Sinopec Corporation of China - Setting Standards in Corporate Governance
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Case Code: CGOV003 Case Length: 20 Pages Period: 2002 - 2003 Pub Date: 2005 Teaching Note: Not Available |
Price: Rs.300 Organization: Sinopec Corporation Industry: Petroleum & Chemical Countries: China Themes: Coporate Governance |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Supervisory Committee (SC)
Sinopec adhered to all the directives of CCGLC in China with regard to their supervisory board (Refer Exhibit V). The SC was responsible for supervising the company's financial affairs, and overseeing whether the directors and the top management (including the president, vice-president, CFO, and secretary of the BoD) were abiding by all laws and protecting the company's and shareholders' lawful interests. The SC was answerable to the shareholders' general meeting (SGM). The SC comprised of 12 supervisors. Of these, eight were shareholder representatives, while the other four were representatives of Sinopec's employees and staff...
Board of Directors
Sinopec's board of directors (BoD) performed all the duties and responsibilities as mentioned in the guidelines of CCGLC in China (Refer Exhibit VI). The BoD at Sinopec comprised of 13 directors, of which four were independent directors. The board was headed by the Chairman and also had the Vice-Chairman-cum-President on the panel. The Chairman and Vice-Chairman could be elected and removed by the members of the BoD by passing a simple majority vote...
Board Committees
The BoD consisted of three committees: the 'Strategic Planning Committee' (SPC), the 'Audit Committee' (AC), and the 'Compensation Committee' (CC). Each of these committees was constituted by the members of the BoD. The SPC developed long-term strategies and planned for large-scale corporate investments. It comprised of 13 members. The AC comprised of seven members. The Chairman and a simple majority of the members of the AC had to be independent directors, and at least one independent director had to be a qualified accountant...
Shareholders' General Meeting
The SGM exercised its powers and functions as per the Chinese law. Sinopec had designed the "Rules and Procedures for the Shareholders' General Meetings" (RPSGM). These rules were executed by the company after their formal approval by the shareholders at the SGM (Refer Table V). The RPSGM were regarded as an important element of AoA...
Board and SC Meetings
The board meetings were held four times in a year. These included an annual meeting, an interim results meeting, and two quarterly results meeting. The board met in December every year for a year-end scrutiny meeting. The extraordinary board meetings were conducted through telephone, video conferencing, and written resolutions. A meeting that required the compulsory physical presence of all the directors was held half-yearly. Information about, and notice of a board meeting was furnished to the directors 10 days prior to the scheduled meeting, in order to give them ample time to prepare for the meeting...
Secretary of the BoD
According to Article 119 of Sinopec's AoA, the company must appoint a secretary to the BoD, who should be a senior official of the company. Sinopec had formulated 'Work Regulations for the Secretary of the Board' (WRSB) to support the company's management and make provisions for information disclosure...
Sinopec's Executive Compensation Plan (ECP)
The 'Executive Compensation Plan' (ECP) at Sinopec was designed by an autonomous consulting company, proposed by the company's BoD and approved by the shareholders (in September 2000). The ECP was developed in such a way as to link the financial interests of senior managers with Sinopec's operating results and stock price performance. All the senior executives of Sinopec and its subsidiaries were covered under the ECP. The senior executives included the president, the CFO, the secretary of the BoD, the vice-presidents, the BoD, and the supervisors...
The Future Plans
Upto late 2003, Sinopec continued to get awards and recognition for its corporate governance practices. In September 2003, Euromoney ranked Sinopec first among fifteen 'best corporate governance companies' in China.' Euromoney ranked Sinopec best on five corporate governance related factors - ownership transparency and rights, financial transparency, board structure and process, stakeholders' relations, and alignment of managerial interests...
Exhibits
Exhibit I: Sinopec's Financial Report (First Half 2003) Prepared in Accordance with IFRS)
Exhibit II: Corporate Governance Awards/Recognitions for Sinopec
Exhibit III: Corporate Management Structure of Sinopec
Exhibit IV: Information Disclosure Regarding Corporate Governance
Exhibit V: Duties and Responsibilities of Supervisory Board
Exhibit VI: Duties and Responsibilities of Directors
Exhibit VII: Classification of Independent Directors
Exhibit VIII: Powers & Functions of Independent Directors at Sinopec
Exhibit IX: Powers & Functions of the SGM
Exhibit X: Special Resolutions of The BoD
Exhibit XI: Functions of the Secretary of the BoD
Exhibit XII: Powers & Functions of the President
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