CORPORATE GOVERNANCE REPORT

STOCK CODE : 7113

COMPANY NAME : TOP GLOVE CORPORATION BHD
FINANCIAL YEAR : August 31, 2018

OUTLINE:

SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE

Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing
Requirements.

SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES

PERSUANT CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA
MALAYSIA
Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures)
of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is
only applicable for financial institutions or any other institutions that are listed on the
Exchange that are required to comply with the above Guidelines.

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SECTION A – DISCLOSURE ON MALAYSIAN CODE ON CORPORATE GOVERNANCE

Disclosures in this section are pursuant to Paragraph 15.25 of Bursa Malaysia Listing
Requirements.

Intended Outcome
Every company is headed by a board, which assumes responsibility for the company’s
leadership and is collectively responsible for meeting the objectives and goals of the
company.

Practice 1.1
The board should set the company’s strategic aims, ensure that the necessary resources are
in place for the company to meet its objectives and review management performance. The
board should set the company’s values and standards, and ensure that its obligations to its
shareholders and other stakeholders are understood and met.

Application : Applied

Explanation on : The Board comprised members who possessed wide spectrum of

application of the skills and experience and specialised in the glove manufacturing
practice and various business sectors.

The Board is responsible to observe the following principles in

establishing clear roles and responsibilities:
 Establish clear functions reserved for the Board and those
delegated to Management.
 Establish clear roles and responsibilities in discharging its
fiduciary and leadership functions.
 Formalise ethical standards through a Code of Conduct and
ensure its compliance.
 Ensure that the Company’s strategies promote sustainability,
which includes Environmental, Social and Governance.
 Have procedures to allow its members access to information
and advice.
 Ensure the capital and resources of the Company be
allocated as to achieve the Company’s goals in a manner best
serving the interests of the shareholders.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Every company is headed by a board, which assumes responsibility for the company’s
leadership and is collectively responsible for meeting the objectives and goals of the
company.

Practice 1.2
A Chairman of the board who is responsible for instilling good corporate governance
practices, leadership and effectiveness of the board is appointed.

Application : Applied.

Explanation on : The Chairman of the Board is Tan Sri Dr Lim Wee Chai.
application of the
practice The Chairman of the Board, Tan Sri Dr Lim, provides effective
leadership role to the Board and steers the Board to be fully
committed to maintain high standard of corporate governance whilst
pursuing its corporate objectives in enhancing shareholders’ value and
competitiveness. Under his leadership, the Board is fully aware of the
importance of governance and will continue delivering sustainable
performance and instilling best corporate governance practices in
building a sustainable business.

The Chairman ensures that regular dialogue with his fellow Board
members over all operational matters is maintained and will consult
with the fellow Board members promptly over any matter that gives
him cause for major concern.

The Chairman ensures that no Directors, whether Executive or Non-

Executive, dominates discussion and he also ensure that appropriate
discussion takes place during the Board meetings.

The role of the Chairman has been specified in the Board Charter,
which is available on the Company’s website at
http://www.topglove.com/corporate-governance/.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Every company is headed by a board, which assumes responsibility for the company’s
leadership and is collectively responsible for meeting the objectives and goals of the
company.

Practice 1.3
The positions of Chairman and CEO are held by different individuals.

Application : Applied.

Explanation on : The position of the Chairman is held by Tan Sri Dr Lim Wee Chai,
application of the Executive Chairman, whereas, the position of Chief Executive Officer is
practice held by Dato’ Lee Kim Meow, Managing Director.

The roles and responsibilities of the Executive Chairman and Managing

Directors are distinctive and have been clearly segregated to further
enhance and preserve a balance of authority and accountability to
avoid unfettered powers of decision making. The Executive Chairman
is primarily responsible for the orderly conduct of the Board meetings
and ensure effectiveness of the Board. The Managing Director will
assist the Executive Chairman in the effectiveness of implementation
of the Board policies, making operational decisions and monitoring the
day-to-day running of the businesses, including defining the limits of
Management’s responsibilities.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Every company is headed by a board, which assumes responsibility for the company’s
leadership and is collectively responsible for meeting the objectives and goals of the
company.

Practice 1.4
The board is supported by a suitably qualified and competent Company Secretary to provide
sound governance advice, ensure adherence to rules and procedures, and advocate
adoption of corporate governance best practices.

Application : Applied.

Explanation on : Our Company Secretaries are qualified Chartered Secretaries under

application of the Section 235 of the Companies Act 2016. The Company Secretaries
practice constantly keep themselves abreast with the regulatory changes and
corporate governance development through attending the relevant
conferences and training programmes.

The Board has full access to the advice and service of the Company
Secretaries for the Board’s affairs and the businesses. The Company
Secretaries will highlight all compliance and governance issues that
required the Board’s attention.

The Company Secretaries will also act as facilitator in communicating

the key decisions and policies between the Board, Board Committees
and Senior Management and ensure the required actions from the
Board to Management are followed through.

The Company Secretaries are also responsible for ensuring the Board
procedures are followed, that the applicable rules and regulations for
the conduct of the affairs of the Board are complied with and for all
matters associated with the maintenance of the Board or otherwise
required for its efficient operation.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Every company is headed by a board, which assumes responsibility for the company’s
leadership and is collectively responsible for meeting the objectives and goals of the
company.

Practice 1.5
Directors receive meeting materials, which are complete and accurate within a reasonable
period prior to the meeting. Upon conclusion of the meeting, the minutes are circulated in a
timely manner.

Application : Applied.

Explanation on : The notice of Board meeting is circulated within fourteen (14) days
application of the prior to the meeting and the board papers (non-financial meeting
practice materials) are circulated within seven (7) days prior to the meeting
whereas the financial meeting materials in average within two (2) days
prior to the meeting.

The board papers are issued in advance to facilitate informed decision

making by the Board. The Managing Director and Executive Directors
would lead the presentation of board papers and provide
comprehensive explanations of business plans, business performance,
potential mergers and acquisitions and other pertinent issues.

Any proposal and recommendation put forth by Management will be

deliberated and discussed by the Board before a decision is made. All
matters raised, discussions, deliberations, decisions and conclusions
including dissenting views made at the meeting with clear actions to
be taken by responsible parties are recorded in the minutes of
meeting.

The draft minutes of meeting will be circulated to all Directors for

comments within seven (7) working days after the meeting. The
Directors will revert with comments, if any, to the draft minutes within
seven (7) working days after the minutes is circulated.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

There is demarcation of responsibilities between the board, board committees and

management.

There is clarity in the authority of the board, its committees and individual directors.

Practice 2.1
The board has a board charter which is periodically reviewed and published on the
company’s website. The board charter clearly identifies–
 the respective roles and responsibilities of the board, board committees,
individual directors and management; and
 issues and decisions reserved for the board.

Application : Applied.

Explanation on : The Board Charter clearly established the functions reserved for the
application of the Board, Directors’ roles and responsibilities and those delegated to
practice Management. It is a reference and induction literature in providing the
Board members and Management insight into the functions of the
Board.

The core areas of the Board Charter are as follows:

(a) Company goals, mission and vision;
(b) Board governance process;
(c) Board and Management relationship;
(d) Board and shareholders relationship; and
(e) Stakeholders relationship.

The Board will link the Company’s governance and management

functions through the Executive Directors. All Board authority
conferred on Management is delegated through the Executive
Directors so that the authority and accountability of Management is
considered to be the authority and accountability of the Executive
Directors so far as the Board is concerned.

The Board reserves for its consideration and approval for the following
matters/issues:
(i) Strategy and management
(ii) Structure and capital
(iii) Financial reporting and controls
(iv) Risk management and internal controls
(v) Contracts
(vi) Communication
(vii) Board membership and other appointments
(viii) Remuneration
(ix) Delegation of authority
(x) Corporate governance matters
(xi) Policies

The Board Charter also explained the role of the Senior Independent

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 Non-Executive Director.

The Board Charter is periodically reviewed by the Board to ensure that

it remains consistent with the Board’s objectives, current laws and
practices.

The Board Charter is made available on the Company’s website at

http://www.topglove.com/corporate-governance/.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy
corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered
acceptable behaviour and practice in the company.

Practice 3.1
The board establishes a Code of Conduct and Ethics for the company, and together with
management implements its policies and procedures, which include managing conflicts of
interest, preventing the abuse of power, corruption, insider trading and money laundering.

The Code of Conduct and Ethics is published on the company’s website.

Application : Applied.

Explanation on : The Company had established the Directors’ Code of Conduct and the
application of the Employees’ Code of Conduct reflecting underlying values required to
practice be upheld by personnel.

The Directors’ Code of Conduct was adopted by the Board in 2013 and
it covers the principles of conflict of interests, insider dealings,
integrity, law compliance obligation and others.

Directors are expected to conduct themselves with the highest ethical

standards, to behave ethically and professionally at all times to
promote and protect the reputation and performance of the
Company. As part of the enforcement, Directors are required to
submit their declaration adhering and observing to the provisions in
the Directors’ Code of Conduct annually.

The Directors’ Code of Conduct is made available on the Company’s

website at http://www.topglove.com/corporate-governance/.

Employees’ Code of Conduct is a manual applicable to employees of

Top Glove Corporation Bhd and its subsidiaries (“the Group”). It guides
the employee’s conduct in the workplace, business conduct when
dealing with external parties, key issues such as bribery, conflict of
interests, insider trading as well as data integrity and retention. The
Employees’ Code of Conduct is disseminated to the Group’s
employees through its intranet.

Corruption and bribery risk assessment has been put in place and the
Company has obtained the certification for ISO 37001:2016: Anti-
Bribery Management System for our main manufacturing plant in end
of 2017.

The Company has taken a very strong stand against bribery and
corruption and has robust anti-corruption and anti-bribery policies and
practices integrated into our organisation. In reflecting our
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 commitment to uphold integrity and prevent corruption in the
conduct of our businesses, we established the Top Glove Prevention
and Anti-Corruption Committee in 2009. Our commitment in this area
is enshrined in our Business Ethics: Honestly, Integrity and
Transparency.

The Employees’ Code of Conduct is made available on the Company’s

website at http://www.topglove.com/corporate-governance/.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

The board is committed to promoting good business conduct and maintaining a healthy
corporate culture that engenders integrity, transparency and fairness.

The board, management, employees and other stakeholders are clear on what is considered
acceptable behaviour and practice in the company.

Practice 3.2
The board establishes, reviews and together with management implements policies and
procedures on whistleblowing.

Application : Applied.

Explanation on : The Board believes that having a Whistle-Blowing Policy in place

application of the strengthens, supports good management and at the same time
practice demonstrates accountability, good risk management and sound
corporate governance practice. A Whistle-Blowing Policy was adopted
by the Board in 2010 and is made available on the Company’s website
at http://www.topglove.com/whistle-blowing/.

The Board aims to provide a platform and to act as a mechanism for

parties to channel their complaints or to provide information on fraud,
wrongdoings or non-compliance to any rule or procedure by
employees or Management of the Company. The Whistle-Blowing
Policy outlines when, how and to whom a concern may be properly
raised, distinguishes a concern from a personal grievance and allows
the whistle-blower the opportunity to raise a concern outside their
management line and in confidence. The identity of the whistle-
blower is kept confidential and protection is accorded to the whistle-
blower against any form of reprisal or retribution. Any concern raised
will be investigated by the Top Glove Prevention and Anti-Corruption
Committee and Whistle Blowing Committee and a report and update
are provided to the Board, through the Audit Committee (“AC”).

Whistle-Blowers may write to the AC to communicate on any

information about fraudulent actions and breaches of ethics directly
and anonymously to [email protected].

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.1
At least half of the board comprises independent directors. For Large Companies, the board
comprises a majority independent directors.

Application : Applied.

Explanation on : More than half (54%) of the Board during the financial year ended 31
application of the August 2018 (“FY2018”) comprises Independent Non-Executive
practice Directors (“INED”).

The Board during the FY2018 consist of 13 Board members: one (1)
Executive Chairman, one (1) Managing Director, four (4) Executive
Directors, one (1) Senior INED and six (6) INEDs.

The Nomination and Remuneration Committee (“NRC”) reviews the

independence of the Directors annually according to the criteria on
independence set out in the Main Market Listing Requirements of
Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Main LR”) and
Practice Notes of Main LR. In addition to the annual review by the NRC
of the Directors’ independence, each INED also submits an annual
declaration regarding his/her independence.

All of the INEDs are also independent from the substantial

shareholders of the Company, not being substantial shareholders
themselves or directly associated with any substantial shareholder.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.2
The tenure of an independent director does not exceed a cumulative term limit of nine years.
Upon completion of the nine years, an independent director may continue to serve on the
board as a non-independent director.

If the board intends to retain an independent director beyond nine years, it should justify and
seek annual shareholders’ approval. If the board continues to retain the independent director
after the twelfth year, the board should seek annual shareholders’ approval through a two-
tier voting process.

Application : Applied

Explanation on : Based on Malaysian Code on Corporate Governance (“MCCG”), the

application of the tenure of an INED shall not exceed a cumulative term of nine (9) years.
practice Upon completion of nine (9) years, an INED may continue to serve on
the Board subject to the Director’s re-designation as Non-Independent
Non-Executive Director. In the event such Director is to be retained as
an INED, the Board must justify and seek shareholders’ approval
annually for a person who has served in that capacity for more than
nine (9) years.

If the Board continues to retain the INED after year twelfth, the Board
should provide justification and seek shareholders’ approval annually
through a two-tier voting process.

In 2017, the NRC has reviewed and assessed the independence of the
INEDs and recommended that the Board sought shareholders’
approval at the Nineteenth Annual General Meeting (“AGM”) held in
January 2018 for the retention of Tan Sri Dato’ Seri Utama Arshad Bin
Ayub (“Tan Sri Arshad”) who has served on the Board for more than
nine (9) years as an INED, to which the shareholders had approved.

Tan Sri Arshad who has served on the Board as Senior INED for more
than twelve (12) years and who shall retire by rotation in accordance
with Article 94 of the Company’s Constitution has notified the Board
that he does not wish to seek for re-election as Director at the
forthcoming Twentieth AGM. Hence, he shall retire from the Board
upon the conclusion of the Twentieth AGM scheduled to be held in
January 2019.

Explanation for :
departure

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Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.3 - Step Up

The board has a policy which limits the tenure of its independent directors to nine years.

Application : Not Adopted.

Explanation on :
adoption of the
practice

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.4
Appointment of board and senior management are based on objective criteria, merit and with
due regard for diversity in skills, experience, age, cultural background and gender.

Application : Applied.

Explanation on : The Company takes diversity not only at the Board level but also at the
application of the workplace as it is an essential measure of good governance, critically
practice attributing to a well-functioning organisation and sustainable
development of the Company. Diversity encapsulates not only gender
but also age and ethnicity, if well-managed, can drive performance
and strengthen governance.

Despite the importance of Boardroom diversity, the Board is of the

view that the selection criteria of a Director, based on effective blend
of competencies, skills, extensive experience and knowledge in areas
identified by the Board, should remain a priority, not compromising on
qualification, experience and capabilities.

A Board Diversity Policy was adopted by the Board in 2014 and is

made available on the Company’s website at
http://www.topglove.com/corporate-governance/.

Aside from achieving gender diversity aspect, the Board also aspires to
achieve significant benefits by focusing on individual talents, abilities
and experiences to meet the Group’s objectives of being the world’s
leading gloves manufacturer; hence, requiring a Board with broader
range of competence, skills and experience.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.5
The board discloses in its annual report the company’s policies on gender diversity, its
targets and measures to meet those targets. For Large Companies, the board must have at
least 30% women directors.

Application : Applied.

Explanation on : For the FY2018, the Board has four (4) female Directors, representing
application of the 31% of the total Board members. It provides the Board with gender
practice diversity that will add value to the Board’s deliberations from the
different perspectives and insights of the female Directors.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.6
In identifying candidates for appointment of directors, the board does not solely rely on
recommendations from existing board members, management or major shareholders. The
board utilises independent sources to identify suitably qualified candidates.

Application : Applied

Explanation on : In the process of recruiting of new Board members, the NRC is guided
application of the by a clear set of board skill matrix criteria to conduct a review and
practice assessment on the potential Board candidates before appointment to
the Board and Board Committees.

Apart from its own networks in sourcing suitable candidates for the
Board, the Board also takes into consideration the potential
candidates from independent sources such as 30% Club Malaysia.

For recruitment of new Board member, the NRC will review the profile
of potential candidates. As for the existing Board composition, the
NRC will conduct annual assessment and review to identify gaps/
vacancy. The NRC will identify and evaluate the potential candidates
before engaging and interviewing the shortlisted candidates. The
engagement and interview sessions will enable the NRC to make an
appropriate assessment of their background, experience, personality
and time commitment. Thereafter, NRC will put forth its
recommendation to the Board for the Board’s approval.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

Board decisions are made objectively in the best interests of the company taking into
account diverse perspectives and insights.

Practice 4.7
The Nominating Committee is chaired by an Independent Director or the Senior Independent
Director.

Application : Applied.

Explanation on : For the purpose of efficiency and effectiveness, the Board had
application of the combined both Nomination Committee and Remuneration Committee
practice into NRC in October 2017.

The NRC is chaired by the Senior INED, as recommended by MCCG.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

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Intended Outcome
Stakeholders are able to form an opinion on the overall effectiveness of the board and
individual directors.

Practice 5.1
The board should undertake a formal and objective annual evaluation to determine the
effectiveness of the board, its committees and each individual director. The board should
disclose how the assessment was carried out and its outcome.

For Large Companies, the board engages independent experts periodically to facilitate
objective and candid board evaluations.

Application : Applied.

Explanation on : The Board undertook annual evaluation for FY2018 via an Online
application of the Assessment system to review their own performance, the
practice effectiveness of the Board as a whole, the contribution of each
individual Director and peers and independency of INEDs.

The assessment of the Board covers areas such as the Board structure,
operation, roles and responsibilities, Chairman’s roles and
responsibilities and the performance of the Board Committees. For
self and peer assessments, the assessment criteria have included
Board’s interaction and contribution, quality of input to the Board and
Directors’ calibre and personality.

As for AC, an effective evaluation as a whole, member self’s and peers’

evaluations, effective evaluation of Internal Audit function and the
External Auditors performance and independence were assessed. The
assessment criteria included the quality and composition, skills and
competencies, meeting administration and conduct, the effectiveness
of Internal Audit function and the quality, performance, independency
and the adequacy of audit scope of External Auditors.

The NRC conducts review annually on its required mix of skills and
experience and other qualities, including core competencies in which
the Directors should bring to the Board.

The NRC is entrusted with the responsibility of carrying out annual

Board effectiveness evaluation, the annual AC’s term of office and
performance evaluation and to authorise the evaluation process to
ensure it meets the objectivity, including to review and approve all the
evaluation forms/questionnaires, review the results of the evaluation
and finally to convey the results to the respective parties for
improvement and enhancement.

The evaluations were facilitated by the Company Secretaries making

references to the guides available and the good corporate governance
compliance companies.

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Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

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Intended Outcome

The level and composition of remuneration of directors and senior management take into
account the company’s desire to attract and retain the right talent in the board and senior
management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent
process.

Practice 6.1
The board has in place policies and procedures to determine the remuneration of directors
and senior management, which takes into account the demands, complexities and
performance of the company as well as skills and experience required. The policies and
procedures are periodically reviewed and made available on the company’s website.

Application : Applied.

Explanation on : The Remuneration Policy was adopted by the Board in 2015. The
application of the Remuneration Policy was adopted (i) to ensure the remuneration of
practice Non-Executive Directors are commensurate according to their level of
responsibilities and experience ; (ii) to structure the component parts
of remuneration so as to link rewards to corporate and individual
performance of Executive Directors and (iii) to also ensure it was
aligned with the business strategy and long-term objectives of the
Company. The performance of the Executive Director is measured
based on the achievements of his annual key performance indicators
as well as the performance of the Group.

The Remuneration Policy is periodically reviewed by the Board to

ensure that it remains relevant.

The Company rewards its employees and the Executive Directors with
options under Employees’ Share Option Scheme III (“ESOS III”) and
shares under the Employees’ Share Grant Plan (“ESGP”). The Executive
Directors are not entitled to receive meeting allowances for the Board
and Board Committees meetings they have attended. Whereas, the
Non-Executive Directors are entitled to receive meeting allowances for
the Board and Board Committees meetings they have attended but
are not entitled to participate in the ESOS III and ESGP.

The Remuneration Policy is made available on the Company’s website

at http://www.topglove.com/corporate-governance/.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.

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Measure :

Timeframe :

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Intended Outcome

The level and composition of remuneration of directors and senior management take into
account the company’s desire to attract and retain the right talent in the board and senior
management to drive the company’s long-term objectives.

Remuneration policies and decisions are made through a transparent and independent
process.

Practice 6.2
The board has a Remuneration Committee to implement its policies and procedures on
remuneration including reviewing and recommending matters relating to the remuneration of
board and senior management.

The Committee has written Terms of Reference which deals with its authority and duties and
these Terms are disclosed on the company’s website.

Application : Applied.

Explanation on : For effectiveness and efficiency reasons, the Board has combined both
application of the Nomination Committee and Remuneration Committee into NRC.
practice
The duties and responsibilities of the NRC are clearly stated in its
Terms of Reference, which amongst others, includes:

 To review and assess the remuneration packages of the

Executive Directors in all forms, with or without other
independent professional advice or other outside advice to
reflect the Board’s responsibilities, expertise and complexity of
the Company’s activities.
 To ensure the levels of remuneration be sufficiently attractive
and be able to retain Directors and Senior Management needed
to run the Company successfully.
 To structure the component parts of remuneration so as to align
with the business strategy and long-term objectives of the
Company and to link rewards to individual performance and to
assess the needs of the Company for talent at Board level at a
particular time.
 To review and recommend the fees and benefits payable to the
Non-Executive Directors to the Board.
 To review and approve remuneration packages of Senior
Management and related employees (who are not Directors) to
ensure that they are in line with the Group’s staff remuneration
guidelines and commensurate with their respective job scopes
and levels of responsibilities.

The Terms of Reference of the NRC is made available on the

Company’s website at http://www.topglove.com/corporate-
governance/.

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Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

25
Intended Outcome

Stakeholders are able to assess whether the remuneration of directors and senior
management is commensurate with their individual performance, taking into consideration
the company’s performance.

Practice 7.1
There is detailed disclosure on named basis for the remuneration of individual directors. The
remuneration breakdown of individual directors includes fees, salary, bonus, benefits in-kind
and other emoluments.

Application : Applied.

Explanation on : The detailed disclosure on named basis for the Directors’

application of the remuneration of individual Director comprising remuneration
practice received/ receivable from the Company and its subsidiaries for the
FY2018 is shown in the Corporate Governance Overview Statement
under the Annual Report 2018.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

26
Intended Outcome

Stakeholders are able to assess whether the remuneration of directors and senior
management is commensurate with their individual performance, taking into consideration
the company’s performance.

Practice 7.2
The board discloses on a named basis the top five senior management’s remuneration
component including salary, bonus, benefits in-kind and other emoluments in bands of
RM50,000.

Application : Departure

Explanation on :
application of the
practice

Explanation for : For the FY2018, the Board has disclosed the remuneration of top nine
departure (9) instead of top five (5) senior management in bands of RM50,000,
as shown in the Corporate Governance Overview Statement under the
Annual Report 2018.

The Board is of the view that it is not to the Company’s advantage or

business interest for such disclosure considering the highly
competitive market for talents.

The Board through NRC will ensure that the remuneration of the
senior management is commensurate with their key performance
achievements and the performance of the Company.

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure : The Board will monitor the market practice in respect of such
disclosure for future consideration.

Timeframe : Within 5 years subject to NRC

and Board’s review.

27
Intended Outcome

Stakeholders are able to assess whether the remuneration of directors and senior
management is commensurate with their individual performance, taking into consideration
the company’s performance.

Practice 7.3 - Step Up

Companies are encouraged to fully disclose the detailed remuneration of each member of
senior management on a named basis.

Application : Not Adopted.

Explanation on :
adoption of the
practice

28
Intended Outcome
There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and
recommendations. The company’s financial statement is a reliable source of information.

Practice 8.1
The Chairman of the Audit Committee is not the Chairman of the board.

Application : Applied.

Explanation on : The Chairman of the AC is Tan Sri Arshad, a Senior INED, whilst the
application of the Chairman of the Board is Tan Sri Dr Lim Wee Chai, an Executive
practice Chairman. This has ensured the overall effectiveness and
independence of the AC.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

29
Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and
recommendations. The company’s financial statement is a reliable source of information.

Practice 8.2
The Audit Committee has a policy that requires a former key audit partner to observe a
cooling-off period of at least two years before being appointed as a member of the Audit
Committee.

Application : Departure

Explanation on :
application of the
practice

Explanation for : In line with recommendation of the MCCG, the Terms of Reference of
departure the AC has been revised in October 2018 to include the cooling off
period of at least two (2) years before any former key audit partner
could be appointed as AC member to safeguard the independence of
the audit of the Company’s financial statements. The Terms of
Reference of the AC is available on the Company’s website for
reference.

To-date, the Company has not appointed a former audit partner to be

a member of the AC.

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure : The aforesaid departure has been addressed in October 2018 whereby
the Terms of Reference of the AC has been revised to reflect the
cooling off period of at least two (2) years before any former key audit
partner could be appointed as AC member.

Timeframe : Not applicable since the

Company has complied in
October 2018.

30
Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and
recommendations. The company’s financial statement is a reliable source of information.

Practice 8.3
The Audit Committee has policies and procedures to assess the suitability, objectivity and
independence of the external auditor.

Application : Applied.

Explanation on : The AC is assigned to assess, review and supervise the performance,

application of the suitability and independent of External Auditors. The AC has adopted
practice External Auditors Assessment Policy in 2013 outlining the guidelines
and procedures for the AC to assess and review the External Auditors.

Under the said External Auditors Assessment Policy, the External

Auditors are precluded from providing any service that may impair
their independent or conflict with their role as External Auditors.

The AC shall obtain a written assurance from the External Auditors

annually confirming that they are and have been independent
throughout the conduct of the audit engagement in accordance with
the terms of all relevant professional and regulatory requirements.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

31
Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and
recommendations. The company’s financial statement is a reliable source of information.

Practice 8.4 - Step Up

The Audit Committee should comprise solely of Independent Directors.

Application : Adopted.

Explanation on : The AC comprises four (4) members and all of whom are INEDs, which
adoption of the meets the requirements of Paragraphs 15.09(1)(a) and (b) of Main LR.
practice

32
Intended Outcome

There is an effective and independent Audit Committee.

The board is able to objectively review the Audit Committee’s findings and
recommendations. The company’s financial statement is a reliable source of information.

Practice 8.5
Collectively, the Audit Committee should possess a wide range of necessary skills to
discharge its duties. All members should be financially literate and are able to understand
matters under the purview of the Audit Committee including the financial reporting process.

All members of the Audit Committee should undertake continuous professional development
to keep themselves abreast of relevant developments in accounting and auditing standards,
practices and rules.

Application : Applied.

Explanation on : All members of the AC are financially literate and one (1) of its
application of the members, Dato’ Lim Han Boon, is a member of the Malaysian Institute
practice of Accountants, the Chartered Management Institute, United Kingdom
(“UK”) and fellow of the Association of Chartered Certified
Accountants, UK, which fulfilled financial expertise required by Main
LR.

During the FY2018, all members of the AC have continued to

participate in training programmes to equip themselves and to
effectively discharge their duties as AC members. The AC members
have constantly kept themselves updated of both local and
international affairs and to changes in regulations affecting the
Company through advisories from regulatory bodies, Management
and through self-reading.

The AC members are also updated by the Company Secretaries on any

change to the accounting and auditing standards that may have
impact on the Company’s businesses via email and at every AC
meeting.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

33
Intended Outcome

Companies make informed decisions about the level of risk they want to take and implement
necessary controls to pursue their objectives.

The board is provided with reasonable assurance that adverse impact arising from a
foreseeable future event or situation on the company’s objectives is mitigated and managed.

Practice 9.1
The board should establish an effective risk management and internal control framework.

Application : Applied.

Explanation on : The Board is committed to establish and maintain a sound, effective

application of the and efficient system of risk management and internal control to
practice safeguard shareholders’ investment and the Group’s assets. There is
an on-going review process undertaken by the Board to ensure
adequacy and integrity of the system mentioned.

The system of risk management and internal control is designed to

identify and manage the Group’s risk within the acceptable risk
tolerance, rather than to eliminate the risk of failure in achieving the
Group’s corporate objective in accordance with the Group’s strategy.

The Board regards risk management as an integral part of all business

operations. Hence, the Board explicitly assumes the responsibility of
identifying principal risks and ensures the implementation of a
dynamic system to manage risk exposure within the acceptable level
of tolerance.

To fill its oversight responsibility, the AC is committed to review the

adequacy and effectiveness of the Group’s internal control system.
The Group’s Internal Audit Department (“IAD”) has been set-up in
2003 to undertake the obligation to provide control assurance services
to the Group.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

34
Intended Outcome

Companies make informed decisions about the level of risk they want to take and implement
necessary controls to pursue their objectives.

The board is provided with reasonable assurance that adverse impact arising from a
foreseeable future event or situation on the company’s objectives is mitigated and managed.

Practice 9.2
The board should disclose the features of its risk management and internal control
framework, and the adequacy and effectiveness of this framework.

Application : Applied.

Explanation on : The Board has disclosed the features of its risk management and
application of the internal control framework and the adequacy and effectiveness of this
practice framework in the Statement on Risk Management and Internal Control
under the Annual Report 2018. The Risk Management Committee is
reviewing and monitoring the Group’s risk management framework
and activities.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

35
Intended Outcome

Companies make informed decisions about the level of risk they want to take and implement
necessary controls to pursue their objectives.

The board is provided with reasonable assurance that adverse impact arising from a
foreseeable future event or situation on the company’s objectives is mitigated and managed.

Practice 9.3 - Step Up

The board establishes a Risk Management Committee, which comprises a majority of
independent directors, to oversee the company’s risk management framework and policies.

Application : Adopted.

Explanation on : The Risk Management Committee has been established and comprises
adoption of the a majority of INEDs, i.e. three (3) INEDs and two (2) Executive Directors.
practice
To fulfil its oversight responsibility, the Board, as a whole or through
delegation to the Risk Management Committee, reviews the adequacy
and integrity of the Group’s risk management framework and policies
which encapsulates the key processes or risk identification, assessment,
mitigation, monitoring and reporting.

36
Intended Outcome

Companies have an effective governance, risk management and internal control framework
and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.1
The Audit Committee should ensure that the internal audit function is effective and able to
function independently.

Application : Applied.

Explanation on : The Group has in place an in-house IAD which provides to the Board,
application of the through AC, with independent assessment and assurance on the
practice adequacy and effectiveness of the Group’s system and internal
controls. The IAD reports functionally to the AC in order to preserve its
independence and objectivity.

A rolling three-year Internal Audit plan, with specific audit scopes

identified from the audit universe, is tabled annually to the AC for
consideration and approval. Guided by the approved plan, the Internal
Audit assignment is carried out to evaluate the adequacy,
effectiveness and efficiency of the internal control system of the areas
under review.

Details of the Internal Audit function are set out in the Statement on
Risk Management and Internal Control under the Annual Report 2018.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

37
Intended Outcome

Companies have an effective governance, risk management and internal control framework
and stakeholders are able to assess the effectiveness of such a framework.

Practice 10.2
The board should disclose–
 whether internal audit personnel are free from any relationships or conflicts of
interest, which could impair their objectivity and independence;
 the number of resources in the internal audit department;
 name and qualification of the person responsible for internal audit; and
 whether the internal audit function is carried out in accordance with a recognised
framework.

Application : Applied.

Explanation on : The IAD carries out the Internal Audit function, of which the Head of
application of the Internal Audit reports directly to the AC. The IAD is independent of the
practice activities audited and also independent from the day-to-day internal
control processes.

The principal objective of the IAD is to undertake regular reviews of

the system of controls, procedures and operations so as to provide
reasonable assurance that the internal control system is sound,
adequate and satisfactory.

Currently, the IAD is led by Mr Lim Lung Fui @ Jack, a member of

Malaysian Institute of Accountants. For the FY2018, the total number
of Internal Audit personnel was eight (8), comprising degree holders
and professionals from related disciplines.

The Board via the AC will review the Internal Audit function such as:

 review the adequacy of the scope, functions, competency and

resources of the Internal Audit function, and that it has the
necessary authority to carry out its work;
 review the Internal Audit programmes, processes and results of
the Internal Audit processes and, where necessary, ensure that
appropriate actions are taken on the recommendations of the
Internal Audit function;
 review any appraisal or assessment of the performance of the
members of the Internal Audit function;
 approve any appointment or termination of senior staff
members of the Internal Audit function; and
 take cognisance of resignations of Internal Audit staff members
and provide the resigning staff member an opportunity to
submit his reasons for resigning.

Explanation for :
departure

38
Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

39
Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the
company, its policies on governance, the environment and social responsibility.

Practice 11.1
The board ensures there is effective, transparent and regular communication with its
stakeholders.

Application : Applied.

Explanation on : The Company recognised the importance of timely and equal

application of the dissemination of material information to the shareholders, investors
practice and public at large. The Investor Relations (“IR”) team has been
scheduling regular engagement sessions with investors and is usually
attended by the Executive Director and the IR team.

The IR team also attends conferences, non-deal roadshows, and one-

on-one meeting with equity analysts, fund managers and institutional
shareholders to provide updates on the Company’s quarterly financial
performance, corporate and regulatory developments as well as to
discuss on strategic matters and address issues that the investing
community may have with respect to the businesses or operations of
the Company.

Analyst and media briefing via conference call will usually be held
immediately after release of quarterly results to Bursa Securities or an
actual briefing will be held within a week after the release of the
quarterly results and chaired by the Executive Chairman, Managing
Director and Executive Director.

The Company has established a comprehensive corporate website at

www.topglove.com which includes a dedicated section on IR to further
enhance shareholders’ communication.

To better serve stakeholders of the Company, a feedback page on the

website provides an avenue for stakeholders to suggest improvements
to the Company via email: [email protected]. In addition,
stakeholders wish to reach the respective divisions of the Group can
do so through the ‘Contact Us’.

Besides the above, the Annual Report remains as a vital and

convenient source of essential information for investors, shareholders
and other stakeholders. Management constantly improve the contents
of the Annual Report to incorporate developments amongst others, in
corporate governance and reports of Board Committees.

40
 Another key avenue of communication with its shareholders is the
Company’s AGM, which serves as the principal forum for dialogue with
shareholders where they may raise questions or seek clarifications on
the Company’s businesses and reports from the Directors.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

41
Intended Outcome

There is continuous communication between the company and stakeholders to facilitate

mutual understanding of each other’s objectives and expectations.

Stakeholders are able to make informed decisions with respect to the business of the
company, its policies on governance, the environment and social responsibility.

Practice 11.2
Large companies are encouraged to adopt integrated reporting based on a globally
recognised framework.

Application : Departure.

Explanation on :
application of the
practice

Explanation for : The Company would review the need to adopt the integrated
departure reporting based on a globally recognised framework at the
appropriate time.

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure : The Board will need to firstly conduct a review on its internal systems
(i.e. various business functions) as well as the Company’s policies on
governance, the environment and social responsibility and then may
consider engaging external consultants to assist in drawing out a
comprehensive integrated reporting based on a globally recognised
framework.

Timeframe : Within 5 years subject to the

Board and relevant Board
Committees’ review and
approval.

42
Intended Outcome

Shareholders are able to participate, engage the board and senior management effectively
and make informed voting decisions at General Meetings.

Practice 12.1
Notice for an Annual General Meeting should be given to the shareholders at least 28 days
prior to the meeting.

Application : Applied.

Explanation on : The Notice of 2019 AGM together with the Company’s Annual Report
application of the 2018 are despatched to the shareholders on 14 November 2018,
practice which is more than 28 days’ notice prior to the 2019 AGM. In addition
to sending the notice, the Company also published the Notice of AGM
on its website, released via Bursa LINK and advertised in the
newspaper.

The Notice of AGM also provides detailed explanation for resolutions

proposed along with any background information and reports or
recommendations that are relevant, where required and necessary, to
enable shareholders to make informed decisions regarding the
business agenda of the AGM of the Company.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

43
Intended Outcome

Shareholders are able to participate, engage the board and senior management effectively
and make informed voting decisions at General Meetings.

Practice 12.2
All directors attend General Meetings. The Chair of the Audit, Nominating, Risk Management
and other committees provide meaningful response to questions addressed to them.

Application : Applied.

Explanation on : The dates of AGM, Board meetings and Board Committees’ meetings
application of the for each financial year were fixed in advance for the whole year to
practice ensure all Directors/Committees members’ dates are booked and also
enable Management’s planning for the whole financial year. All
Directors and Chairman of the Committees attended the AGM held on
9 January 2018.

The Board ensures that sufficient opportunities are given to

shareholders to raise issues relating to the affairs of the Company and
that adequate responses are given.

Explanation for :
departure

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure :

Timeframe :

44
Intended Outcome

Shareholders are able to participate, engage the board and senior management effectively
and make informed voting decisions at General Meetings.

Practice 12.3
Listed companies with a large number of shareholders or which have meetings in remote
locations should leverage technology to facilitate–
 including voting in absentia; and
 remote shareholders’ participation at General Meetings.

Application : Departure.

Explanation on :
application of the
practice

Explanation for : The Company would review the need to leverage technology to
departure facilitate the conduct of general meetings at the appropriate time.
The Company currently practice the electronic voting platform via
polling stations.

Large companies are required to complete the columns below. Non-large companies are
encouraged to complete the columns below.
Measure : As the Company is also listed in other Stock Exchange, the Company
will need to further seek guidance from the regulators and to conduct
in-depth study in term of technology platform and best practice
solutions before adopting this practice.

Timeframe : Within 5 years subject to the

Board’s review and readiness of
the technology platform to
cater for the aforesaid matter.

45
SECTION B – DISCLOSURES ON CORPORATE GOVERNANCE PRACTICES
PERSUANT CORPORATE GOVERNANCE GUIDELINES ISSUED BY BANK NEGARA
MALAYSIA

Disclosures in this section are pursuant to Appendix 4 (Corporate Governance Disclosures)

of the Corporate Governance Guidelines issued by Bank Negara Malaysia. This section is
only applicable for financial institutions or any other institutions that are listed on the
Exchange that are required to comply with the above Guidelines.

Click here to enter text.

46