Commercial Bank of Ceylon PLC

Annual Report 2018

How We Govern

Bank’s approach to governance

Commercial Bank firmly believes in and values good corporate governance – a disciplined approach to making decisions and executing them.

With its mutually beneficial outcomes, it is considered a necessary conditio

and beyond the legal and regulatory requirements. We are aware that it is the foundation for financial integrity, sustainable performance and investor confidence. It promotes fairness, transparency and accountability in dealing with all its stakeholders. Accordingly, the Bank is committed to good corporate governance which drives the Bank to conduct its affairs with the utmost intellectual honesty and diligence, being mindful of its obligations to the society and the environment. A culture that values good governance prevails across the Bank.

The Bank has adopted a time-tested corporate governance framework which is being regularly reviewed and updated in line with the evolving regulations and best practice, to guide the Board, Board committees, Management and staff in performing their stewardship roles. This framework is underpinned by leadership, integrity, accountability, transparency, sustainability and shareholder engagement. These guide the Bank in all its decisions relating to Board oversight, delegation of authority, division of responsibilities, resource allocation, risk management, compliance, performance appraisal and compensation, related party transactions, and financial reporting. The commitment to good corporate governance has in fact been a major contributory factor to the many achievements the Bank has accomplished.

Annual corporate governance report

Required to be published as per the Banking Act Direction No. 11 of 2007 on Corporate Governance (Direction), the annual corporate governance report of the the Bank included in the chapter on Governance elaborates the structure, overarching principles and components of the Bank’s corporate governance framework and Annex 2 that identify the extent of compliance with the applicable Direction and codes.

Following a review of the Bank’s compliance with the Direction, Messrs Ernst & Young, External Auditors of the Bank have submitted their Assurance Statement thereon to the Central Bank of Sri Lanka.

The Bank is compliant with all the applicable laws, rules, regulations, and codes in the spirit of good governance.

Compliance with the Banking Act Direction No. 11 of 2007 and the Code of Best Practice on Corporate Governance of CA Sri Lanka is given in Annexes I and II. As the Bank is compliant with all requirements of the Banking Act Direction No. 11 of 2007, the Colombo Stock Exchange (CSE) has exempted the Bank from disclosure of compliance with the Directions stipulated in Section 7.10 of the Continuing Listing Requirements on Corporate Governance.

Key regulatory requirements and voluntary codes relevant to the Bank and elements of the Corporate Governance Framework of the Bank are depicted in Figure 24.

Board of Directors approved the rules applicable to transactions on the Bank’s shares in 2015. Board approved “Internal Rules applicable on the Bank share purchases/disposals by employees of the Bank” govern the transactions on the Bank’s shares by employees. Code of Ethics issued to the employees also include guidelines with regard to insider dealing in securities.

In order to incentivise employees to achieve better performance, increase staff retention, and raise equity funding, the Bank has structured Employee Share Option Plans (ESOP). This entitles the eligible employees to buy a set number of shares at a fixed price during a given period of time. These plans have been approved by the shareholders at Extraordinary General Meetings (EGMs).

The key regulatory requirements and voluntary codes relevant to the Bank and elements of the Corporate Governance Framework of the Bank are depicted above.

Governance structure

The governance structure of the Bank comprises several governance bodies with well-defined roles and responsibilities, greater accountability and clear reporting lines. These include the Board, Board committees, Management and Management committees. The Board and Board committees, assisted by consultants where necessary, are responsible for setting strategy, risk appetite, and oversight. Management and Management committees are responsible for executing strategy and driving performance. Strategic business units and support functions are responsible and accountable for conducting operations and assuming risk under the purview of the Management.

Figure 25 provides an overview of the governance structure of the Bank.