Our objective is to communicate with stakeholders material and significant information in a concise but comprehensive manner to facilitate shareholders to obtain a balanced understanding of how good governance is being practiced in the Company in its efforts to create value for stakeholders in a sustainable manner. It is detailing about policies, procedures, framework and key component of the Company’s corporate governance mechanism along with its approach in managing risk. This report should be read in conjunction with the corporate governance annexes.
Provides a detailed report on compliance with following key regulatory provisions and voluntary guidelines in a checklist form, with reference to the sections of the report,
The Board firmly believes that good corporate governance is essential to create trust and engagement between the Company and its investors, contributing to the long-term success of the business. It guides the Board and all levels of employees in the conduct of day-to-day business activities. The Company is committed to achieving the highest standards of corporate governance practices that go beyond the minimum prescribed in statutes and codes.
The Board is responsible for creating and delivering sustainable stakeholder value. The governance policies and procedures enable the Board to manage the Company for the benefit of all stakeholders, ensuring long-term value creation. The Company conducts internal and external reviews at regular intervals to ensure compliance with governance standards and where non-compliance is identified, immediate measures are initiated to achieve compliance.
The framework and policies are reviewed at regular intervals to maintain alignment with the Company’s strategy, regulatory requirements, dynamic business environment, technological advancements and international best practice. Policies are reinforced through alignment of performance management systems to maintain a culture of compliance and realise our corporate goals.
As part of the continuous commitment towards improving its compliance of corporate governance standards, the Board has complied throughout the year with mandatory and voluntary standards in its governance practices.
People’s Leasing aims at achieving the highest standard of governance and adopts globally accepted best practices that promote independence and transparency. The best practices are integrated into a robust Corporate Governance Framework, thereby creating a platform for prudent management of the Company in the interest of all its stakeholders.
The external mechanisms are imposed on the Company through various laws, regulations, and codes that govern the industry. The Company has also developed an internal mechanism that focuses on risk management, culture, and general company practices.
Our governance structure provides a strong foundation for good governance with oversight, accountability, and improved decision-making ensuring sustainable behaviour, combined with effective risk management, internal controls, and compliance.
The structure is based on a system of checks and balances that enable the Board of Directors, Management, and employees to achieve the overall goals of the Company with fewer conflicts focusing on the rights and interests of all stakeholders of the Company.GRI 102-18
The present Board comprises eight (8) Directors and coherent Boardroom dynamics and culture is being adopted at the Boardroom table in all proceedings.
The Board fully appreciates that an effective corporate governance system is essential to drive the Company’s performance in a manner that maximises stakeholder interests. As drivers of corporate governance, all Directors dedicate sufficient time to attend Board and Board Committee meetings and matters deliberated therein. Directors bring their independent judgement in discharging their duties on matters pertaining to strategy, performance,
risk management, governance and business conduct.
The Board acknowledges its responsibility to ensure that the Annual Report provides a balanced view of its corporate governance practices and those salient matters which are expected to have a profound impact on stakeholders. The Board both individually and jointly confirms that its operations are being carried out in full adherence to the applicable laws and regulations. Whilst measures are in place to consolidate data and facilitate disclosure, the process of data management systems is further strengthened to ensure increased reliability, and completeness of information.
Developed the strategic plan and continuous monitoring of the status of the strategic plan.
Continuous monitoring of performance of the Company and subsidiaries against the budget. Review of performance of Bangladesh operations.
Retirement and resignation of existing members and new appointments to the Board.
Introduced Internet banking and digital models to capture field visits and incentives of officers.
Executive level committees
Established new committees to overview Islamic business and information technology and reviewed composition of existing committees.
GRI 102-22 GRI 102-23
The present Board comprises eight (8) members and there is a strong independent element on the Company’s Board. Whilst all eight Directors were Non-Executive, three were Independent Directors during the financial year 2018/19. In this backdrop, Deputy Chairman, Mr Amirthanayagam, resigned from the Board of Lankan Alliance Finance Limited on 13 June 2019, from which date onwards the Board comprised four Independent Directors. An Independent Director’s tenure does not exceed nine years ensuring that possible safeguards are applied in maintaining their independence.
The Board believes that the current composition and size of the Board provide sufficient diversity without interfering with efficient decision-making, taking into account the nature and scope of the Company.
A well-balanced Board is critical for the Company to remain competitive in the dynamic business environment. Accordingly, each year the size and composition of the Board and skills and competencies of the members are reviewed to ensure an appropriate balance of skills, experience and age. The competencies include banking, accounting and finance, business acumen, industry knowledge, familiarity with legal and regulatory requirements, and risk management. The Board considers that its Directors possess the necessary knowledge and competencies to lead and govern the Company effectively.
GRI 102-23 GRI 102-26
There is a clear segregation in the roles of the Chairman and the CEO in line with the corporate governance best practice. This ensures that no one Director has unfettered power in the decision-making process. Whilst the CEO carries out the executive functions of the Company, the Chairman facilitates effective discharge of Board functions.
The Board fully appreciates that an effective and robust Board whose members engage in open and constructive debate is fundamental to good corporate governance.
The Board is responsible for leadership and strategy, risk management and control, and monitoring and improving performance.
The Board of Directors is comprised of individuals/professionals specialised in diverse fields such as Banking, Accounting, Management, Human Resources, Marketing and even Academia. There are three Chartered/Management Accountant Directors on the Board with financial knowledge and acumen to offer guidance on finance –
In addition, Directors are continuously updated on revisions to various accounting and regulatory standards to ensure they remain up to date on the latest trends and issues.GRI 102-24
The Company follows a formal process for the selection of new Directors to enhance the transparency in the selection of nominees for Directors. The Remuneration and Nomination Committee adopts the following process –
Dr Kennedy Degaulle Gunawardena and Mr Namugoda Wijesinghe Attapattu Mudiyanselage Udawatte Keerthi Kumara Edward Weerasinghe were newly appointed to the Board on 9 October 2018 pursuant to the cessation of two Directors of the Company, after having followed the above process. Mr R M Jayasena and Dr Ali Asgar Shabbir Gulamhusein retired and resigned from Board membership respectively, during the financial year and such changes were communicated to shareholders immediately through the CSE disclosures.
In addition, the Company’s Articles of Association requires a newly appointed Director during the year to hold office until the next Annual General Meeting and be eligible for re-election. Accordingly, Dr Gunawardena and Mr Weerasinghe will be re-elected at the next AGM of the Company.
The Remuneration and Nomination Committee Report on page 204 could be referred for further details on nomination and appointment of Directors.GRI 102-27
All newly appointed Directors undergo a structured induction which introduces the members to the relevant governance information, Company’s charters, key reports and applicable regulations and policies. Directors are also introduced to the Key Management Personnel and to the operations of the Company.
Accordingly, the newly appointed Directors, Dr Gunawardena and Mr Weerasinghe were given an in-depth briefing about the Company, the business, governance practices, growth strategies, and risks facing the Company.
The Board recognises training as pivotal for continuous improvement and effective discharge of duties of Directors. The Company Secretary is responsible in collating the training needs and organising training for Directors. Accordingly, various training programmes have been organised for the Board during the year to keep with current trends. Further, the Continuous Professional Development (CPD) undertaken by Directors in their personal capacity also contributes in meeting the training needs of Directors.GRI 102-25
The Board has to act in good faith and exercise their powers in the best interest of stakeholders and the Company as a whole, in compliance with the applicable regulations.
Directors who have no relationship with the Group, its related corporations, officers or its shareholders with more than 10% of voting rights of the Company that could interfere, or reasonably perceive to interfere, with the exercise of the Directors independent judgement in the best interest of the Company, are considered to be independent.
The Remuneration and Nomination Committee reviews the independence of Directors on an annual basis as well as when circumstances require the same, taking into account any salient feature that renders a Director Non-Independent. Directors are expected to provide an annual declaration of their independence which is deliberated by the Remuneration and Nomination Committee.
Upon our review it was noted that the two-third independent requirement in the Code was not complied, and measures were immediately initiated to mitigate the same. Accordingly, Mr Amirthanayagam resigned from the position of Director of the Company’s Subsidiary, Lankan Alliance Finance Limited Bangladesh, increasing the number of Independent Directors to four (4). In addition the Board appointed Senior Independent Director monitors all Board proceedings to ensure no conflicts
The Board considers the following Directors as Non-Independent Directors of the Company having taken into account the views of the Remuneration and Nomination Committee.
|Name of the Director||Reason for Non-independency|
|Mr Hemasiri Fernando||Director of Parent of the Group, People’s Bank Chairman of Subsidiary of the Company – People’s Leasing Havelock Properties Limited, Director of the Company’s Subsidiaries – People’s Leasing Property Development Limited, People’s Leasing Fleet Management Limited and Lankan Alliance Finance Limited, Bangladesh.|
|Mr Jehan Prasanna Amaratunga||Chairman of Subsidiary of the Company, People’s Insurance PLC and Director of Company’s subsidiaries, People’s Micro Commerce Ltd. and Lankan Alliance Finance Limited, Bangladesh.|
|Mr Goluhewage Bindu Rasitha Poojitha Gunawardana||Employed as CEO/GM of Parent of the Group, People’s Bank. Further serves as a Director of subsidiaries of the Company, People’s Leasing Fleet Management Ltd. and Lankan Alliance Finance Limited, Bangladesh.|
|Mr Johnson Anthony Fernando||Director of Subsidiary of the Company, Lankan Alliance Finance Limited, Bangladesh|
All other Directors are deemed to be Independent Directors.
The Board has delegated certain functions to various Board subcommittees, such as –
Each of the Board subcommittees has its own Terms of Reference and the actions of which are reported and monitored by the Board. All Directors exercise due diligence and independent judgement and make decisions objectively in the best interest
of the Company.
|Board subcommittees||Board Audit
|Related Party Transactions
|Chairman||J P Amaratunga||M P Amirthanayagam||J P Amaratunga||M P Amirthanayagam|
|Members||M P Amirthanayagam||G B R P Gunawardana||M P Amirthanayagam||J A Fernando|
|M A M Rizwan||M A M Rizwan A S Ibrahim Sanjeewa Bandaranayake Lionel Fernando Rohan Tennakon||J A Fernando||M A M Rizwan|
|Secretary||U Gunawardena||A I Samarasinghe||K G L D Kottegoda||K G L D Kottegoda|
|Scope||Monitors the integrity of the financial information, ensures the compliance with the financial reporting requirements and reviews the Company’s internal controls and risk management systems.||Assesses and monitors risk profile of the Company and ensures that risk profile is maintained at a manageable level.||Recommends to the Board on the matters relating to remuneration of the Executive Directors and provides advice on appointment of members to the Board and the composition of the Board.||Monitors the related party transactions of the Company and ensures that a “more favourable treatment than that accorded to third parties” is not accorded to such related parties.|
|Reference to committee report||Reference to Board Audit Committee||Reference to Integrated Risk Management Committee||Reference to Remuneration and Nomination Committee||Reference to Related Party Transactions Review Committee|
Board meetings are held on a monthly basis as well as when a significant deliberation requires Board approval. There were thirteen (13) Board meetings during the year and the Board ensured that a wide array of items including strategy, finance, risk, governance and compliance were discussed during meetings to assist the executive management to effectively execute the Company strategy.
In order to maximise the effectiveness of meetings and obtain the fullest commitment of Board members at meetings, the following steps are being adopted in connection with Company meetings:
|Preparation prior to the meeting||During the meeting|
It is pivotal to ensure the flow of complete, adequate and timely information to the Directors to facilitate effective discharge of their duties and responsibilities.
Board and Board committee papers are distributed in advance of meetings to allow sufficient time for preparation for meetings. In addition to these documents, additional information requested by the Directors is promptly furnished.
Management forwards various proposals to the Board and those are submitted with the background, facts, risk analysis and mitigating strategies, financial impact, regulatory implications, and expected outcomes to obtain Board approval.
Employees who could provide valuable insights into matters taken up for discussion are also invited to attend Board and Board committee meetings.
The Board is updated on a monthly basis of the Company’s performance, with specific emphasis on recoveries, as well as on market insights biannually to keep Directors abreast the Company’s performance.
The Board deliberated on numerous aspects pertaining to strategy, performance, governance, finance, and operations during the year. The time spent on such deliberations is illustrated below:
Special matters discussed by the Board during its meetings are as follows:
The Board meets once a month and ad hoc meetings are also convened to deliberate on urgent substantive matters.
The number of Board meetings and Board committees held during the year as well as attendance of each member at those meetings are disclosed below:
|Name of Director||Board meetings||Board Audit Committee meetings||Integrated Risk Management Committee meetings||Remuneration and Nomination Committee meetings||Related Party Transactions Review Committee meetings|
|Michael Pradeep Amirthanayagam||13/13||10/10||4/4||6/6||4/4|
|Jehan Prasanna Amaratunga||11/13||10/10||–||5/6||–|
|Johnson Anthony Fernando||12/13||–||–||5/6||3/4|
|Mohamed Anise Mohamed Rizwan||13/13||10/10||4/4||–||3/4|
|Goluhewage Bindu Rasitha Poojitha Gunawardana||13/13||–||4/4||–||–|
|R M Jayasena||2/2||–||–||–||–|
|Ali Asgar Shabbir Gulamhusein||3/6||–||–||–||–|
|Dr Kennedy Degaulle Gunawardana||6/7||–||–||–||–|
|Namugoda Wijesinghe Attapattu Mudiyanselage Udawatte Keerthi Kumara Edward Weerasinghe||7/7||–||–||–||–|
The Remuneration and Nomination Committee assesses the effectiveness of the Board as a whole as well as each individual Director in the Board on an annual basis. The three components to this assessment include –
2. Board assessment and;
3. Peer evaluations.
The Remuneration and Nomination Committee has established a set of performance criteria for the Board and each individual Director to assess the performance.
|Board performance criteria||Individual Director performance criteria|
Size and composition
Information and accountability
Discharge of principal activities
Achievement of financial KPIs
Active participation and coherence with other Directors
Industry and business knowledge
Contribution to the Board committees and effective discharge of responsibilities as a Director
Availability of Director for meetings when warranted
Overall performance of the Director
The Chairman and the Deputy Chairman review the individual Directors self- assessment vis-à-vis the previous year’s results and highlight any corrective action for gaps identified. The periodical review of the Board and its members helps in maintaining the effectiveness of the Board on a continuous basis.
The process of self-evaluation of the Board carried out in 2018/19 was led by the Chairman and supported by the Company Secretary. The full results of the Board evaluations were then analysed and presented to the Board in June 2019, which duly affirmed that the Board and its committees operated effectively during the year under review.
The Board, in consultation with the CEO, sets reasonable financial and non-financial targets in line with short, medium, and strategic objectives of the Company to be achieved by the CEO on an annual basis. As the apex Executive, the CEO is responsible for the entire Company’s operations and achievement of set targets. The performance of the CEO is reviewed at the end of the financial year against the set targets as well as in the backdrop of the operating environment and discussed by the Chairman with the CEO prior to forwarding for Board approval.
Succession planning is a key element of the Governance process. The Remuneration and Nomination Committee seeks to refresh the Board membership progressively and in an orderly manner. The Remuneration and Nomination Committee reviews the succession and leadership development plans for the Board and development plans are instituted for the identified successors.GRI 102-35 GRI 102-36 GRI 102-37
The Remuneration and Nomination Committee is accountable to set up a transparent procedure for developing policies on Directors’ remuneration.
The Board as a whole determines the remuneration of Non-Executive Directors including members of the Remuneration and Nomination Committee.
The remuneration of Executive Directors is determined upon consulting the Chairman and/or CEO on their performance. The Company has no Executive Directors on the Board and hence there was no necessity to consult the Chairman/CEO
in determining their pay.
The Remuneration and Nomination Committee when deemed necessary seeks advice from external remuneration consultants in framing the remuneration policy and determining the level and mix of remuneration.
None of the members of the Remuneration and Nomination Committee or any Director is involved in deliberations pertaining to remuneration payable to them.
In recommending the level and mix of remuneration, the Remuneration and Nomination Committee seeks to establish a framework to attract, retain and motivate Directors. Such pay that is commensurate with market rates is essential in attracting quality personnel needed to drive the long-term success of the Company. The remuneration structure is reviewed frequently to ensure alignment with market rates.
The Non-Executive Directors receive a fee for attending meetings of the Board and Board subcommittees. Such fees paid are neither performance related nor pensionable.
Nevertheless, the performance-related component of the CEO’s remuneration is linked to the achievement of predefined targets.
For further details on composition of Remuneration and Nomination Committee and rewarding methodology adopted, kindly refer the Remuneration and Nomination Committee Report on page 204.
Directors have separate and independent access to the Company Secretary. The key roles of the Company Secretary include –
The appointment and removal of the Company Secretary are subject to Board approval.GRI 102-19 GRI 102-20
In addition to Board committees, several other executive level committees focused on different aspects have been established under the delegated authority of the CEO/GM of the Company in order to facilitate execution of Board-approved strategies. Each committee has its own Terms of Reference and follows a structured process. The proceedings of such meetings are communicated to the CEO/GM on a regular basis.
|Executive level committee||Scope|
|Group Management Committee||Reviews the performance of the Group, implements strategies to optimise the benefits of Group synergies, and reports critical issues and recommends remedial action to the Boards of respective Group companies|
|Senior Management Committee||Reviews business strategy and overall policy matters impacting the Company, and communicate critical issues to the Board through the CEO with recommended corrective actions|
|Asset and Liability Committee||Reviews and assesses the liquidity position of the Group and the Company, analyses the product portfolio with the current market sentiments, and reports decisions and critical issues with recommended remedial action to the Integrated Risk Management Committee|
|Branch Credit Committee||Evaluates the credit disbursements at branch level and all credit proposals exceeding branch authority level, reporting to the Operation Department at the Head Office|
|Tender Review Committee||Reviews and manages the tender award process and reports critical issues with recommended remedial action to the Senior Management Committee|
|Integrated Risk Management Operating Committee||Reviews the risk governance structure of the Group and reports to the Integrated Risk Management Committee|
|Sustainability Governance Steering Committee||Reviews sustainability performance in terms of economic, environmental, and social aspects and recommends and reports strategic sustainability initiatives to the Board through the CEO|
The Company recognises the importance of maintaining transparency and effective engagement with its shareholders. The Board ensures that shareholders are treated equally including non-controlling shareholders.
The Company focuses on facilitating effective communication with shareholders and attending to their queries and concerns using various modes:
Shareholders are encouraged to raise their queries and concerns with the Board by contacting the Company Secretary through the channels specified in page 186 of the Annual Report.GRI 102-21
The Company is committed to providing shareholders accurate, adequate and timely information and encourages active shareholder participation. Shareholders are able to proactively engage in discussions on performance and Company related matters at the AGM.
Notices to AGMs are posted to shareholders individually fifteen (15) working days prior to the date of the AGM. Such notice outlines the nature of business at the Meeting and resolutions to be passed enabling shareholders to form a reasonable judgement.
The Articles of Association of the Company allows shareholders to appoint proxies when they are unable to attend the Meeting in person, and the appointed proxy has the same voting right as the shareholder. To be effective the Proxy Form is expected to be filled and handed over to the Company, forty-eight (48) hours prior to commencing the Meeting.
A separate resolution is passed for each materially substantial matter and is adopted when a majority of shareholders vote in favour of the same.
The most recent AGM was the 22nd AGM of the Company held on 29 June 2018 at the People’s Bank Staff Training College Auditorium, Colombo 10.
Matters discussed at the AGM took a performance, financial, shareholder and wider stakeholder perspective:
Sustainability drives the strategy and operations of the Company using a pragmatic and profound approach. Sustainability is not simply about being ethical. It often combines short-term gains with longer-term benefits to generate new sources of revenue and enhance Company performance and reputation. It identifies that social, environmental, and economic drivers influence the success of an organisation.
We have recognised sustainability as a strategic issue which helps in creating value across several dimensions including revenue generation, cost reduction, risk management and long-term value creation. Hence, we integrate sustainability into our business strategies to realise the full potential. Drivers are set and performance is measured using a robust sustainability performance management system.
A Sustainability Governance Steering Committee has been established, comprising the executive management team of the Company, which reviews sustainability performance in terms of economic, environmental and social aspects, and recommends and reports strategic sustainability initiatives to the Board through the CEO.
GRI 102-29 GRI 102-30 GRI 102-31
People’s Leasing recognises the importance of the long-term value of strategic and transparent ESG practices, to its investors and stakeholders. ESG information is considered more relevant and useful to investors in assessing the financial prospects and operational performance of the Company than traditional accounting practices. ESG creates an impact upon a host of vital business drivers including cost saving and productivity, risk management, revenue growth and market access, brand value and reputation, employee recruitment and retention, and human capital management.
The Company uses various tools across the three categories, environmental, social, and governance to track and disclose its sustainability performance.
|Environment (E)||Social (S)||Governance (G)|
Cybersecurity is an emerging risk faced by many organisations having a high probability and impact which could compromise systems, steal data and other valuable company information, and damage the Company reputation.
Cybersecurity consists of technologies, processes and measures that are designed to protect the Company and its assets from cybercrimes. Effective cybersecurity reduces the risk of a cyberattack through the deliberate exploitation of systems, networks and technologies. The Company considers cybersecurity as a main component of its Information Security Management System (ISMS) which built on three pillars; people, processes and technology.