Corporate Governance About the Group | Management Discussion & Analysis Aitken | Spence Governance Hotel Holdings | Financial PLC | Reports Corporate |Governance Supplementary Disclosures Information 2019/20 1 CORPORATE GOVERNANCE An Effective Board Board Sub Committees The Board of Directors appointed by the shareholders becomes the of Parent Company conscience guardians and custodians of the Company, providing leadership for determining the strategic course of the Company and discharge of its obligations as a responsible corporate citizen. Consequently, composition of Executive Committees the Board is key to its effectiveness and determines the tone at the top, a sine qua non for sound corporate governance. Board Profiles on pages 16 to 18 of the Annual Report 2019/20 Managing Related Party Director Transactions Review Committee The Board of Directors Group Supervisory Board Remuneration Composition Committee Chairman Board of Management Executive Directors Independent Nomination Non-Executive Directors Committee Non-Independent Non-Executive Directors Senior Management Committees Audit Committee Internal Compliance Framework Audit Mandatory • Companies Act No.7 of 2007 • Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 • Articles of Association Administration • Listing Rules of the Colombo Stock Exchange (CSE) of the Board • Central Depository System Rules • Securities & Exchange Commission of Sri Lanka Act No. 36 of 1987 (as amended) Company Secretarial services • Group Code of Ethics are provided by Aitken Spence • Inland Revenue Act No. 24 of 2017 Corporate Finance (Private) Limited, a subsidiary of our parent • Foreign Exchange Act No. 12 of 2017 company, Aitken Spence PLC. Voluntary • Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants 2017 • Aitken Spence Integrated Sustainability Policy and its Implementation Framework • Codes of regulatory authorities, professional institutions and Trade Associations • United Nations Global Compact (UNGC) • UNWTO Global Code of Ethics for Tourism • GRI Standards • Integrated Reporting Framework • Women’s Empowerment Principles • Social and Environmental Certification Requirements 2 Aitken Spence Hotel Holdings PLC | Corporate Governance Disclosures 2019/20 Board Composition The Board consisted of 9 members throughout the financial year 2019/20. The Directors bring a range of diverse skills, expertise and competencies to the Board to facilitate the effective discharge of Board responsibility. Five out of nine Directors are Non- Executive Directors, who are eminent professionals. All Directors must, by duty, act with independence of mind and in the best interests of the Company. This mandate is enhanced by the presence of five Non-Executive Directors, of whom three are Independent Directors. The Board of Aitken Spence Hotel Holdings PLC is represented by a young female Director, thus resulting in a gender balance in the Board amounting to 11% female and 89% male. TABLE 1: COMPOSITION OF THE BOARD Composition Gender Diversity Age % % % 11 11 22 33 45 22 45 22 89 Executive Directors Male Female 30-45 Years 66-75 Years Non-Independent Non-Executive Directors 46-65 Years >76 Years Independent Non-Executive Directors Tenure of Service Expertise % % 35 50 30 40 25 30 20 15 20 10 10 5 0 0 Tourism < 5 Years < 10 Years < 15 Years > 20 Years Business Leadership Economist & Scientist Accounting & Finance Investment & Banking Investment Aitken Spence Hotel Holdings PLC | Corporate Governance Disclosures 2019/20 3 CORPORATE GOVERNANCE Roles & Responsibilities of the Board Chairman’s Responsibility Managing Director’s Responsibility • Ensuring formulation and implementation • The role of the Chairman and the • Maintaining a close working relationship of a sound business strategy. Managing Director are separate, with the Chairman, and acting as a facilitating a balance of power and sounding board for the Chairman when • Ensuring that the Managing Director and authority. The Role of the Chairman is as required. Management Team possess the relevant follows: skills, experience, knowledge and • Developing Group’s business strategy for capacity to implement the strategy. • Provide leadership to the Board. approval by the Board. • Approving Budgets and major capital • Facilitate effective discharge of its • Developing and recommending to the expenditure. functions. Board, budgets that support the Group’s long-term strategy. • Establishing effective systems to secure • Facilitating participation by both the integrity of information, internal Executive and Non-Executive Directors. • Support the Executive Directors, Board controls, business continuity and risk of Management, and Senior Management • Ensuring that all Directors are adequately management. Committees on the day –to-day briefed on matters arising at Board management of the Group’s business • Ensuring the compliance of the Group’s Meetings. operations. statutory and regulatory obligations and • Ensuring that Directors contribute safeguarding the Group’s reputation • Ensuring that the Group operations are effectively leveraging the collective skills by promoting corporate values and an within the approved risk appetite. and experience of the Board. ethical culture. • Ensuring compliance with applicable • Ensuring that shareholders are • Considering and carefully balancing rules and regulations and Corporate given adequate opportunity to make stakeholder interests in corporate Governance principles. observations, express their views decisions. and seek clarifications at meetings of • Ensuring proper succession planning of • Recognising sustainable business shareholders. the Executive Management and assessing development in Corporate Strategy, their performance. • Building and maintaining stakeholder decisions and activities. trust and confidence. • Creating an ethical environment and • Setting up the Company values and nurturing a culture based on the Group’s standards with emphasis on adopting values. appropriate accounting policies and fostering compliance with financial regulations. • Establishing a process of monitoring and evaluating the progress on strategy implementations, budgets, plans and related risks. 4 Aitken Spence Hotel Holdings PLC | Corporate Governance Disclosures 2019/20 Independence of Non-Executive Further, two Directors of the Company, 225 of the Financial Statements of the Directors Deshamanya D.H.S. Jayawardena and Annual Report 2019/20 provides a list Directors exercise their independent Miss D.S.T. Jayawardena are related to of companies in which the Directors had judgement, promoting constructive each other. However, they act in the transactions during the year under review. deliberations and objective evaluation of best interests of the Group using their matters set before them. Independence independent judgement on matters referred of Directors is determined by the Board, to the Board. based on annual declarations submitted by Disclosures made by Directors from time to the Non-Executive Directors in compliance time, regarding their interest in transactions with the Listing Rules of the CSE and also in including the related party transactions line with schedule K of the Code. Annually, are formally noted and duly entered into the Board discusses the possibility of any the interest register. Note 49 on page impairment of Directors’ independence due to extended Board tenures, and collectively evaluates the re-election of such Board members. The period of service of Mr. R.N. The period of service of Mr. C.H. Mr. G.P.J. Goonewardena served Asirwatham as a Board Member Gomez as a Board Member exceeds as an Executive Director of Aitken exceeds nine years. Additionally, nine years. Additionally, Mr. C.H. Spence Hotel Holdings PLC until his Mr. R.N. Asirwatham is a Director of Gomez is a Director of the parent retirement on 30th June 2017 which the parent company in which majority company in which majority of the was during the period of two years of the other Directors of the Company other Directors of the Company are immediately preceding his appointment are Directors. However, his period of Directors. However, his period of as a Non-Executive Director on 30th service and his office of Independent service and his office of Independent March 2018. However, his appointment Non-Executive Director of the parent Non-Executive Director of the parent as an Executive Director within two company do not compromise his company do not compromise his years period immediately preceding independence and objectivity in independence and objectivity in his appointment as a Non-Executive discharging his functions as a Director discharging his functions as a Director Director of the Company does not of the Company. Therefore, the Board of the Company. Therefore, the Board compromise his independence and determined that Mr. R.N. Asirwatham determined that Mr. C.H. Gomez is objectivity in discharging his functions is ‘independent’ of Aitken Spence Hotel ‘independent’ of Aitken Spence Hotel as a Director of the Company. Holdings PLC as per the Listing Rules. Holdings PLC as per the Listing Rules. Therefore, the Board determined that Mr. G.P.J. Goonewardena is ‘independent’ of Aitken Spence Hotel Holdings PLC as per the Listing Rules. Mr. R.N. Asirwatham Mr. C.H. Gomez Mr. G.P.J. Goonewardene Aitken Spence Hotel Holdings PLC | Corporate Governance Disclosures 2019/20 5 CORPORATE GOVERNANCE Appointment, Re-Appointment, Regular presentations by management, Re-election and Resignation of