REVISED MANUAL ON CORPORATE GOVERNANCE OF EMPIRE INSURANCE COMPANY
The Board of Directors and Management, i.e. officers and staff, of EMPIRE INSURANCE COMPANY hereby commit themselves to the principles and best practices contained in this Revised Manual, and acknowledge that the same may guide in the attainment of our corporate goals.
This Revised Manual shall institutionalize the principles of good corporate governance in the entire organization. The primary objective is to enhance its corporate accountability and promote the interests of its stakeholders specifically those of the policyholders, claimants and creditors.
The Board of Directors and Management, employees and shareholders, believe that corporate governance is a necessary component of what constitutes sound strategic business management and will therefore undertake every effort necessary to create awareness within the organization as soon as possible.
C. BOARD OF DIRECTORS
The Board of Directors shall be composed of nine (9) members elected by the shareholders.
The Corporation shall ensure that there is at least one (1) independent director in the Board.
The Board shall endeavour to include a balance of executive and non-executive directors, such that no individual or small group of individuals can dominate the Board’s decision making.
The non-executive directors shall be of sufficient qualifications and stature. Non-executive independent directors shall be identified in the annual report.
Directors sitting on its Board shall be possessed of the necessary skills, competence and experience, in terms of management capabilities, and preferably in the field of insurance or insurance-related disciplines. In view of the fiduciary nature of insurance obligations, directors shall also be persons of integrity and credibility.
The stockholders shall elect the Board of Directors.
Each director shall represent all shareholders and shall be in a position to participate independently and objectively.
The corporation shall provide for an adequate orientation process for new directors.
The Board shall assess the adequacy of director development and education for individual directors and for the Board as a team.
Considering that the insurance business is imbued with public interest, the roles of Chairman and Chief Executive Officer shall as a general rule not be combined to ensure a balance of power and authority such that no one person has unfettered decision-making powers. Accordingly, the Chairman of the Board should be a non-executive director.
The Board shall consider guidelines on the number of directorships for its members. Such guidelines may be subject to exceptions in a few cases. In general, however, the CEO and other executive directors shall submit themselves to a low indicative limit (four or lower) on membership in other corporate boards. There can be a higher indicative limit (five or lower) for other directors who hold non-executive positions in any corporation.
An independent director shall be on who has not been an officer or employee of the corporation for the last three (3) years immediately preceding his term or incumbency;
He or she is not related by consanguinity or affinity to an officer in a senior management position of the corporation;
He or she does not provide services, and receives no significant income for other professional services to the corporation.
D. MISSION & RESPONSIBILITY OF THE BOARD OF DIRECTORS
E. BOARD AUTHORITY
The Board shall formally establish and adopt a schedule of matters and authorities specifically reserved for its decision as a safeguard against the risk of misjudgement or deliberate illegal or irregular practices.
The schedule shall include the following matters:
F. BOARD COMMITTEES
An Executive Committee can act in behalf of the full Board on matters defined by the Board, and submitted by management for action, when the Board cannot meet.
An Investment Committee shall be made up of at least three (3) directors. It is charged with responsibility for advising the Board on placement of the Company’s funds in any marketable securities and/or financial institutions for investment purposes.
An Audit Committee shall include at least one (1) independent director who shall be free to hire independent advisers when necessary. Its main responsibilities include: recommend the appointment of external auditors, whose report they review; monitor the system of internal controls and corporate compliance with laws, regulations and code of ethics; serve as direct channel of communication to the Board for the internal auditors and compliance officer(s).
The Board may constitute a Governance Committee to advise the Board on corporate governance matters. It may serve as the mother committee for the compensation sub-committee (to ensure that there is in place a system of compensation providing performance-incentives to management); the monitoring and performance evaluation sub-committee (to perform board and senior management evaluation).
G. CORPORATE INDEPENDENCE
Corporate independence shall as much as possible be maintained so as not to compromise the interests of policyholders, claimants, creditors and minority shareholders. Controlling or substantial interests shall be disclosed to the Board, and the latter shall ensure compliance with the provisions of Title 20 Chapter III of the Insurance Code on Holding Companies.
Overlapping interests in the insurance entity shall be disclosed to the Board and any material transaction involving such interests shall be similarly disclosed.
Related-party transactions shall be conducted on terms that are at least comparable to normal commercial terms in order to safeguard the best interests of the insurance corporation and its policyholders, creditors and claimants. In all cases, the provisions of Title 20, Chapter III of the Insurance Code shall be complied with.
Related-party transactions shall be disclosed fully to the Board. Prior Board approval shall be obtained for related-party transactions that are material in nature.
H. BOARD MEETINGS
The Board shall hold regular monthly meetings at the principal office of the Company on such day and time as the Board of Directors may decide. Special meetings of the Board may be called by the President or by written request of any two Directors.
Directors shall have the duty of rigorously preparing for board meetings, giving undivided attention and actively participating in meetings.
I. BOARD REMUNERATION
The Board shall set remuneration levels adequate to attract and retain qualified directors.
Remuneration for directors shall be competitive and take into account the duties and other commitments imposed upon them.
The Board may include a significant percentage of the remuneration package for directors to be in the form of stock ownership.
The Board may remunerate directors in the form of equity or cash.
Stock options and registered stock awards may be integrated with other elements of remuneration to ensure that the package for directors is competitive and appropriate for the responsibilities they discharge.
J. FINANCIAL REPORTING TRANSPARENCY AND INTERNAL CONTROL
The Board shall ensure timely and accurate disclosure on all material matters, including the financial condition, performance, ownership and governance of the corporation.
Fair, timely and cost-efficient access to relevant information shall be provided for all parties with a legitimate interest in the corporation. Key financial information should be readily and easily accessible to shareholders, policyholders, creditors and claimants.
The Board and senior management shall receive regular reports on all key aspects of the operations of the insurance corporation, which shall include an analysis of premium growth, underwriting performance, investment results, claims management and credit control, to provide a sound basis for assessing financial performance and condition, identifying real and potential problems and formulating appropriate policies and strategies.
The Board shall ensure faithful compliance with the financial and other reportorial requirements under the Insurance Code using a standard format to be provided by the Insurance Commission.
Disclosure shall include material information on the financial and operating results of the corporation.
It shall also include any material foreseeable risks for the corporation.
The Board shall assure that an effective system of controls is in place for safeguarding the corporation’s assets.
Major risks facing the corporation which are likely to affect the performance and financial condition of the corporation (including underwriting risk, reinsurance risks, investment risk, geographical risk, operational risk and legal risk) and the approach taken by management in dealing with these risks, shall be reported to the Board to enable the latter to effectively address said risks.
The Board shall ensure that reports accurately reflect the financial condition of the corporation and the results of corporate operations.
The Board shall regularly review the system for securing adherence to key internal policies as well as to significant laws and regulations that apply to it. An effective and comprehensive internal audit of the corporation’s internal control system shall be carried out by operationally independent and competent staff, and audit findings and recommendation reported to the Board and the senior management of the corporation.
One of the most important missions of the Board is to protect shareholder value through adequate financial controls. The Board shall foster and encourage a corporate environment of strong internal control, fiscal accountability, high ethical standards and compliance with the law and code of conduct.
K. PUBLIC ACCOUNTABILITY
As custodian of public funds, EMPIRE INSURANCE COMPANY shall ensure that its dealings with the public are always conducted in a fair, honest and equitable manner. Accordingly, its officers shall avoid conflict of interest and not engage in any unfair or deceptive acts or conduct that constitute unfair trade practices to the detriment of policyholders and claimants, including but not limited to:
L. RESPONSIBILITY FOR GOOD GOVERNANCE
Good corporate governance is the responsibility and concern, not only of the Board of Directors and management, but also of each and every employee of the corporation. The Board of Directors shall see to it that a system of rules and regulations is in place defining the duties and responsibilities of each and every officer and employee to accomplish this objective.
M. IMPLEMENTATION AND ENFORCEMENT
EMPIRE INSURANCE COMPANY shall strive towards the best practice applications over time to raise its corporate governance practices to international standards.