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Corporate Governance

Introduction

Our approach to corporate responsibility is integral to corporate governance and corporate strategy. Directed by our Vision, Mission and Values and guided by our established processes of Enterprise Risk Management and Stakeholder Engagement, we manage our businesses to balance the interests of all stakeholders.

What Does Corporate Responsibility Mean to Us?

Our approach to corporate responsibility is documented throughout this report. We strive to be a leader in safety, to meet and exceed our customers’ expectations for service, to treat our staff with respect, to manage our impacts on the environment and to contribute positively to the community.

Underpinning all of this are sustainable financial models, allowing us to provide reasonable returns to capital providers while achieving our Vision, Mission and Values. Working with partners in our Value Chain is also important for being a responsible, competitive and profitable enterprise that builds and connects communities.

 

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Each year, we publish a Corporate Governance Report as part of our Annual Report. It describes the best practices we have adopted with reference to the Corporate Governance Code from the Listing Rules of Hong Kong Exchanges and Clearing Limited.

 

Management Approach

Corporate responsibility is embedded in our organisation through established committees at both Board and Executive levels.

Board of Directors

The Board of Directors is our highest governing body. Led by the Chairman, it focuses on overall strategic policies and corporate governance. During 2014, the Board of Directors strengthened corporate governance by setting up new committees for Capital Works and Risk and by appointing four new Non-Executive and Independent Non-Executive Directors.

Our Board Diversity Policy ensures that Board members have an appropriate balance of skills, experience and diversity of perspectives. This diversity enhances effective execution of our business strategy.

 

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Please refer to Terms of Reference for the Board Corporate Governance Functions and our Board Diversity Policy.

 

Corporate Responsibility (CoR) Committee

Reports to: Board of Directors
Chaired by: Chairman of the Board
Frequency of meetings: Twice per year
Composition: Two Non-Executive Directors (including the Chairman), four Independent Non- Executive Directors, and three members of the Executive Directorate, including the Chief Executive Officer (CEO) and the Legal Director & Secretary (LD&S).

The Corporate Responsibility (CoR) Committee monitors implementation of the Corporate Responsibility Policy and the Corporate Sustainability Policy.

Risk Committee

Reports to: Board of Directors
Chaired by: An Independent Non-Executive Director, appointed by the Board
Frequency of meetings: No less than once every quarter
Composition: At least four Non-Executive Directors, with a majority of Independent Non-Executive Directors.

The Risk Committee has oversight on Enterprise Risk Management (ERM); it is mandated by the Board to review the effectiveness of the ERM framework, including top risks and emerging risks and to commission “deep dive” reviews on key risk areas. Crisis management arrangements are reviewed on a regular basis.

 

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Please refer to Terms of Reference for the Corporate Responsibility Committee.

 
 

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Please refer to Terms of Reference for the Risk Committee.

 

Executive Committee

The Board has delegated day-to-day management of the Company’s business to the Executive Committee. Led by the Chief Executive Officer, this committee is comprised of seven Executive Directors and the General Manager - Corporate Relations.

Corporate Responsibility Steering Committee (CoRSC)

Reports to: CoR Committee
Chaired by: Legal Director & Secretary
Frequency of meetings: Four times per year
Composition: Executive Directors and senior managers representing all major business units.

The CoR Steering Committee monitors and approves initiatives related to corporate responsibility and sustainability in consultation with all major business units.

Enterprise Risk Committee (ERC)

Reports to: Risk Committee
Chaired by: Legal Director & Secretary
Frequency of meetings: Four times per year
Composition: Executive Directors and senior managers representing all major business units.

The Enterprise Risk Committee monitors enterprise risks and approves risk management measures in consultation with all business units.

Enhancing Corporate Governance in 2014

The Board established an Independent Board Committee (IBC) to examine the Express Rail Link delay that was announced in the first half of 2014. We have accepted the findings of two IBC reports, including recommendations to enhance management systems and reporting, monitoring and communication processes.

After the departure of Chief Executive Officer Mr Jay H Walder on 15 August 2014, the Board appointed Deputy Chief Executive Officer Mr Lincoln Leong to be Acting Chief Executive Officer with effect from 16 August 2014. On 12 March 2015 the Board appointed Mr Leong as Chief Executive Officer with effect from 16 March 2015, for a term of three years.

During the year, the Risk Committee and the Capital Works Committee (CWC) were established at Board level to provide additional monitoring of overall enterprise risk and major capital projects. The Board also adopted key milestones and performance indicators that were recommended by the IBC, and the implementation of these measures is being monitored by the CWC.

The Office of the Chief Executive of the HKSAR published the Report of the Express Rail Link Independent Expert Panel on 30 January 2015. We have reviewed this report in conjunction with experts appointed by the IBC and will implement its recommendations where appropriate.

 

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In the spirit of openness and transparency, we released a Supplementary Note to our Sustainability Report 2013 to address public concern and criticism about the revised programme for the Express Rail Link project that was announced in the first half of 2014.

Subsequent to that, we have made more information available about project delays and enhancement of corporate governance in relevant press releases on our corporate website and also in our Annual Report 2014.

The Report of the Express Rail Link Independent Expert Panel has been published by the Government.

 

Enhancing Enterprise Risk Management in 2014

Our framework for Enterprise Risk Management (ERM) provides a simple and effective management process to aid business units across the organisation to identify and review risks and prioritise resources to manage risks that arise. It provides our managers with a clear view of the significant risks facing the Company and is used to support decision making and project execution, helping to deliver better business performance.

We are taking proactive measures to manage risks arising from our recurrent business and business growth as well as from the constantly changing business environment. Some key risks that we are currently managing include the following:

  • Reputational impacts arising from programme slippage and cost overruns on network expansion projects in 2014. In response, we have implemented measures to enhance corporate governance.
  • Reputational impacts arising from public dissatisfaction with the tendering process for property development projects. In response, we have formulated a comprehensive communication plan and reviewed our tendering strategy for individual property development projects.
  • Risks to successful completion of four major new railway projects that are underway in Hong Kong, including general shortage of workers, geotechnical difficulties, and technicalities related to carrying out construction activities in close proximity to operational rail lines and urban developments.
  • Service disruptions and over-crowding in some sections of our network. Please refer to Customers.
  • Impacts of workforce transition and growing manpower needs. Please refer to Staff.

In mid-2014, the ERC conducted a thorough review of the ERM framework and implemented some new measures to raise risk awareness across all levels of the organisation. These measures include launching our first Risk Awareness Week in October 2014, introducing a computer-based ERM training programme for managers, holding regular meetings of the Executive Committee to discuss top risks and emerging risks, and increasing the frequency of reporting by the ERC to the Executive Committee and the Board. These enhancements are helping to reinforce a risk-informed and risk-aware culture.

We keep ourselves abreast of the latest developments in risk management through reviews with users, cross-industry benchmarking and experience sharing. During Risk Awareness Week 2014, we engaged external risk experts to share best practices on risk management with our executives, senior managers, members of the ERC and divisional risk co-ordinators.

Corporate Policies

Our management approach to corporate responsibility comprises a number of corporate policies, particularly on issues that are considered to be highly material to our stakeholders and/or that require extensive cross-departmental coordination.

Please refer to the following policies, which can be downloaded from this site. Please click on the name of each document to open it as a pdf file or follow the links provided to other relevant information about implementation of each policy in this report.

Corporate Responsibility Policy
Corporate Sustainability Policy
Safety Policy
Climate Change Policy
Biodiversity Policy
Whistle-blowing Policy
Corporate Board Diversity Policy

 

External charters and memberships

 

We endorse externally developed charters, principles and initiatives, and participate in associations and advocacy organisations. To download a list, please click here.