GPIC Corporate Governance

CORPORATE GOVERNANCE 2008

2008

TABLE OF CONTENTS Topic

Page No.

Introduction

1

GPIC Corporate Vision

2

GPIC Corporate Mission

2

GPIC Corporate Values

2

CORPORATE GOVERNANCE

3

GPIC CORPORATE GOVERNANCE

4

A. PRINCIPLES

5

B. CODE OF BUSINESS CONDUCT

6

B 1. PURPOSE

6

B 2. SCOPE

6

B 3. VALUING ALL PEOPLE

7

B 3.1 Respect for Religious Beliefs

7

B 3.2 Respect for the Law

7

B 3.3 Harassment

7

B 3.4 Rights of Individual

8

a) Good Working Environment

8

b) Employee Indemnification

8

c) Equal Employment Opportunity

9

d) Fair Treatment

9

i. Advancement ii. Development iii. Disciplinary Process e) Participation

10

B 4. SHE POLICY AND COMMITMENT

10

B 5. PROTECTION AND MAINTENANCE OF COMPANY ASSETS

10

B 6. CONFIDENTIALITY

11

B 6.1 Information and Knowledge Management

11

B 6.2 Requests for Employee Information

12

B 6.3 Information Technology Privacy, Security and Copyrights

12

B 6.4 Confidential Information B 7. GOOD CITIZENSHIP AND SOCIAL RESPONSIBILITY

13 13

B 7.1 Substance Abuse

13

B 7.2 Social and Political Relations

14

B 8. ETHICAL BUSINESS CONDUCT

14

B 8.1 Business Ethics

14

B 8.2 Conflict of Interest

15

B 8.3 Bribery and Corrupt Practices

15

B 8.4 Gifts, Gratuities & Entertainment

16

B 8.5 Outside Employment

16

B 8.6 Preventing Fraud and Thefts

16

B 8.7 Representing or Speaking on Behalf of GPIC

17

C. COMPANY OWNERSHIP/ SHAREHOLDING

18

C 1. GPIC SHAREHOLDERS

18

C 2. SHAREHOLDERS RIGHTS

18

C 3. GENERAL ASSEMBLY

18

C 4. GENERAL ASSEMBLY MEETINGS

19

C 4.1 Advance Notice

19

C 4.2 Place, Date and Time

19

C 4.3 Agenda, Meetings papers, Documents, Materials

19

C 4.4 Voting Process

20

D. BOARD OF DIRECTORS D.1 GPIC BOARD OF DIRECTORS

20 20

D 1.1 Role of the Board of Directors

20

D 1.2 Appointment and Size of Board

21

D 1.3 Term Limits

21

D 1.4 Qualification

21

D 1.5 Orientation

21

D 1.6 Time Commitment by Board Members

21

D 1.7 Disqualification of Board Members

21

D 1.8 Compensation and Remuneration for Board Members

D 2. KEY APPOINTMENTS

22

22

D 2.1 Appointment of Chairman

22

D 2.2 Authority of the Chairman

23

D 2.3 Appointment of Managing Director

23

D 2.4 Authority of the Managing Director

23

D 2.5 Appointment of General Manager/ President

24

D 2.6 Secretary to the Board

24

D 2.7 Executive Management

24

D 3. BUSINESS OF THE BOARD

26

D 3.1 Powers of the Board

26

D 3.2 Agenda and Meetings

27

D 3.3 Committees of the Board

27

(1) Major Projects Committee (2) Audit, Finance and Risk Committee D 3.4 Strategic Plans

28

D 3.5 Evaluation of General Manager/ President Performance

28

D 3.6 Management Succession

28

D 3.7 Interaction with Public

28

D 3.8 Communications with Directors

28

D 4. FINANCIAL PROVISIONS

30

D 4.1 Financial Year

30

D 4.2 Accuracy and Preparation of Financial Documents

30

D 4.3 Appointment of External Auditors

30

D 4.4 Relationship with External Auditors

30

D 4.5 Powers of the External Auditor

30

D 4.6 External Auditor's Report to the Shareholders

31

D 4.7 Responsibility and Liability of the External Auditor

31

D 4.8 Risks and Controls

31

E. CORPORATE POLICIES

32

APPENDICES APPENDIX-A OECD Principles for Corporate Governance

35

APPENDIX-B Board of Directors Responsibilities

37

About GPIC

INTRODUCTION: Gulf Petrochemical Industries Company (GPIC) was established in December 1979 as a joint venture for the manufacture of fertilizers and petrochemicals.

The joint venture is equally owned by three shareholders, the Government of the Kingdom of Bahrain represented by the Oil & Gas Holding Company, Saudi Basic Industries Corporation (SABIC), and Petrochemical Industries Company (PIC), Kuwait.

GPIC utilizes natural gas as a feedstock for the production of 400,000 tonnes per annum Ammonia, 600,000 tonnes per annum Granular Urea, and 400,000 tonnes per annum of Methanol. In addition to the production plants the GPIC Complex, which is located in Sitra on a reclaimed area of 600,000m2, comprises utilities plants, maintenance workshops, offices, stores, laboratories and operates a dedicated Urea export terminal.

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GPIC CORPORATE VISION To be a global, dynamic world-class organization of choice recognized for excellence.

GPIC CORPORATE MISSION To add value to our customers and stakeholders by meeting their expectations whilst: •

Producing high quality petrochemicals.

•

Managing our business in a safe, environmentally friendly and socially responsible manner.

•

Optimizing resource utilization.

•

Embracing knowledge, innovation, creativity and best practice.

GPIC CORPORATE VALUES •

Excellence

•

Integrity / Fairness

•

Respect

•

Transparency

•

Safety

•

Professionalism

•

Social Responsibility

•

Creativity

•

Team Work

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CORPORATE GOVERNANCE Corporate governance is the set of systems and processes, customs, policies, laws and regulations by which a corporation is directed, administered and controlled. Corporate governance is a multi-faceted subject which also includes the relationships among the many shareholders involved and the goals for which the corporation is governed. The principal stakeholders are the

shareholders,

Board

of

Directors

and

the

management.

Other

stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the societal interest groups and the community at large.

Why Corporate Governance?

There has been renewed shareholder and governmental interest in the corporate governance practices of modern corporations for the past few years, particularly due to the high-profile collapses of a number of large international

firms

and

worldwide

economic

changes

resulting

from

globalization and advancement of new technologies that have resulted in making communication through various mediums fast and efficient.

A good number of renowned international bodies and business leaders took upon themselves the task of addressing the issues resulting from poor corporate governance and inadequate controls and monitoring of companies.

The Organization for Economic Cooperation and Development "OECD" is one of the pioneers in this respect. In 1999 OECD put forward a list of principles and guidelines in response to the growing awareness of the importance of good corporate governance. These were later revised in 2004 and new OECD Principles of Corporate Governance were released. By issuing the OECD Principles of Corporate Governance, the OECD has provided governments,

regulators and other standard setters with an international benchmark and framework for good practice duly endorsed by governments of all 30

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countries that are members of the OECD and readily adopted by the World Bank. (See Appendix A for OCED Principles).

GPIC believes and strongly supports having good Corporate Governance practices within its business philosophy, hence this code is written.

GPIC Corporate Governance GPIC's Corporate Governance system is based on three fundamental components namely Principles, Code of Conduct and Policies. The system has been based on the shareholders aspirations to conduct the company's business within the acceptable international and local guidelines and standards to ensure full protection of the interest of the shareholders and various stakeholders.

Review of GPIC Corporate Governance Principles: It is worth noting that the GPIC Corporate Governance is a living document which will be reviewed annually by the GPIC's Executive Management with the Managing Director. Any proposed amendments/ recommendations to the document will be presented to the Board for their final approval.

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A. PRINCIPLES The company's Corporate Governance principles have been developed primarily from the company's Memorandum and Articles of Association and the Bahrain Commercial Companies Law. These Corporate Governance Principles are responsible for providing a basis for a system of principled goalsetting, effective decision making and ethical actions, with the objectives of establishing a fundamental corporate entity that provides, on long term basis, added value to the company's shareholders and in line with the principles outlined in the company's Articles of Association.

The Board of Directors is fully entrusted with the responsibility and custody of the corporate governance within GPIC, as further explained under the "Board of Directors Responsibilities" in Appendix B. The objectives of this Corporate Governance Code include: •

Optimizing the financial returns for the shareholders;

•

Improving the performance of the company;

•

Facilitating the obtainment of necessary credit at acceptable and reasonable cost;

•

Contributing to the long term continuity of the company as going concern.

The basic principles of this Corporate Governance Code are: •

Transparency

•

Fairness

•

Accountability

•

Responsibility

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B. CODE OF BUSINESS CONDUCT: The Code of Conduct developed by GPIC sets the standards for corporate governance and ethical behaviour within the company which must be followed and respected by Directors of the Board, senior management and the other employees. All employees of the company are requested to sign a copy of this code upon joining the company and a copy is placed in each employee's respective personnel file under the custodianship of the Administration Department.

B 1. PURPOSE The purpose of developing a GPIC Code of Conduct is to provide employees with a set of standards meant to assist them in avoiding wrongdoing and to promote honest and ethical behaviour in conducting the company's business while at the same time laying down a process for reporting suspected violations of the Code.

B 2. SCOPE The intent of this Code is to provide a set of guidelines to all employees in the conduct of their business and professional activities and when dealing with colleagues, vendors, customers, contractors, government agencies and the public. This document serves as a reminder to all employees working at GPIC that it is important for them to uphold the highest standards of integrity and personal conduct in all matters that involve their work.

The employees should be aware that breaches of these values may result in disciplinary action against violators and those who conceal or hide information against the company's interests. References to disciplinary action in this Code are in accordance with locally applicable rules and regulations; such action

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may extend to termination of employment in appropriate cases. In addition to such disciplinary action, one might be subject to legal action in case of any violation of public law.

B 3. VALUING ALL PEOPLE B 3.1 Respect for Religious Beliefs: GPIC's policy is to respect the beliefs and religious practices of people of all faiths. It is therefore the responsibility of each employee to honour and respect the right of others and to practice their religious beliefs in dignity. Interference with these rights and beliefs will be considered a violation of the law and GPIC policy and will be subject to disciplinary action, including termination of employment.

B 3.2 Respect for the Law: All employees are required to obey all local laws and regulations. GPIC maintains appropriate levels of legal awareness to protect its interests and those of its employees by anticipating the legal requirements that may arise from new laws and regulations, new business endeavours or modifications of existing business arrangements. Employees are also responsible for reporting any occurrences or circumstances that may have legal implications for the company. Employees are also required to obey the laws of other countries when travelling on business trips or training courses.

B 3.3 Harassment:

The company provides a work environment that is

pleasant, healthy, comfortable and free from intimidation, hostility or other offensive behaviours toward employees, contractors, vendors or customers.

Sexual harassment of any sort, including verbal, physical or visual, is strictly prohibited. The making of false accusations and defamatory statements, whether verbal or written, of such harassment is also strictly prohibited.

Any employee who engages in any act of harassment in the course of employment shall be subject to disciplinary action. If an employee believes that he/ she may have been subjected to harassment, he/ she should

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immediately report the occurrence to the Personnel Department. All complaints will be treated in strict confidentiality and will be promptly investigated.

B 3.4 Rights of Individual: a) Good Working Environment: GPIC endeavours to provide a safe, healthy,

pleasant and supportive working environment for all its employees. Such a working environment creates a positive impact on the production process and contributes to achieving economic and social development and provides the opportunity for creativity and innovation within GPIC. b) Employee Indemnification: GPIC shall indemnify and hold harmless each

employee, whether one is a current or former employee, if in the performance of his/ her duties or acting at the company's request, he/she is made a party to any civil, criminal or administrative action brought against him/ her and/or his/ her company. In such a situation, the company will pay any costs or expenses reasonably incurred and any amounts paid to settle any action or judgement actually and reasonably incurred by him/ her in connection with the investigation, defence or appeal of such proceedings, provided: i. That such expense has been made bona fide, believing that he/ she acted in the interest of the company and in compliance with instructions given to him/ her by his/ her superior in writing, and that there was no breach of the employment contract, the law or moral conduct.

ii. In the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty and that the employee has reasonable grounds for believing that his/ her actions were lawful. iii. He/ She promptly notifies the company of the initiation of such proceeding. iv. He/ She positively participates in the defence.

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v. He/ She allows the company to participate in his defence. vi. He/ She obtains the company's prior written approval before making any settlement in the proceedings. c) Equal Employment Opportunity: It is GPIC's policy to provide equal

employment opportunity for all applicants for vacancies, subject to the effective applicable rules and regulations. It must be taken into consideration that recruitment for a vacancy shall be based upon relevant qualifications, skills, experience and eligibility. The personnel rules, regulations, and pertinent programmes shall be administered in a non-discretionary manner in all aspects of the employment relationship and conditions, including recruitment, assignment, promotion, transfer, termination, salary and other benefits, nomination for training, etc. d) Fair Treatment (Advancement, Development, and Discipline): GPIC

regards its employees as its greatest assets. As such, all decisions that directly affect an employee's recruitment status will be fair and equitable. This manifests itself in three ways: i. Advancement:

Will be on the basis of merit and performance. Clear

criteria will be applied to candidates for vacant posts and the most capable will be promoted.

ii. Development:

Is an essential aspect for all employees. GPIC

endeavours to provide all employees with an environment for improving qualifications, abilities and skills compatible with their position and responsibilities. iii. Disciplinary Process:

The Company will always be fair and equitable.

If an employee is a party to a disciplinary review, he/ she will have the full opportunity to forward his case or grievance to the Personnel Department. He/ She will be considered innocent of any alleged

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violation unless found otherwise. At all times, he/ she will be kept fully aware of his/ her rights and options and will have access to an appeals process. If found to be in violation, disciplinary actions will be prescribed according to the disciplinary code of the relevant personnel policy. All employees are advised to refer to the personnel policy and to contact the Personnel Department for any additional information. e) Participation: GPIC encourages all employees to make suggestions and

give ideas that will help improve production, services, rules, regulations and processes. All such constructive ideas and suggestions will be highly appreciated as part of motivation, innovation and initiation.

B 4. SAFETY, HEALTH AND ENVIRONMENT "SHE" POLICY AND COMMITMENT: All employees are expected to be aware of and comply with the Company's Safety, Health and Environment and Security Policies. GPIC believes that an excellent performance in Safety, Health and Environment has tangible and intangible benefits by way of protecting our environment and caring for the welfare of our employees and contractors. Our goals in this regard are to achieve zero injuries and illnesses and ensure the protection of environment

wherever we conduct our business. Furthermore, off-the-job safety of our employees is just as important as safety on-the-job. Strict compliance with applicable SHE policies and standards is an ethical and professional value of GPIC. We aim to conduct our business in a safe, healthy and environmentally acceptable manner.

B 5. PROTECTION AND MAINTENANCE OF COMPANY ASSETS: The Board of Directors, Executive Management and all employees of the company must protect all the assets and various facilities of the company and use assets under their control and custody for the purposes of the business of the company only. Misuse of the assets of the company such as personal or

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improper use would result in losses to the company. The Board members, Executive Management and all employees must hold the interest of the company above their personal interest when using these assets and facilities.

GPIC will provide the resources, tools, equipment, vehicles, raw materials and production tools required for work. Each employee must therefore take due care to protect and maintain the equipment and tools placed under his control. The employee must understand that such endeavour on his part is an essential obligation under the relevant rules and regulations. Any breach thereof may result in holding the concerned employee disciplinarily and civilly accountable where loss, damage or destruction occurs to the equipment, tools or products owned by the company. Where the breach of this obligation results in a gross loss to GPIC, the penalty imposed may include the termination of services.

B 6. CONFIDENTIALITY: B 6.1 Information and Knowledge Management: GPIC is aware of the need to control the flow of data, information and knowledge from within

the company and to protect and maintain the knowledge that currently resides therein. Deliberate misuse by any employee of the company's knowledge, data or information for personal gain or for the benefit of a competitor is a serious breach of contract and shall be subject to disciplinary action. Accordingly, when sharing information with those outside the company, it is imperative that prior authorization is obtained from the respective supervisor or the company's Management.

The company will strive to maintain an excellent, professional and rewarding relationship with all its customers to ensure their full satisfaction. Hence, it is important that confidential information and data pertaining to the customers are handled within the company's set guidelines at all times, and the necessary approval is obtained from the management as required.

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B 6.2 Requests for Employee Information: In order to ensure the accuracy and objectivity of information concerning current or former employees, any calls or written requests to release information about employees, such as personnel, medical and other records should be referred to the Personnel Department. Any employee who examines or releases information about a current or former employee without specific authorization will be subject to disciplinary action.

B 6.3 Information Technology - Privacy, Security and Copyrights: GPIC uses the state of the art and modern information technology systems to facilitate work. In giving employees and authorized contractors access to this technology, it is expected that each employee shall exercise a high degree of responsibility in its usage. The employees should be careful not to be involved in unauthorized actions such as:

i. Accessing or attempting to access data, files or directories of others on their PCs or directories. ii. Violating the company's IT policies. iii. Tampering with software or hardware. iv. Illegal copying of copyrighted software. v. Illegal photocopying of copyrighted document. vi. Releasing of confidential data or sharing of confidential information with others. vii. Attempting to intrude or hack into the company's computers or PCs. viii. Unauthorized use of/ or disclosure of user ID's and passwords. ix. Accessing and using PCs for personal purposes.

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x. Employees should be aware that GPIC may monitor computer use, including email, to verify compliance with it computer users' policies. Any violations will be subject to disciplinary action.

B 6.4 Confidential Information: In the course of employment, employees may be placed in positions of trust or confidence because of the work they perform and therefore are exposed to or have access to company funds, employee payroll data, personnel records, employee billing records, vendor and service contracts, operational data, licence agreements, computerized information, financial information and other types of sensitive information that is considered confidential or personal in nature. By virtue of their positions, such employees are expected to be trustworthy and to perform their duties in a confidential and honest manner. Any misuse of such confidence will result in withdrawing such trust and in exposing the employee concerned to disciplinary actions.

Whether one is a current or former employee, he/ she is reminded of the covenants of confidentiality in the employment contract and that revealing any type of confidential or sensitive information to unauthorized persons or tampering with company records and/or property is a violation of that trust and may result in disciplinary or legal action, including termination of employment. If an employee has any questions or doubts about what is considered confidential information or may constitute a violation of trust he/ she is urged to seek advice from the Personnel Department. Former employees shall also not release any information without prior written approval from the company.

B 7. GOOD CITIZENSHIP AND SOCIAL RESPONSIBILITY: B 7.1 Substance Abuse: All employees working for GPIC are expected to be in good health while at work for effective and safe performance of their duties. Any use of alcohol or misuse of prescription drugs or the use of mood altering

substances

(illegal

drugs)

may

jeopardize

job

safety

and

Page 13

performance, and is therefore strictly prohibited at the GPIC workplace and considered a serious violation subject to disciplinary action.

Use, possession, transportation or sale of any illegal drugs or other moodaltering, non-prescription substances on the company-owned or leased business premises is strictly prohibited. GPIC reserves the right, in accordance with the law, to search all persons and their personal effects at any time on the company's property or upon entering the company's premises for any of those items, and to require employees to submit to a medical evaluation or test where cause exists to suspect use of illegal substances.

B 7.2 Social and Political Relations: GPIC recognizes that it has an important role to play in the welfare of society and the responsibility to

communicate, participate and cooperate with local authorities and with organizations interested in the welfare of society. GPIC therefore encourages all its employees to accept this responsibility and take part in discussions and activities designed to debate community problems in the best interest of society and GPIC, but at the same time urges them to ensure that they do not appear to be acting as spokespeople for the company.

Employees as individual citizens should maintain good relationships with society, including participating effectively in professional societies, licensed charities and community centres in the Kingdom of Bahrain. Employees have the right to voluntarily participate in the political process and campaigns but not during official working hours on company-owned or leased property or by using company-owned or leased assets such as computers, printers, photocopiers, telephones, electronic mail and any other such assets.

B 8. ETHICAL BUSINESS CONDUCT B 8.1 Business Ethics: GPIC is committed to conducting all its affairs in a uniformly ethical manner and pursuant to a standard of fundamental honesty and fair dealing. This standard requires adherence to all laws, regulations and

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normal ethical practices that apply to business activities, including adherence to official working hours and appropriate business attire. All employees are expected to act with the utmost integrity and to report violation of laws or policies to the Personnel Department.

B 8.2 Conflict of Interest: Employees must avoid conflicts of interest with the company. A conflict of interest may be actual, apparent or potential and may exist whenever an individual's personal interests directly or indirectly interfere or conflict or appear to interfere or conflict with one's obligation as an employee acting in the best interests of the company.

Conflicts of interest include: •

Making personal gain from an opportunity discovered through the use of corporate information or position.

•

Using corporate property, information or position for the employee's intended benefit, whether direct or indirect.

•

Accepting a full or part time employment with a competitor or any other company or accepting any personal payments from such company.

•

Accepting from or granting gifts to customers or business partners in excess of management approved value limit.

•

Having a personal interest in dealing with any customer or business partners or suppliers due to personal or family association.

•

And or competing with the company.

Where a situation arises where a conflict of interest exists or may exist, the employee must handle the situation in an ethical manner. If the employee has any doubt as to how a situation is to be handled, the employee must discuss the situation with his supervisor.

B 8.3 Bribery and Corrupt Practices: Corruption is any abuse of an official position for personal gain. Bribery is a form or corruption. Employees must

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not offer, solicit or accept a bribe in any form and not permit any third parties acting on behalf of their company to do so. Employees may not accept any gift, payment or bribe, or anything else of value, whether directly or indirectly, from any person for the purpose of influencing an official act or decision, or to obtain, retain or direct business to any company or person.

B 8.4 Gifts, Gratuities and Entertainment: GPIC believes that principally, there is nothing wrong with receiving or giving gifts of appreciation of nominal value and of a promotional nature endorsed with a corporate logo such as calendars, diaries, pen sets and calculators. However, if an employee receives any gift valued at over BD 100 or the local currency equivalent, he must declare the same to his supervisor. Employees are prohibited from offering any gift to anyone employed by an outside organization, government department, or anyone else with whom GPIC has or may be in the process of developing a business relationship where the giving of such a gift violates the regulations issued by GPIC or the laws governing the recipient.

B 8.5 Outside Employment: GPIC employment contract clearly prohibits any employment outside the company, except for pro bono work at registered charitable organizations. The company strictly enforces this provision and any employee who violates this prohibition will be subject to strict disciplinary action, including termination of employment.

B 8.6 Preventing Fraud and Thefts: Fraud and theft are violations of the law and of GPIC's Code of Conduct. Types of fraud and theft include but are not limited to: a)

Falsifying contractual issues such as receipts, charges, quantities, etc.

b)

Falsifying qualifications and experience.

c)

Misappropriation of funds.

d)

Deliberate misinterpretation of information.

e)

Misuse of budget funding, including petty cash, vouchers etc.

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Employees are instructed to seek advice and guidance from the Personnel Department before entering into an activity that could be construed as fraud or theft.

B 8.7 Representing or Speaking on Behalf of GPIC: It is in the best interest of GPIC to develop a positive relationship with members of the media, government officials, community leaders and business partners. All public relations activities and contact with the media and senior government officials must be handled only by or with the prior approval of the General Manager.

Employees must be careful to distinguish between speaking personally and in an official capacity on behalf of the company. If an employee does not have explicit authority to make statements to the media and he receives enquiries from a media representative, he must make no comment other than to refer the media representative to the relevant department in his company. Any statements or press releases must be cleared in advance by the relevant department if they involve any company business.

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C. COMPANY OWNERSHIP / SHAREHOLDING C 1 GPIC SHAREHOLDERS The Company is equally owned by the following three shareholders: •

Government of the Kingdom of Bahrain represented by the Oil and Gas Holding Company.

•

Saudi Basic Industries Corporation "SABIC" Kingdom of Saudi Arabia.

•

Petrochemical Industries Company "PIC" Kuwait.

C 2 SHAREHOLDERS RIGHTS GPIC will treat all shareholders fairly and equally and will make available to them all the necessary, accurate and relevant information to enable them to exercise their rights. These rights are exercised within the Annual General Assembly Meetings through a voting process.

The shareholders' rights are granted to them in a manner that corresponds to the number of shares they hold in the company. Each share will have one vote.

C 3 GENERAL ASSEMBLY The General Assembly of the company represents its shareholders and is considered the highest authority in the corporate governance of GPIC. The shareholders will appoint the Board of Directors who will be entrusted with the responsibility and authority to act on behalf of the shareholders to fulfill their vision, aspiration and protection of their interests as per the Articles of Association.

The General Assembly will have the full power to consider and approve the following issues: •

Increase or decrease of the capital of the company.

•

Amendment of company's Memorandum and Articles of Association.

•

Appointment or termination of the Board of Directors.

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•

Review of company's annual financial reports and making necessary resolutions in relation to these reports.

•

Making and approving necessary decisions concerning transfer, merging, de-merging, closing or liquidating of the company.

•

Approving appointment, re-appointment or change of the external auditors.

C 4 GENERAL ASSEMBLY MEETINGS C 4.1. Advance Notice: The notice to convene the Annual General Assembly Meeting "AGM" or the Extra-Ordinary General Assembly Meeting "EGM" must be sent to all shareholders, in writing, (30) days before the date set for such meetings to give the shareholders adequate time to free themselves for attendance. The Chairman or the Secretary to the Board will usually send the invitation notice to the shareholders. The Secretary to the Board must keep an active follow up with the shareholders to ensure that the notice to attend the meeting is received by them.

C 4.2 Place, Date and Time: The selection of place, date, and time of the AGM/ EGM must be made with due consideration that the majority of shareholders can attend. The Chairman is responsible for this task.

C 4.3 Agenda, Meeting Papers /Documents/Materials: The agenda and meeting papers will be made available and delivered to all shareholders (21) days before the date of the scheduled meeting to enable the shareholders or their representatives to be prepared to take the necessary position in regard to items that need voting on. No other items may be added to the agenda, if not tabled or listed in the agenda sent to shareholders at the time of first sending the notice of the meeting.

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C 4.4 Voting Process: Decisions are taken in the AGM Annual General Meeting and EGM ExtraOrdinary General Meeting based on majority votes of the shareholders.

D. BOARD OF DIRECTORS D 1. GPIC BOARD OF DIRECTORS The Board of Directors represents the owners' interest in perpetuating a successful business, including optimizing long-term financial returns. The Board is responsible for determining that the company is managed in such a way to ensure this result. This is an active, not a passive, responsibility. The Board has the responsibility to ensure that in good times, as well as difficult ones, management is capably executing its responsibilities. The Board's responsibility is to regularly monitor the effectiveness of management policies and decisions including the execution of its strategies. The Board shall set the company’s strategic aims, values and standards and Directors must take decisions objectively in the interests of the company. In short, the GPIC Board of Directors is collectively responsible for the success of the company. For more elaborate responsibilities of the Board, please refer to Appendix (B).

D 1.1 Role of the Board of Directors: The Board oversees and provides policy guidance on the business and affairs of the company. In particular, the Board monitors overall corporate performance and exercises its business judgment to act in what each director reasonably believes to be in the best interest of GPIC and its shareholders. The Board selects the senior management team, which is responsible for the day-to-day conduct of the company's business. The Board also provides entrepreneurial leadership to the company within a framework of prudent and effective controls which enables timely assessment and management of risks. Moreover, it also sets the company’s strategic aims, ensures that the necessary financial and human resources are in place for the company to meet its objectives. The Board of Directors also reviews management performance on a regular basis.

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D 1.2 Appointments and Size of the Board: As per the GPIC Memorandum and Articles of Association of the company, the GPIC Board of Directors will consist of nine members and will be equally nominated by the 3 shareholders.

D 1.3 Term Limits: As per the Memorandum and Articles of Association of GPIC the duration of membership to the Board of Directors is for three years and members can be reappointed for the same duration or other durations.

D 1.4 Qualification: A member of the Board of Directors in his/ her personal capacity shall not be a member of a Board of Directors of a similar or competitive company, nor shall he/ she be a trader carrying on a similar or competitive business of the company. He/ she shall have no direct or indirect interests in the company's transactions and contracts.

D 1.5 Orientation of New Directors: The company shall conduct an orientation programme for new directors following the meeting at which the new director is appointed. The orientation will include presentations by senior management with respect to the company's Vision, Mission and Core Values, its principal officers, strategic plans, financial reporting, Code of Conduct, and its auditing processes. The Board of Directors will periodically receive relevant updates and briefing sessions to remain abreast on subjects that assist directors in the discharge of their duties.

D 1.6 Time Commitment by Board Members: Each Board Member is expected to ensure that he makes available adequate time for Board Meetings/ business and that his/ her other existing or planned future commitments do not materially interfere with his/ her service as a director.

Directors should advise the Chairman of the Board in advance of accepting an invitation to serve on another Board of another company.

D 1.7 Disqualification of Board Members: If a member of the Board of Directors fails to attend three consecutive meetings without a lawful excuse,

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he/ she shall be deemed to have resigned. The Chairman of the Board shall notify the shareholding company which he/ she represents to appoint another member to replace him/ her.

D 1.8 Compensation and Remuneration for Board Members: The compensation and benefits of Directors will be decided and reviewed periodically by the shareholders through the Annual General Assembly of the company.

D 2. KEY APPOINTMENTS D 2.1 Appointment of Chairman: The Chairman of the Board will be elected by a secret ballot by the Board of Directors. The Chairman will always be elected from amongst the Bahraini Board Members, while the Deputy Chairman is to be elected from amongst either Saudi or Kuwaiti Board members. The Chairman and the Deputy Chairman will be elected for a period of three years.

The responsibilities of the Chairman will include the following: •

To ensure the efficient performance of the Board and all its members.

•

To schedule the Board Meetings in a manner that enables the Board to perform its duties without unduly affecting the smooth running of company's operations.

•

To prepare the Board Meeting agendas in consultation with the General Manager/ President.

•

To ensure that accurate and complete materials and documents relating to the Board agenda are delivered to all Board Members in advance of the meeting.

•

To organize and supervise the activities of other Board Members, as far as their duty on the Board is concerned.

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•

To review and evaluate the performance of the company's General Manager/

President

and

decide

the

relevant

compensation

in

consultation with the Board. •

To monitor and evaluate the process of the Board and senior management to ensure compliance with the company's code of corporate governance.

D 2.2 Authority of the Chairman: The Chairman shall represent the company before the Law Courts and the third parties and sign on behalf of the Board of Directors. The Chairman shall implement resolutions of the Board of Directors and shall comply with its recommendations. The Deputy Chairman shall replace the Chairman during his absence or in case of any reason preventing his attendance.

The Chairman, whenever deems necessary, may take decisions through letters, telegrams, emails or faxes which shall be recorded in the minutes of meeting of the Board which shall be held immediately after taking such decisions.

D 2.3 Appointment of Managing Director: The Board of Directors appoints a Managing Director from amongst the Board Members representing Saudi Arabia or Kuwaiti Board Members and shall determine his/ her level of authority. The selection will be alternated between the Saudi and Kuwaiti shareholders. The appointment shall be for a period of three years.

D 2.4 Authority of Managing Director: The Managing Director is elected by the Board of Directors as per the company's corporate governance, with

the prime task of being the link between the Board of Directors and the Executive Management.

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The Managing Director is responsible for ensuring full implementation of the approved policies and strategies set by the Board through the Executive Management. His / her authorities are defined in the Approval Authority Scheduled (AAS) by the Board of Directors.

D 2.5 Appointment of General Manager/President: The Board of Directors shall appoint a General Manager or President for the company and shall determine his / her authority, responsibilities and remuneration.

D 2.6 Secretary to the Board: The Board shall appoint a Secretary to the Board who will be responsible for the Board's secretarial duties as listed below: - To work jointly with the Chairman and the Managing Director in preparing the meetings’ agendas.

-

To send out the agenda along with the necessary documents to the remaining Board members.

-

To arrange the meeting’s venue and all administrative details.

-

To give advice concerning the legal and regulatory issues during the meetings.

-

To record the minutes of meetings of the Board.

-

To maintain records of meetings according to the legal requirements.

-

To send the information required by members whenever necessary.

-

To seek to learn the latest developments concerning corporate governance and to inform the Board Members about them.

D 2.7 Executive Management: Under the stewardship of the General Manager/ President, the Executive Management is responsible for the day to day operations and activities of the company. These are based on the overview, guidelines and directives provided by the Board of Directors and/or the Managing Director.

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The Board approves the overall Organisational structure which lays down the levels and positions for every department and section within the company.

Each position will carry a defined designation and grade based on an approved document that details the Job Description and responsibility. Staff grades, remuneration and other benefits for each position are governed by the HR Policy and other directives issued by the Board/ Managing Director issued from time to time. The General Manager/ President is responsible for the implementation of the same.

The Board of Directors also approves the Approval Authority Schedule (AAS) delineating approval authority and limits for various levels and positions within the organisation. This AAS will also be the formal basis upon which the process-flow, routing and approval under the ERP system will be regulated.

The Finance Manager is responsible for ensuring the implementation and compliance with the AAS. The Executive Management is responsible for ensuring an appropriate and healthy work environment that boosts staff morale and promotes productivity at all levels within the organisation. Plant operations, maintenance and associated technical services will be undertaken in a manner so as to obtain optimum level of output without jeopardising the reliability and safety of the plant and equipment and the people. The highest levels of safety and security shall be ensured at all times to safeguard the assets as well as the employees

of the company and those of the contractors working at the site. Appropriate resources shall be provided to achieve these objectives.

An Enterprise Risk Management (ERM) framework shall be put in place to provide a mechanism to identify, assess and evaluate risks at the enterprise level as well as at the business operations level. The objective is for the Management to provide comfort to the Board that major risks are adequately managed and that the significant ‘residual risks’ (risks that cannot be Page 25

managed or risks that can be mitigated at an uneconomic cost) are appropriately highlighted.

The best practices shall be followed in all spheres of activity and the necessary IT and other computing aids will be provided to control and improve the operations. Under the integrated Enterprise Resource Planning (ERP) System, the Executive Management shall ensure that there is seamless integration of all the key functions within the organisation.

The Executive Management shall accord highest priority to staff training and development by providing resources to acquire and enhance skills required for the jobs as well as to develop them further with reference to an approved Career Growth and Succession Plan.

GPIC will ensure that the final products meet the required technical specifications at all times and that adequate measures are put in place to ensure that customer requirements are fully met. The marketing arrangement for the final products together with the method of sharing revenues and the remuneration will be decided by the Board of Directors. The Executive Management shall ensure that an appropriate procedure is in place to implement the agreed marketing arrangements.

D 3. BUSINESS OF THE BOARD D 3.1 Powers of the Board: The Board has full power to direct and lead the company and to perform all acts required for its management in accordance with its objectives. The Board of Directors is empowered to supervise the company's affairs, ensure that its business is performed and necessary policies are drawn up. The Board shall also pass decisions and regulations relating to the company's operations, financial and administrative affairs, employees' regulations, to form committees and subcommittees at the corporate level, and determine their powers and duties. The Board may also

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extend guarantees and conclude and execute loan agreements on behalf of the company.

D 3.2 Agenda and Meetings: The Board of Directors shall hold at least one meeting every three months, at the request of the Chairman or at the request of at least 3 members of the Board. Board Meetings shall not be considered valid unless attended by a majority of the members whether personally or by proxy. The Chairman will establish the agenda for each Board Meeting in consultation with the Managing Director; each Board Member may suggest the inclusion of items on the agenda. Each Board Member may also raise at the beginning of any Board Meeting subjects that are not on the agenda for that meeting. The Board Meeting agenda and relevant papers shall be delivered to the Directors at least 21 days before the date of the meeting.

D 3.3 Committees of the Board: The Board may from time to time establish committees on permanent or ad-hoc basis as necessary or appropriate. The Committee members will be appointed by the Board.

Consideration shall be given to rotating committee members periodically.

Each committee will have its own objectives and specific tasks assigned to

them. The Chairman of each committee will determine the frequency and length of committee meetings and will develop the committee's agenda for each meeting. Currently the Board key committees include: 1. Major Projects Committee: The proposed Projects Committee shall be

chaired by the Chairman of the Board and will include the Deputy Chairman and the Managing Director along with the General Manager/ President. The Major Projects Committee shall be responsible for reviewing and making recommendations to the Board of Directors regarding important policy matters and essential projects that have a significant impact on GPIC.

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2. Audit, Finance and Risk Committee: The Audit, Finance and Risk

Committee shall be chaired by the Managing Director and two other Directors nominated by the Board representing the other two shareholders. The Committee shall be appointed to assist the Board in fulfilling its oversight responsibility relating to: the integrity of the company's financial statements; the financial reporting process; the systems of internal accounting and financial controls; independence and performance of the external auditors; risk management processes; financing plans; pension plans; and compliance by the company with ethics policies and legal and regulatory requirements.

D 3.4 Strategic Plans: The Board has the responsibility for overseeing, understanding, reviewing and monitoring the company's short, medium and long term strategic plans from their inception through their development and execution by management.

D 3.5 Evaluation of General Manager/ President Performance: The performance of the General Manager/ President shall be reviewed by the

Board at least annually.

D 3.6 Management Succession: The General Manager/ President shall report annually to the Board on the company's programme for succession and management development. The General Manager/ President shall make available to the Board his/ her recommendations and evaluations of potential successors.

D 3.7 Interaction with the Public: The Chairman, Managing Director and or General Manager/ President have the authority to speak and communicate with the press, media and external authorities on the company policies, developments and day to day activities.

D 3.8 Communications with Directors: Interested parties including employees and other stakeholders may communicate with the company's

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Board of Directors by writing to the address published on the company's public website. All communications will be routed through the General Manager/ President to the Managing Director who in turn is responsible to communicate with the Board of Directors.

D 3.9 Dividend Determination, Declaration and Payment: GPIC will observe a prudent dividend policy that aims to provide a fair return on the capital deployed by the shareholders of the company by striking an optimum balance between the reward to the shareholders and the need for adequate cash flows to ensure smooth company operations. Dividends will generally be declared by the shareholders at the end of each accounting period at the time of the annual general assembly meeting. All statutory reserve requirements and other stipulations under the Bahrain Commercial laws will be fulfilled at all times. A minimum of 30 days shall be provided between the dates of the dividend declaration and payout.

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D 4. FINANCIAL PROVISIONS: D 4.1 Financial Year: The company's financial year shall commence from the 01 January and shall end on the 31 December of every year unless the company's Memorandum and Articles of Association provide otherwise.

D 4.2 Accuracy and Preparation of Financial Reports: The Board of Directors shall take reasonable steps to be assured that the company's financials

statements

and

other

disclosures

accurately

represent the

company's financial condition and results of operations to the shareholders.

The financial statements should present a balanced and understandable assessment of the company's position and prospects. The Board is further responsible for ensuring that the company's balance sheet and profit and loss statement and report on the operations of the company are prepared based on International Accounting Standards (IAS) and best business practices. The aforementioned shall be carried out within six months of the date on which the financial year ended.

D 4.3 Appointment of External Auditors: The shareholders in the General Assembly Meeting shall appoint one or more auditor(s) for the company. The auditors with respect to their authority, responsibility and conduct will be subject to the provisions of the of the Bahrain Commercial Law. D 4.4 Relationship with External Auditors: The Board should establish formal and transparent arrangements for the financial reporting and internal control principles and for maintaining a clear and appropriate relationship with the company's external auditors.

D 4.5 Powers of the External Auditors: The Auditors shall have access at all times to the books, records and documents of the company and shall

request any information they may deem necessary for performance of their role. They are empowered to verify the assets and liabilities of the company.

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In case they encounter any difficulty in exercising such powers they shall report this in writing to the General Manager/Managing Director.

D 4.6 External Auditors' Report to the Shareholders: The Auditors shall submit to the General Assembly Meeting of the shareholders a report indicating whether the balance sheet and profit and loss accounts are in agreement with the facts and that they give a true and fair view of the company's financial state, whether the company maintains regular accounts, whether the stock taking has been carried out in a proper manner, whether the particulars, data and information stated in the report to the Board of Directors are in conformity with those contained in the books of the company, and whether there has been any breach of any rules of the Memorandum and Articles of Association of the company during the financial year in question.

D 4.7 Responsibility and Liability of the External Auditors: The Auditors (acting as the agent of the shareholders) shall be responsible for the accuracy of the particulars stated in his report to the shareholders. Each shareholder shall have the right at the General Meeting to discuss the auditors' report and to seek clarification in respect of its contents. The auditors shall be liable to the company for compensation of damages sustained by reason of errors committed by them in the course of carrying out their duties.

D 4.8 Risks and Controls: The Board is responsible for the risk and control framework within the company. While it normally delegates the task of establishing, operating and monitoring this to the Executive Management, it cannot delegate the responsibility.

The Board has the responsibility to monitor the risks to which GPIC is exposed and that the system of internal control is effective in reducing those risks to an acceptable level. The Board therefore has to ensure that management has established appropriate internal controls and the Board shall regularly assure

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itself that the processes are functioning effectively.

The Audit Committee

would perform this role and report to the Board.

E. CORPORATE POLICIES: From time to time, the Board of Directors provides a plan of action to guide decisions and achieve rational and desired outcomes. This can be communicated through the Board resolutions and/ or Corporate Policies.

Currently the GPIC Board of Directors has approved specific policies covering various aspects of the company's operations such as: 1. HR Policy 2. Legal and Ethics Policy 3. Accounting Policy 4. Finance and Investment Policy 5. Dividend Policy 6. Procurement Policy 7. Inventory Management Policy 8. IT Policy 9. Integrated Quality, Safety, Health and Environment Policy 10. Vehicle Policy 11. Credit Card Policy 12. Risk Management Policy GPIC will ensure that all legal and regulatory requirements are fulfilled at all times and shall endeavour to comply with the prevailing globally accepted accounting, engineering, safety, environment and other standards. Based thereon, appropriate detailed and documented procedures shall be developed to cover every significant process within the organisation. These shall be validated and certified through independent accreditation bodies to cover all aspects of quality, occupational hazards and safety, health, environment and IT security, preferably under the umbrella of an appropriate Integrated Management System.

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Adequate audit systems will also be put in place to validate compliance as well as ensure that necessary controls and checks are in place.

The master copy of the corporate policies shall be kept in the custody of the Secretary to the Board of Directors. The General Manager/ President shall distribute the copies of the policies to various Department managers to ensure compliance. The Board of Directors may also from time to time amend these policies or issue new policies to meet the business requirements of the company based on the prevailing business/ corporate environment at the time.

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Appendices

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Appendix A OECD Principles for Corporate Governance Rights, Obligations of Shareholders:

•

• Equitable Treatment of Shareholders:

• • •

Role of Stakeholders in Corporate Governance:

• • • •

Transparency, Disclosure of Information and Audit

•

• •

Corporate governance framework should protect shareholder rights.

1 share, 1 vote; sufficient and relevant information from companies; participate in an annual general meeting; vote; share in residual profit (dividends); protection of minority rights; fairness and transparency of company operations.

Obligations: use voting rights.

Corporate governance framework should ensure equitable treatment of all shareholders, including minority and foreign shareholders.

Same voting rights (within same class of shares etc).

All shareholders of same class should be treated equally.

Corporate governance framework should ensure rights of stakeholders are protected by law and that these rights are respected.

Effective redress for violation of rights.

Encourage the role of stakeholders in the corporation in a manner that enhances the performance of the corporation and the market.

Provision for disclosure of information relevant to interests of stakeholders.

Corporate governance framework should ensure the full, timely and detailed disclosure of information on all material matters, including its financial situation, performance, ownership structure and governance of the corporation.

Includes establishment of (internal) audit committee.

Transparency/disclosure includes disclosure of information on: financial/operating results - ownership structure - members of Board of Directors and management - quantitative and qualitative matters concerning employees and other stakeholders in the corporation.

- governance structures and policies - corporate targets and prospects - execution of unusual and complex transactions, transactions on derivative products and their level of risk.

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Board of Directors

•

•

Non-Executive Members of Board

• •

• Executive Management, Compensation and Performance

• • • •

Corporate governance framework should ensure the strategic leadership of the corporation, the efficient monitoring of management by the Board of Directors; accountability of Board to its corporation and shareholders.

Meetings, for example one a month; process; Chair/CEO (separation of duties and responsibilities) etc Should form independent judgments especially with respect to corporation's strategy, performance, asset management and appointment of management.

Non-Executive members should be independent from Executive members of Board (no family relation) and have no business relation with the corporation or other commercial involvement that may affect their independent judgment.

Interlocking directorships (should be avoided).

Good practice that management compensation be tied to corporation’s general level of profitability and overall performance.

Total compensation should be disclosed in financial statements.

Procedures for determining compensation be disclosed.

Remuneration Committee (or Review Committee).

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Appendix B Board of Directors Responsibilities The Board’s responsibilities include: A. The Board of Directors “BOA” should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders.

B. Where Board decisions may affect different shareholder groups differently, the Board should treat all shareholders fairly.

C. The Board should ensure compliance with applicable laws and take into account the interest of all stakeholders.

D. The Board should fulfill certain key functions, including: • Reviewing and guiding corporate strategy, major plans for action, risk policy, annual budgets and business plans, setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestures.

• Selecting, compensating, monitoring and, when necessary, replacing key Executives and overseeing succession planning.

• Reviewing key Executive and Board remuneration, and ensuring a formal and transparent Board nomination process.

• Monitoring and managing potential conflicts of interest of management, Board members and shareholders including misuse of corporate assets and abuse in related party transactions.

• Ensuring the integrity of the corporation’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for monitoring risk, financial control and compliance with the law.

• Monitoring the effectiveness of the governance practices under which it operates and making changes as needed.

• Overseeing the process of disclosure and communications.

E. The Board should be able to exercise objective judgment on corporate affairs independently, in particular, from management • Boards should consider assigning a sufficient number of non-Executive Board members capable of exercising independent judgment to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are financial reporting, nomination and Executive and Board remuneration • Board members should devote sufficient time to their responsibilities.

F. In order to fulfill their responsibilities, Board members should have access to accurate, relevant and timely information.

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