59 Annual Report 2006 Bank Danamon Corporate Governance • Responsibility: compliance with all The Bord of prevailing laws and regulations, and Commissioners nd the commitment to act as a good Bord of Directors corporate citizen in the community elieve good corporte at large. governnce prctices • Independence: Board member re intrinsic to Bnk objectivity is upheld in all matters. Dnmon’s philosophy. In judgements with the potential Emedded within Bnk for conflict of interest, independent Dnmon’s governnce advice is sought. principles re the bank’s core vlues: cring, Bank Danamon has issued a Good honesty, pssion to excel, Corporate Governance manual for temwork nd disciplined employees at all levels to serve professionlism. as a practical reference guide for implementing Good Corporate Governance principles. Transparency and accountability are the bedrock from which the bank develops relationships with stakeholders Responsiilities of the Bords who have a legitimate interest in the operations of the bank including Both Boards are guided by the following customers, suppliers, creditors, accountability and disclosure precepts. employees and the communities in which the bank operates. Accountability • Bank Danamon’s written set of rules Corporate governance best practice is relating to governance is adhered to based on six core principles: in the course of normal business. • Integrity: a fundamental honesty • The bank’s vision, mission, and which ensures that conduct and objectives are clearly stated and a decision making are free from conflict supporting business plan is in place. of interest and that the interests • A full committee structure ensures of the company are placed before key elements of governance are personal ones. carried out. • Fairness: objective professionalism • As of December 31, 2006, four in decision making to ensure that Independent Commissioners have shareholder rights are protected in a been appointed by shareholders fair and equitable manner. in excess of the minimum 30% • Transparency: the clear, accurate and requirement set by the Jakarta timely disclosure of information. Stock Exchange regulation No.IA, in • Accountability: defined obligations, compliance with Bank Indonesia’s responsibilities, and roles between 50% requirement. commissioners, directors and • As of January 16, 2007, all shareholders of the bank. committees are chaired by an Independent Commissioner. Bank Danamon Annual Report 2006 60 Disclosure • A formal share ownership • A transparent ownership structure programme is in place to offer is in place with a clear statement of performance incentives to employees any beneficial ownership of shares and the Board of Directors, and to by Commissioners and Directors. align their interests with those of the Board members hold less than 1% bank’s shareholders. of the bank’s shares, while public shareholders’ constituted 30.75% of the total ownership of Bank Aligning Employee nd Danamon on December 31, 2006 Shreholder Interests (please refer to Note 5/76 in the Consolidated Financial Statements). In line with our mission to be an • Accurate, adequate and timely employer of choice, Bank Danamon information is provided through launched an Employee/Management quarterly public expose, as well Share Option Plan (E/MSOP) in as regular investor meetings and 2004. The principle objectives non-deal road-shows on the bank’s included retaining employees whose financial performance, business contributions are essential to the operation, competitive position, success and prosperity of the bank, and the extent of the bank’s and recognising outstanding members approach to managing all risks in of the Board of Directors and senior its normal operations. Details of the employees who have contributed to the appointment of Board members growth and profitability of the bank. and Board remuneration are also • Members of the Board of Directors provided. and senior employees are eligible • Multiple communication channels for E/MSOP subject to individual for shareholders and the public performance conditions set out are in place, including among by the relevant Committees. In others, the annual report, company order to avoid any conflict of website, regular press and analyst interest, members of the Board of briefings, and the publishing of Commissioners will not participate in press releases and newsletters. the E/MSOP as they are responsible for determining the compensation Shreholder Rights paid to management. • Shareholders have the right to • The bank will grant options to eligible appoint Board members and to persons to subscribe for the shares approve the remuneration of Board of the bank up to a maximum of 5% members at the Annual General of the total issued and fully paid up Meeting of Shareholders (AGM). shares in the bank as of 26 March • Prior shareholder approval is always 2004, or in aggregate, 245,346,100 sought with regard to any material shares Series B, each share having changes which have any affect a par value of Rp 500. The total whatsoever on the equity, economic accumulated grants issued in 2004, interests, or share ownership rights 2005 and 2006 were 164,125,000 of existing shareholders. options, 225,196,800 options, and • Proper notice is given to 254,638,300 options respectively. shareholders in calling the AGM and The compensation costs associated includes the main agenda items for with E/MSOP were Rp 37 billion in the meeting. Over the year these 2004, Rp109 billion in 2005, and items will include, among others, Rp107 billion in 2006 (please refer the approval of financial statements, to Note 5/85 in the Consolidated the approval of dividend payments, Financial Statements December 31, and the appointment and terms 2006, for detailed information). of the external auditor. All proxy appointments for the purpose of voting are notarised. 6 Annual Report 2006 Bank Danamon • Committee I (comprising members Investment Policy of the Board of Commissioners) determines the allocation and Bank Danamon has implemented distribution of options to eligible an investment policy governing the members of the bank’s Board personal investment activity of its of Directors, and Committee II employees. One stipulation of this policy (consisting of the members of the is the imposition of a black out period in Board of Directors) performs the the trading of the bank’s securities, 14 same task in the case of senior working days prior to the release of the employees. bank’s results to the public. • The Vesting Period is structured such that the options will be vested in stages. The options will continue Relted Prty Trnsction Policy to be in force for a maximum period of five years commencing from the Bank Danamon has implemented a respective Grant Dates. The option related party transaction policy which price is reset for every allocation serves as a guideline for related party granted to ensure fairness and transactions. The policy ensures proper alignment of the interests of transactions are conducted in a employees with all stakeholders. reasonable manner and are based on commercial and market terms. All bank related party transactions are reported Code of Conduct to the Compliance Director, who then reviews and carries out a compliance Bank Danamon’s Code of Conduct test on those transactions prior to applies to the Board of Commissioners, seeking Commissioner approval. Board of Directors and employees without exception. The Code serves as a basic guideline for all employees The Proprietary and Confidential to ensure that relationships among Informtion Policy employees, customers and other stakeholders are conducted in the In the normal performance of their most ethical manner and are free duties, employees receive and deal with from conflict of interest. All employees information which, if improperly used must sign to the effect that they or disclosed, may directly or indirectly accept and understand the Code expose Bank Danamon to unfavorable and will be guided accordingly on an risks. To prevent this risk, the annual basis. The Code is supported proprietary and confidential information with appropriate awareness training, policy was established, focusing on the reviewed periodically, and approved by proper way of handling proprietary and the Boards. non-public information by employees. This policy applies to employees of A confidential hotline, also known as a Bank Danamon and its subsidiaries. whistleblower programme, is offered to employees to report suspected breaches of the Code of Conduct, or cases of fraud or corruption. Awareness of the hotline is promoted through the internal website, posters and trainings. A Statement of Conduct is in all contracts signed with accredited suppliers to the bank. A confidential hotline is provided to report breaches of conduct by suppliers. Bank Danamon Annual Report 2006 62 Governnce Structure The Board of Commissioners undertakes a supervisory role in The Bord of Commissioners monitoring the bank’s performance against stated strategy and goals. It also In addition to the President provides oversight on the bank’s risk Commissioner and four Independent management, its external and internal Commissioners, there are two other audit controls and findings (substantially Board members, bringing the total through the work of the Risk and Audit to seven; all of whom are competent Committees) and ensures the timely professionals with extensive experience disclosure of information required to and a wide range of expertise, one of comply with regulatory requirements. which