CHARTER OF THE BOARD OF COMMISSIONERS
PT Indo Tambangraya Megah Tbk ( ITM ) is a leading Indonesian coal and energy provider with sustainable value creation along the value chain and publicly listed at the Indonesia Stock Exchange (IDX), which is obliged to comply with all related laws and regulations prevail to its status and business. Compliance is essential for ITM in the accomplishment of its vision and mission. Furthermore ITM also upholds the principles and rules of Good Corporate Governance (“GCG”) namely transparency, accountability, responsibility, independency and fairness and promotes best governance practices while managing its operation in the interest of shareholders and wider stakeholders. In performing its supervisory role vis a vis the Board of Directors (BOD) and to facilitate its works in fulfillment of its fiduciary duties, the Board of Commissioners (BOC) needs to have a general guidelines named as “the Charter of the Board of Commissioners” (hereinafter referred to as “BOC Charter”). The above mentioned guidelines shall be the reference for the Board Members in executing its responsibility, authority and in acting consistently for the advancement of the Company and the interest of all stakeholders as well as in evaluating the performance of committees under BOC. The first BOC Charter has been in effect since August 2009. Recognizing developments in the company’s GCG, adoption of SDG and new capital market regulations, the Charter is hereby amended.
2. Vision and Mission
A value-enhancing supervisory organ, acting on behalf of shareholders and wider legitimate stakeholders to oversee and keep the BOD’s individual and collective leadership and managerial actions in line with prevailing Indonesian laws and international agreements of which Indonesia is a party, principles and rules of good corporate governance and sustainable development as well as observed ethical norms.
The BOC acts collectively. It taps professional expertise through various committees with a view to maximizing its mastery of information about the business, leadership and management of ITM. The BOC observes transparency, accountability, responsibility, independency and fairness in its works. It bases its relationship with the BOD on mutual respect as stipulated in the Company Law and the Capital Market Law.
This Charter stipulates the rules and guidelines for the BOC in designing and executing its supervisory duties, responsibility and authority objectively and effectively, observant of the Company’s values and in compliance with the principles and rules of good corporate governance. The Charter also serves as the basis for the performance evaluation of the BOC and each of its members as well as performance evaluation of each Committee under BOC.
ESTABLISHMENT, ORGANIZATION AND TERM OF OFFICE
- Company Law
- Mining and relevant Laws
- Capital Market Law and Regulations
- Indonesia Stock Exchange Rule and Regulations
- Indonesia’s Code of Good Corporate Governance
- Company’s Articles of Association
- Company’s GCG Policy
- OECD on Good Corporate Governance
- Social Responsibility Framework
- Sustainable Development Goals
- ASEAN CG Scorecard
The members of the BOC are appointed and dismissed by the General Meeting of Shareholders. The process of evaluation and selection of candidates shall be carried out by the Sustainable Development, Good Corporate Governance, Nomination and Compensation Committee (SDGNCC). The Company establishes and maintains a balanced BOC membership in terms of professional backgrounds and gender composition.
22.214.171.124. The BOC shall consist of at least 2 (two) members. One member serves as President Commissioner while the rest serves as ordinary members of the BOC;
126.96.36.199. The number of and composition of Commissioners shall enable the BOC to make decision in an effective, timely and independent manner. The Company aims at a BOC membership that consists of at least 1/3 (one third) Independent Commissioner;
188.8.131.52. The President Commissioner position shall be taken up by an Independent Commissioner;
184.108.40.206. The Chairman of the Company should not serve as Chairman in any other company including the Company’s subsidiaries
2.2.2. Multiple and Mobility of Membership
220.127.116.11 Member of the BOC can hold multiple membership as follows :
- as Director in not more than 2 (two) other publicly listed companies, and
- as Commissioner in not more than 2 (two) other publicly listed companies
18.104.22.168 A BOC member who does not serve directorship position in any other publicly listed company can serve as Commissioner in up to 4 (four) other publicly listed companies;
22.214.171.124 A BOC member can serve in up to 5 (five) publicly listed companies as committee member under the BOC of the respective companies;
126.96.36.199 To be eligible as Chairman of the BOC, a retirement transition of 6 (six) months is needed for President Director;
188.8.131.52 To be eligible as Independent Commissioner, a retirement transition of 6 (six) months is needed for affiliated commissioners or directors;
184.108.40.206 After 2 (two) terms of service or 9 (nine) years whichever is longer an independent commissioner can only continue to serve as independent commissioner after submission of a written statement on independency ;
220.127.116.11 A director or commissioner of subsidiary is eligible for commissioner position at the Company.
2.2.3 Membership Requirements
Members of the BOC are expected to bring professional supervisory expertise and know-how to the BOC and shall be prepared to do their utmost while performing their duties, responsibility and authority.
18.104.22.168 General Requirements
In addition to below requirements, those to be appointed as member of the BOC shall meet the basic requirements as stated in the capital market regulations.
22.214.171.124.1. Each Commissioner shall have a high professional, and ethical standards, field experience as well as high mastery of expertise, skills and competencies that are of relevance to the business of the company;
126.96.36.199.2. Each Commissioner shall have a good understanding and commitment to abide with the company law, capital market law and related regulations, the Company’s articles of association and all regulations that prevail in the Company;
188.8.131.52.3. Each Commissioner shall have a good understanding of best practices of GCG and social responsibility and is committed to adhere to them.
184.108.40.206 Independence Requirements
The BOC as an organ of the company shall function and be responsible collectively while overseeing and providing advices to the BOD. At least one of the Independent Commissioners shall have accounting or finance background. The Independent Commissioner(s) shall fulfill the following requirements:
220.127.116.11.1. They do not have any affiliate relation with the controlling shareholders;
18.104.22.168.2. They do not have family affiliations with the other members of the BOC and those of the BOD either horizontally or vertically ;
22.214.171.124.3. They do not occupy any position as a member of the BOC or the BOD in any companies that are affiliated with the Company;
126.96.36.199.4. They do not act as an agent to protect the interest of the company’s directors or commissioners, major shareholders or other shareholders who are related to the company majority shareholders;
188.8.131.52.5. They are able to perform duty, express opinions and report on their works and performance as designated by the BOC independent of the control and influence of the company’s major shareholder or persons related to them, including their closed relatives;
184.108.40.206.6. Members of the BOC shall demonstrate independence and autonomy while performing their supervisory duties, responsibility and authority independently;
220.127.116.11.7. They do not have business relationship either directly or indirectly with the Company’s business;
18.104.22.168.8. They are not a person who works with or have authority and responsibility to plan, lead, control or supervise the Company’s activities within the last 6 (six) months except for the purpose of reappointment as Independent Commissioner in the Company for the next period.
2.3 Term of Office
2.3.1 Each member of the BOC shall be appointed and dismissed by the General Meeting of Shareholders (GMS). Such appointment shall be effective as of the date determined in the GMS and shall cease at the closing of the 3 rd (third) Annual General Meeting of Shareholders (AGMS) after the date of appointment, without prejudice to the right of the GMS to dismiss Commissioner at any time by stating the reasons for the dismissal and having given a fair chance for defense to the Commissioner under dismissal;
2.3.2 The member of the Board of Commissioners whose office term has come to an end may be nominated for reappointment;
2.3.3 Notwithstanding the provision in 2.3.3. an Independent Commissioner can only serve Audit Committee position for not more than 2 terms;
2.3.4 Each Commissioner may resign from the post by submitting a letter of resignation and the resignation comes into force once it is accepted by the General Meeting of Shareholders. The resigning member may be held accountable for her or his works as member of the BOC from the appointment date to the resignation date;
2.3.5 The term of office for the successor who is appointed to replace a resigned or dismissed member of the BOC shall be limited to the remaining office term of the replaced member, unless otherwise determined by the GMS;
2.3.6 Commissioner shall retire when he or she reaches the age of 72 and such retirement shall be effective on the date of the following AGMS;
2.3.7 The office term of a member of Commissioners shall automatically cease under the conditions of :
22.214.171.124 Expiry of the term of office
126.96.36.199 Non-fulfillment of statutory requirements
188.8.131.52 Dismissal by virtue of a resolution of GMS
184.108.40.206 Bankrupt or guardianship by virtue of a court verdict
DUTY, RESPONSIBILITY AND AUTHORITY
3.1 Duties and Responsibilities
Supervising and providing advices to the Board of Directors are the main function of the BOC in both toward the policies and the operations of Company. In carrying out its duties, the BOC has the right to establish appropriate committees to assist the board in reviewing and making informed recommendations to the BOD. Through such supervision the BOC ensures that the BOD strictly complies with the Company Articles of Association, resolutions of shareholders’ meeting, related laws and regulations and acts in good faith with a view to maximizing the company’s value to shareholders and stakeholders. The BOC requires new members to attend an orientation session to learn about the company’s expectation from their roles, duties and responsibilities and what its corporate governance policy and practices are. The orientation will also help them understand the company’s business better as well as provide a chance to visit the company’s operations as a preparation for their tasks.
The BOC has a policy to provide directorship education about good corporate governance, industrial outlooks, business prospects and innovations where it urges commissioner to attend seminar or coursework organized by the Indonesian Institute for Corporate Directorship or other similar and reputable institutes to promote effective board performances. In certain condition, BOC have to convene AGMS or other EGMS in accordance with their authority as stipulated in the company’s AoA and relevant regulations.
BOC is entitled to take over the authority and responsibility of BOD just in case all of BOD members are engaging in a conflict of interest case with the Company. BOC is entitled to temporarily terminate BOD members and such of action shall need disclosure and have to be confirmed by the GMS as regulated in the Company’s AoA and shall also comply with the capital market regulation.
3.1.1 Scope of Work
In addition to any action taken as required by the laws, the Company’s AoA and the resolutions of the shareholders’ meeting, the BOC hereby stipulates that the consideration, acknowledgement and approval of the following matters shall be vested under the authority, duty and responsibility of the BOC in relation to its monitoring and supervisory roles :
220.127.116.11 the company’s policies, business strategies, business plans and annual budget;
18.104.22.168 the company’s monthly and quarterly performance and operation report in which performance is compared with the plan, budget and business outlook of the following period of the budget year;
22.214.171.124 the Company’s investment in a project worth more than IDR 150 billion;
126.96.36.199 Investment which exceeds 10 percent of the total investment budget of an approved project, and which exceeds 10 percent of the total non project investment budget;
188.8.131.52 transaction or act which materially affects the company’s financial status, liabilities, business strategy and reputation;
184.108.40.206 purchase and disposal of assets, acquisition of business and participation in a joint venture project which are not in conflict with the rules and regulations of the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX);
220.127.116.11 entering into a contract not relating to a normal course of business of the company and any contract relating to normal course of business of the company that is material;
18.104.22.168 parts of a connected transactions between the company, its parent company, subsidiaries, associated companies and related individuals according to the capital market regulations;
22.214.171.124 any transaction which causes the ratio of company’s debt-to equity ratio to exceeds 2 : 1;
126.96.36.199 distribution of interim dividend;
188.8.131.52 net borrowing that exceeds a maximum amount of IDR 30 billion subject to annual review;
184.108.40.206 changes in policy and practices with material implications to accounting, risk management and financial reserves
220.127.116.11 significant changes relating to management and financial control system;
18.104.22.168 determination and review of approval authority granted to the executives;
22.214.171.124 approval of salary increment budget and bonus or bonus formula or annual remuneration package adjustment formula of the board and committee members, executives and employees;
126.96.36.199 nomination, appointment, recruitment and termination of directors, Head of Internal Audit and Corporate Secretary and the secretary of the BOC and its committees;
188.8.131.52 appointment and determination of authority of the sub committees;
184.108.40.206 establishing and supervising the management in accordance with the good corporate governance policy and practices;
220.127.116.11 appointment of directors or executives to be directors of subsidiaries and associated companies;
18.104.22.168 registration of new companies and dissolution of companies;
22.214.171.124 duty to keep corporate information strictly confidential especially internal information not to be disclosed to the public or information that may affect its business or share price;
126.96.36.199 amendment to the scope of approval authority of the BOC as stated in item 1- 20 above
3.1.2 Succession Plan
The BOC with the assistance of the SDGNCC in cooperation with Corporate Secretary and HR Head prepares succession plan for the BOD and BOC members to ensure continuity and sustainability of the Company. The succession plan includes assessment approach, leadership and managerial training and development programs and incubation and facilitation program.
To assist the BOC in exercising its oversight and advisory roles the BOC establishes committees in accordance with prevailing laws and the Company’s policies. The committees include Audit and Risk Oversight Committee and Committee on Sustainable Development, GCG, Nomination, and Compensation. Board committee establishment shall be based on the BOC Decree.
The BOC shall appoint their members to serve in that committee. The qualifications of selected commissioners shall be appropriate for the duties of each committee and each committee shall be chaired by independent commissioner unless there is no such independent commissioner. The term of office of a committee member shall be three years and can be renewed by the BOC and shall be stipulated in relevant committee’s charter.
Each board committee shall perform its duties as assigned by the BOC. Management shall attend the board committee meetings on invitation to submit reports or to provide information. Board committees shall have the right to engage external experts at the company’s expenses.
Each committee shall have their own Charter as their working guideline. They shall submit their working reports to the BOC as well as every proposal and recommendation.
3.1.4 Nomination of the members of the BOC
The SDGNCC shall recommend to the BOC the nomination criteria and search for the candidates with appropriate qualifications. It also nominates the candidates to the BOC to replace the retiring Commissioners or to fill any other vacancy. The BOC chooses a candidate that fits with the Company’s needs the most and propose her or him to the General Meeting of Shareholders for appointment.
3.1.5 Relationship between BOC and BOD
188.8.131.52. The BOC may invite Directors and or executives of the company to attend its meeting with the purpose of supplying the BOC with best possible information pertaining to areas for which the invited directors or executives are responsible. Such mechanism aids the BOC to make an informed decision. The invited directors and or executives are thereby able to gain a better understanding of the businesses and issues that are deemed important by the BOC. To forge a mutual understanding and respect between the BOC and the BOD to the advantage of the Company’s shareholders and stakeholders the BOC shall convene a joint meeting of the BOC and the BOD at least once a year. In addition, members of the BOC may directly communicate with individual executives without interfering with the management’s day-to-day operation.
184.108.40.206 The BOC and the BOD shall jointly signed the company’s Annual Report.
220.127.116.11 Each member of the BOD is obliged to provide to the BOC any material information so required by the BOC. Minutes of the BOD meetings shall also be made available if the BOC considers them of importance to its supervisory works.
3.1.6 Business Ethics
The BOC and its individual members shall serve as a good role model in fostering the observance of the following basic ethical standards for the whole members of the organization; A BOC member is not eligible for loan programs of the Company;
Each BOC member is obliged to disclose their shareholdings of the company’s shares either direct or indirect through relatives and nominees;
Each member of the BOC declares through the Company’s Transparency Center any intents to get involved in any transactions or business contracts with the Company with a view to avoiding her or his involvement in the decision on the respective transactions or business contracts;
18.104.22.168 Insider Information
The BOC members protect the Company’s proprietary material information and shall not engage in insider trading
The BOC members shall keep classified corporate information strictly confidential, especially internal information that may affect the business of the company or its share price
22.214.171.124 Trading Rule
The BOC members shall refrain from trading the company’s shares no fewer than 30 days prior to the information disclosure to the public if that information is a report based on an accounting period such as an operating result, financial statements and an annual report;
In case the information is a report of corporate action in a particular situation such as acquisition / disposal of assets, connected transaction, joint venture /cancellation of joint venture, capital increase/ capital reduction, issuance of new securities, repurchase of own shares, payment or non payment of dividend or incidents that affect the company’s share price, in such cases, the BOC members shall refrain from trading the company’s shares from the period he / she learns of the information to the day the company discloses the information to public;
Any BOC members is required to report their dealings in company’s shares within 3 business days after such of trading.
126.96.36.199 Anti – corruption
The BOC members shall refrain and be prohibited from receiving gratification or take personal benefits from the company’s business relations with third parties.
In performing its supervisory role, the BOC shall submit its accountability report on its supervisory works vis-à-vis the BOD as regards the latter’s conduct of the management of the company. The Report of the BOC shall be reflected in the approval of Annual Report and ratification of the company’s financial statement by the General Meeting of Shareholders.
The General Meeting of Shareholders approval to the Annual Report and ratification on the Financial Statement of the company shall release and discharge the BOC members as long as it has been reflected in the annual report without minimizing the responsibility of each member of the BOC in the event that a crime, mistake or negligence occurs causing damage to any third parties which cannot be indemnified by the company’s assets.
3.1.8 Performance Evaluation
The BOC shall assess its performance annually, as board as well as individual commissioners. In addition to self-assessment, a separate assessment is to be conducted by the SDGNCC, the results of which are reported to the BOC The SDGNCC shall recommend to the BOC the criteria for assessing the annual performance of the Commissioners. The general guidelines of the BOC performance individually and collectively shall consider the following elements :
188.8.131.52 strategic direction setting
184.108.40.206 breath and depth of the high level policies
220.127.116.11 effectiveness in monitoring and supervising the BOD.
18.104.22.168 success in integrating the interests of stakeholders in the Company’s strategic and functional management and in supervising compliance of the Company with regulatory system
22.214.171.124 effectiveness of the board structure
126.96.36.199 record of attendance in both the Board of Commissioners and the Committees meeting whenever applicable
188.8.131.52 integrity and refrain from engaging in activities that are in conflict with the company’s interests.
184.108.40.206 knowledge, understanding, commitment and ability to observe the company’s values, vision, mission, long term plan
220.127.116.11 capability in expressing his/her independent argumentations and opinion in providing solutions to the company’s strategic issues
18.104.22.168 Remuneration for the BOC as a group shall be approved by the General Meeting of Shareholders with distribution among individual members left to be decided by the President Commissioner;
22.214.171.124. Remuneration package for the BOC members shall be based on up-to-date survey on market condition. It is proposed by the Compensation Committee to the BOC for final decision. The package is reviewed on a periodic basis by the Compensation Committee;
126.96.36.199. The formula for remuneration for each member of the BOC shall not refer to a specific assignment or company’s performance.
3.2 Authority and Delegation of Authority
3.2.1. In accordance with the Company’s AoA , the BOC shall have the authority to approve certain legal actions taken by the BOC;
3.2.2. The BOC may hire external expert consultants to provide advice with regard to the functioning of the BOC and the committees at the company expenses;
3.2.3. Each member of the BOC shall individually or jointly be entitled to enter buildings, offices and yards used by the Company during the office hours and shall be entitled to examine the books and documents and assets of the Company;
3.2.4. At any time the BOC may, under a resolution of the Meeting of the BOC, suspend one or more member(s) of the BOD from his(their) post(s) if he/they have acted in a way contrary to the Company AoA and/or in contravention of applicable laws and regulations; reasons for such suspension shall be stated explicitly in accordance with prevailing Law;
3.2.5. If all the members of the BOD are suspended or if for any cause no member of the BOD is available, then the BOC shall grant authority to one or more member(s) of the BOC to temporarily manage the Company and to act for and on behalf of and to represent the Company;
3.2.6. The BOC might also have other authorities as set out in the Delegation of Authority table.
MEETING, REPORTING AND BUDGET
4.1.1. The BOC shall convene its Meeting at least once for every 2 months. Such meeting shall valid if it is attended by majority of the BOC members;
4.1.2. The BOC is also oblige to convene joint meeting with BOD at least once for every 4 months;
4.1.3. By the end of a calendar year, the BOC sets a meeting schedule for the following calendar year;
4.1.4. The meeting material for such of scheduled meeting shall be distributed to the meeting participants at the latest 5 (five) working days prior to the meeting date. For an unscheduled meeting, the meeting material may be distributed just prior to the meeting;
4.1.5. President Commissioner shall chair the meetings of the BOC.
4.1.6. In the absence or inability of President Commissioner to attend a meeting of the BOC, of which case it is unnecessary to give evidence to third parties, a member of the BOC elected by and from the members of the BOC being present at the Meeting may chair the Meeting of the BOC;
4.1.7. A member of the BOC may be represented in the Meeting of the BOC only by another member of the BOC under a power of attorney;
4.1.8. A meeting of the BOC shall be legal and entitled to make binding resolutions if more than 1/2 (one half) of the number of members of the BOC are present or represented at the meeting;
4.1.9. Resolutions of the Meeting of the BOC shall be made based on deliberations for a consensus. If consensus is not achieved resolutions shall be made by the majority;
4.1.10. Minutes of meeting of the BOC and Joint BOC and BOD Meeting shall be signed by participating members;
4.1.11.The BOC may also make legal, binding decisions without having to convene a meeting of the BOC, on condition that all the members of the BOC have been notified in writing of the relevant proposal and that all the members of the BOC give approval to the proposal put forward in writing and sign such approval. Resolutions so made in such a procedure shall have the same force as those made legally at the meeting of the BOC.
Report of the BOC activities and the company performance for every fiscal year shall be reflected in the company’s Annual Report and propose to the AGMS for approval and ratification
BOC sets its annual work plan and budget, including budget for committees and professional expenses for expert/consultant by end of September of the calendar year.
5.1 Validity and Evaluation
5.1.1. This Amendment of BOC Charter takes effect on the date stated below to replace the first BOC Charter which was established in August 2009
5.1.2. This BOC Charter shall be reviewed on a periodic basis with a view to aligning it with developments in capital market laws and regulations, as well as in GCG and social responsibilities in general.
Approved by the Board of Commissioners of PT Indo Tambangraya Megah Tbk on 7 December 2015