant risks, established a timely reporting mechanism, and regularly presented topic-specific reports to management. Subsequently, we devised mitigation strategies to ensure the successful execution of risk management activities. Training seminars were conducted for audit and internal control talents to enhance employee quality. By elevating the professional capabilities of our audit and risk control practitioners, we have further improved the quality of our auditing and risk control work. We compiled job-specific risk management manuals to promote risk management among all employees, ensuring all risks of the Group to be controllable and under control throughout the year and the risk management systems to operate effectively.
Integrating risk management into every stage of the investment process to enhance decision-making. Before investing, we conducted thorough risk assessments and prepared project risk reminder letters. Meticulously analyzing the existing project risks, we provided valuable insights to relevant decision-makers to improve the quality of decision-making. At post-investment stage, we regularly monitored project risk response measures and the implementation thereof to ensure project risks to remain under our control at all times. By delving into detailed studies, summaries, and analyses, we shared investment project experiences and lessons learned to offer targeted improvement suggestions for future investment projects. Special presentations on issues identified during the investment process were delivered at the Group’s annual and mid-year development meetings, fostering shared utilization and referencing across the Group and further enhancing the application of post-evaluation results.
Reviewing the continuing connected transactions. The Internal Audit Department took appropriate measures to review the implementation of the Group’s existing continuing connected transactions on a quarterly basis. During the year under review, each of the relevant companies of the Group had strictly monitored the agreed prices and terms of the various continuing connected transactions in the actual course of business operations, hence none of the transactions exceeded the relevant annual caps as disclosed.
Inside Information
The Company adopted its own “Inside Information Management Policy” setting out the procedures and internal controls for handling and dissemination of inside information in August 2013 with reference to the “Guidelines on Disclosure of Inside Information” issued by the Securities and Futures Commission in June 2012.
The Company incorporated the topic on inside information into its annual internal training to its senior management regarding the continuing disclosure obligations under the Securities and Futures Ordinance and the Listing Rules.
External Auditor’s Remuneration and its Related Matters
The Company appointed Ernst & Young as the Company’s auditor (the “Auditor”). The Audit Committee is responsible for making recommendations to the Board on the appointment, re-appointment and removal of the Auditor, and to approve the remuneration and terms of engagement of the Auditor, and any questions of its resignation or dismissal.
For the year ended 31 December 2023, the Audit Committee reviewed and monitored the Auditor’s independence and objectivity and the effectiveness of the audit process in accordance with applicable standards. Details of the works performed by the Audit Committee in 2023 are set out in the Audit Committee Report in this annual report.
For the year ended 31 December 2023, the fees payable by the Company to the Auditor in respect of audit services, audit related services and non-audit services provided were as follows:
| |
RMB'000 |
| Audit services |
7,860 |
| Audit related services#: |
10,300 |
| Non-audit services: |
|
| • Tax service |
1,915 |
| • Others* |
2,105 |
# They were primarily the provision of audit related services relating to the Company’s major transaction for acquisition of certain clean energy project companies. Details of which are as set out in the Company’s circular dated 18 August 2023.
* They were primarily the provision of advisory services relating to international accounting manual benchmarking and risk assessment.
Whistleblowing and Anti-Corruption
Whistleblowing Policy
To ensure that the Company’s culture and values are adhere to and for good corporate governance practices, in order to help detect and deter misconduct and malpractices, the Board approved the launching of the “Whistleblowing Policy” in April 2012, for employees and those who deal with the Group, including customers and suppliers, and other stakeholders to raise concerns about the practices of the Group, in a secure and confidential manner. The Internal Audit Department of the Group is tasked with handling any complaints received and deal with any improprieties in any matters related to the Group, and is responsible for reporting them to the Audit Committee, which in turn will decide whether any further action is required.
Anti-corruption Policies
The Board and management of the Company are committed to anti-corruption and ethical business practices. As such, the Company has formulated a series of anti-corruption policies since 2005 which are in compliance with the prevailing anti-corruption laws and regulations where our business operations and units are located. Anti-corruption seminars are mandatorily organized on a regular basis annually to educate our management and employees across the Group of the relevant laws and regulations and the measures the Company adopted to fight against corruption so as to foster our corporate culture of honesty and integrity.
For further information of our works done in respect of anti-corruption, please refer to the Sustainability Report 2023 of the Company as published on the websites of the Company and the Hong Kong Stock Exchange.
Engagement with Workforce
The Board believes that employees are the most important resource for the sustainable development of the Company and to achieve its long-term goals, therefore, the Group has policies and mechanisms in place to ensure that the values and interests of employees align with that of the Company. Furthermore, there are channels for employees at all levels to provide feedback to management and the Board, thereby allowing the Board to be keep apprised of the expectations of employees and formulate appropriate policies to retain talented employees as well as attract talented individuals to join our Group.
Recruitment and Retention
The Group recruits fresh graduates, experienced professionals and other specialists to support its strategic development. At the same time, the Company promotes opportunities for internal career advancement for its employees. We offer competitive remuneration packages to employees at all levels and bonus tied to an employee’s performance with reference to a specific set of key performance indicators (KPIs).
Staff Development
The Group is committed to the continuous development of competence and ethical behavior of all employees. This provides a win-win situation for the Group and its employees, which on one hand, furthers the professional development of employees, and on the other hand, brings value to the Group by way of having a competent workforce.
We offer a wide range of learning resources for employees to support staff learning and development. To start with, all new joiners are provided with comprehensive induction training covering various aspects, such as the Group’s business, culture, values, history, corporate governance, anti-corruption, etc. Furthermore, we also offer job-specific training to employees depending on their position and job responsibilities, as well as education subsidies to eligible employees to pursue professional or academic qualifications and/or acquire job-related knowledge.
Staff Engagement Platform
The Company collaborated with Tencent Group to develop the tailor-made social communication mobile app named “Diantouyi” (電投壹) for our own staff, which allows two-way communication with fellow employees as well as management in a less formal environment. The app also features various tools which allows employees to receive news and access information of the Group, communicate with management and provide feedback, etc.
Incentive Schemes
To encourage management and employees to adhere to the Company’s strategic goals, values and culture, the Board adopted various incentive schemes to award management and employees who had contributed to achieving the Company’s strategic goals or had made positive impacts in promoting the Company’s culture and values. Most notably, the Company adopted the Share Incentive Scheme, which was approved by shareholders of the Company at the general meeting held on 15 June 2022, the purpose of which is to award employees with outstanding contribution to the further development of the Group and align its interests with the Group by way of equity ownership in the Company. For further information of the aforementioned share incentive scheme, please refer to the section headed “Share Incentive Scheme” in the Report of the Board of Directors in this annual report.
Workforce Diversity
The Board has six male directors and one female director as at 31 December 2023, the current male-to-female ratio of the Board is 6:1.
As at 31 December 2023, the Group had 14,254 employees, among which, 11,575 are male and 2,679 are female, i.e. a male-to-female ratio of approximately 8:2. Due to the inherent nature of the industry which the Group operates in, which involves intensive labour, it is historically a male dominated industry, and therefore the female employees of the Group is relatively low compared to other industries. However, if we focus on employees engaged in managerial and administrative work, including senior management and administrative executives, which is less labour intensive, the male-to-female ratio improved to approximately 7:3, reflecting a gender equality principle generally adhered by the Group.
The Company has implemented a series of policies to ensure that both male and female employees within the organization are treated equally in all aspects of their work.
The diversity mix of employees of the Group are summarized in the following chart:
More details on the Group’s workforce diversity, including employees’ gender ratios, are set out in the Company’s Sustainability Report 2023.
Engagement with Shareholders
The Company maintains a corporate website at www.chinapower.hk where important and updated information about the Group’s activities and corporate matters such as annual and interim reports, trading updates such as electricity sold of the Company, business development and operations, corporate governance practices and other information are available for review by shareholders and other stakeholders. When announcements are made through the Hong Kong Stock Exchange, the same information is made available on the Company’s website simultaneously.
Investor Relations
Apart from the annual general meeting and other general meetings held in 2023, the Board held various meetings with shareholders, investors and potential investors on other occasions to communicate with them on the Company’s strategies, goals and development direction, and to allow investors to provide us with feedback on areas which they believe improvement is needed from an investor’s perspective. The Board values the feedback received and designates relevant management to formulate plans for improvement.
The Company also holds regular press conferences and meetings with financial analysts and investors, during which the Company’s management will directly provide relevant information and data to the media, financial analysts, fund managers and investors, as well as answer their enquiries in a prompt, complete and accurate manner. The Company’s website is updated continuously, providing up-to-date information regarding every aspect of the Company to investors and the public.
The Company has a Capital Markets & Investor Relations Department, which takes charge of the Company’s relationship with investors and shareholders by providing information and services to them, promptly replying to their enquiries, and maintaining channels of active and timely communication with them.
Shareholders Communication Policy
In March 2012, the Board adopted a “Shareholders Communication Policy” of the Company which aims to set out the provisions with the objective of ensuring that the shareholders and potential investors are provided with ready, equal and timely access to balanced and understandable information about the Company, in order to enable shareholders to exercise their rights in an informed manner, and to allow shareholders and potential investors to engage actively with the Company. Summary of the Shareholders Communication Policy is as follows:
The Board shall maintain an on-going dialogue with shareholders and the investment community, and will regularly review this Policy to ensure its effectiveness.
Information shall be communicated to shareholders and the investment community mainly through the Company’s financial reports (interim and annual reports), briefings for results and significant matters, and annual general meetings and other general meetings that may be convened, maintenance of communication with investment market and media, as well as making available all the Company’s disclosures, corporate communications and other corporate publications on a timely manner.
The channels for the shareholders to communicate their views to the Board are set out in the section headed “Shareholders’ Rights” below. The “Shareholders Communication Policy” of the Company is posted on the Company’s website under the “Corporate Governance” section.
The Chairman of the Board attended and chaired the Company’s annual general meeting and general meeting held on 8 June 2023 (the “AGM”) and 6 September 2023 (the “GM”), together with other Directors and the external independent auditor and answered questions from shareholders and investors at meetings. All resolutions proposed were duly passed by shareholders’ voting at the AGM and GM.
Based on the Company’s shareholders engagement works carried out during the year, the Directors believe that the implementation of the Shareholders Communication Policy is effective and adequate. For further details, please refer to the section headed “Investor Relations and Frequently Asked Questions” in this annual report.
Dividend Policy
In January 2019, the Company has adopted a new “Dividend Policy” which aims to set out the provisions with the objective of providing stable dividends to shareholders.
The Company may declare and distribute annual cash dividends to its shareholders in an amount representing not less than 50% of the profit attributable to ordinary shareholders of the Company in any financial year, subject to the criteria set out in the Dividend Policy. In addition to cash, the dividends may be paid up in the form of the Company’s shares, by the distribution of specific assets of any kind or by distribution of any form.
A decision to declare or to pay any dividends, and the amount of dividends, will be based on the recommendation of the Board after taking into consideration of, inter alia, the following factors:
| (i) |
The financial results and financial condition of the Group;
|
| (ii) |
The Group’s expected working capital requirements, capital expenditure requirements and future expansion plans;
|
| (iii) |
The Group’s actual and future operations and liquidity position;
|
| (iv) |
The Group’s debt-to-equity ratio, return on equity and committed financial covenants;
|
| (v) |
The retained earnings and distributable reserves of the Company and each of the members of the Group;
|
| (vi) |
The general economic conditions, the national policies for energy and related industries, and other internal or external factors that may have an impact on the business or financial performance and position of the Company;
|
| (vii) |
The shareholders’ and the investors’ expectation and industry’s norm; and
|
| (viii) |
Any other factors that the Board deems appropriate.
|
The Company shall prioritize payment of cash dividends to its shareholders. Such declaration and payment of dividends shall be determined at the sole discretion of the Board and subject to all applicable requirements under the Hong Kong Company Ordinance and the articles of association of the Company.
Shareholders' Rights
Procedures for Shareholders to Convene General Meeting
Shareholders are entitled to have right to request the Company to convene a general meeting pursuant to Part 12 of the Hong Kong Companies Ordinance. The procedures are as follows:
The Directors are required to call a general meeting if the Company has received requests to do so from the Shareholders representing at least 5% of the total voting rights of all the members having a right to vote at general meetings.
A request -
| (a) |
must state the general nature of the business to be dealt with at the general meeting; and
|
| (b) |
may include the text of a resolution that may properly be moved and is intended to be moved at the general meeting.
|
equests may consist of several documents in like form that –
| (a) |
may be sent to the Company in hard copy form or in electronic form; and
|
| (b) |
must be authenticated by the person or persons making it.
|
Directors must call a general meeting with 21 days after the date on which they become subject to the requirement, and must be held on a date not more than 28 days after the date of the notice convening the general meeting.
If the requests received by the Company identify a resolution that may properly be moved and is intended to be moved at the general meeting, the notice of the general meeting must include notice of the resolution.
If the resolution is to be proposed as a special resolution, the Directors are to be regarded as not having duly called the general meeting unless the notice of the general meeting includes the text of the resolution and specifies the intention to propose the resolution as a special resolution.
Notice and Voting of General Meetings
Sufficient notice of shareholders meeting and the procedures for voting conduction will be given to the shareholders prior to every general meeting. Save as provided under the Listing Rules, resolutions put to vote at the general meetings of the Company (other than procedural matters) are taken by poll. Procedures regarding the conduct of the poll are explained to the shareholders at the commencement of each general meeting, and questions from shareholders regarding the voting procedures are answered. The poll results are posted on the respective websites of the Company and the Hong Kong Stock Exchange on the same day of the poll.
Procedures for Shareholders Sending Enquiries to the Board
Shareholders should direct their questions about their shareholdings to the Company’s registrar and whose details are as follows:
Computershare Hong Kong Investor Services Limited
Shops 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong
Tel: (852) 2862 8628
Fax: (852) 2865 0990
The Company Secretary and the Capital Markets & Investor Relations Department of the Company also handle both telephone and written enquiries from shareholders from time to time. Shareholders’ enquiries and concerns will be forwarded to the Board and/or relevant Board committees of the Company, where appropriate, to answer the shareholders’ questions. For shareholders and investors’ enquiries, the contact information is set out in the section headed “Useful Information for Investors” in this annual report.
Other Procedures for Shareholders’ Proposals
The details of the following procedures are available at the Company’s website www.chinapower.hk under the “Corporate Governance” section for review.
Constitutional Documents
The Company’s constitutional documents have been posted on the Company’s website www.chinapower.hk under the “Corporate Governance” section. During the year under review, there was no change in the Company’s articles of association.
Important Shareholders Dates
The important shareholders dates in the coming financial year are set out in the section headed “Useful Information for Investors” in the annual report.
