Corporate Governance

SHELL PAKISTAN

Prepared by: Fahad Jawed-

16791
Company
Information
 Vision
Statement

“To be the Number One Energy Company in Pakistan.”

 Project
Details
 I had a meeting with Mr. Saad Amin. He is currently working in Shell
Pakistan as Finance Advisor – Accounting & Reporting for the past 3
years. Previously he worked for PSO for 4 years. He is a Chartered
Accountant and working under the team of Deputy Controller Finance
Mr. Mansoor Murad.
 The interview was based on a questionnaire related to code of corporate
governance 2012.
 I interviewed him for almost 35 minutes.
Performance at a Glance
 Board Composition
(2016)  
CATEGORY
 
 
NAME

   
Independent Directors Mr. Zaffar A. Khan
  Mr. Badaruddin F. Vellani
 

   
   
  Mr. Jawwad A. Cheema
Executive Directors Mr. Faisal Waheed
Mr. Haroon Rashid
 

   
   
  Mr. Rafi H. Basheer
  Mr. Farrokh K. Captain
  Mr. Imran R. Ibrahim
Non-Executive Directors Mr. Nasser N. S. Jaffer
Mr. Klaas Mantel
Mr. Omar Yaqoob Sheikh
(effective January 1, 2017 Mr. Sheikh has
been replaced by Mr. Rahat Hussain)
 
Annual Meetings of Board
(2016)  
Name of Director
 
Total No. of
 
No. of Meetings
  Meetings Attended
Omar Sheikh 6 6
Jawwad A. Cheema 3 3
Farrokh K. Captain 6 6
Soo Lim Goh* 5 4
Rafi H. Basheer 0 0
Imran R. Ibrahim 6 6
Nasser N.S. Jaffer 6 5
Zaffar A. Khan 6 5
John King Chong Lo* 2 2
Haroon Rashid 6 6
Badaruddin F. Vellani 6 6
Faisal Waheed 6 6

*Mr. John King Chong Lo resigned and was replaced by

Jawwad Cheema effective 5th May, 2016.
*Mr. Soo Lim Goh resigned and replaced by Mr. Rafi H.
Basheer effective 21st October, 2016.
Annual Meetings of Audit Committee
(2016)
     
Name of Director Total No. of No. of Meetings
  Meetings Attended

Badaruddin F. Vellani (Chairman) 5 5

Soo Lim Goh 5 4

Imran R. Ibrahim 5 5

Rafi H. Basheer 0 0

*Mr. Soo Lim Goh resigned and replaced by Mr. Rafi H.

Basheer effective 21st October, 2016.
Annual Meetings of HR&R Committee
(2016)      
Name of Director Total No. of No. of Meetings
  Meetings Attended

Farrokh K. Captain (Chairman) 1 1

Jawwad A. Cheema 1 1

Klaas Mantel 1 1
 Vision Statement
Q1. The vision statement is,” To be the Number One Energy Company in
Pakistan”, so why Energy Company and not Oil Company?

Ans. Shell Pakistan is working in many different business portfolios like solar power,
electric cars etc that is why we want to be no.1 Energy Company rather than Oil
Company. The world will need much more energy to power homes and fuel transport for
a growing population with rising living standards.

Q2. At which rank your company is? And who do you think is your strong
competitor in market?
Ans. Currently we are at no. 2 nationally, the market leader is PSO. Total Parco has risen
up their shares by consolidating with Caltex. Internationally Shell is no. 1.
 Board Composition
Q3. As per CCG 2012, the Chairman of Board and the CEO shall not be the same person, however, in
Shell Mr. Jawwad A. Cheema is both on the same time, why?
Ans. Chairman is now separate Mr. Rafi Basheer.

Q4. In your opinion, how many non-executive directors should be on the Board? Do you think they
make any contribution to the Board?
Ans. In terms of contribution every single person contributes to the board and works for the betterment of
company, each director has different exposure. Non-executive directors look towards business from a very
different point of view because they are outsiders.

Q5. As Shell Pakistan has 11 directors on the board. Do you think the number should increase?
Ans. I am not an expert to recommend the number of directors on board, board will decide how many
directors should be there.

Q6. What is the criteria of appointing ID in Shell? Since Shell has only two IDs, do you think it is
enough to have two IDs on the board?
Ans. The criteria is same which has been provided in the code. Yes, I think as far as we are complying with
the law, 2 IDs are good enough. There must be some basis as this is a consultative decision by law. Let
suppose if there are 10 IDs in board, there is no justification that board will perform effectively having 10 IDs.
 Board Composition
Q7. Is there any age limit for the directors? And what is the retirement age of a
Director?
Ans: Directors are the shareholders, and when shareholders have no age limit, so I
think there should be no age limit for directors as well, and hence shareholders have
no age of retirement, there should be no age of retirement for directors too.

Q8. What test do you perform before appointing an independent director?

Ans. I don’t remember about the test for ID. It must be according to law.

Q9. What is the eligibility criteria for directors? Including qualification and
experience.
Ans. The eligibility criteria for directors are same as described in code of governance.
 Board Composition
Q10. How many directors in Shell Pakistan have a directorship in 7 listed
companies?
Ans. I don’t know.

Q11. What is your view on the directors’ limit taking seats on other listed
company's Board? As per new amendment the limit has been decreased to 3,
would you like to comment?
Ans. I don’t know about the directorships they have, but I would like to comment that
this amendment must be made to increase the effectiveness and efficiency of
directors. The less organizations they work with, the more output they can give.

Q12. What should be the total no. of Board members according to you?
Ans. As I told you earlier, I am not an expert to tell this. Board itself will decide.
 Board of
Directors
Q13. Who evaluates the Board performance and what should be the methodology to do
evaluation?
t is the responsibility of Board of Directors to make the criteria of evaluation and evaluate their
performance itself.

Q14. Who will evaluate the chairman?

Ans. In my opinion board will evaluate.

Q15. As mentioned in the statement of compliance, why annual evaluation of Board was not
carried out during the year?
Ans. It is not mandatory by law to evaluate the performance every year. Last year we didn’t evaluate
but this year evaluation has been done in 3 rd quarter.
 Board of Directors
Q16. How is the Board contributing to the present issues and competition issues?
Ans. I don’t know what the present issues are but board is looking after each and every aspect of
the business issues, like financials etc.

Q17. Does Shell Pakistan disclose the evaluation of the directors to its shareholders?
Ans. Law doesn’t say anything regarding disclosure of evaluation. This time we engaged our
external auditors i.e. EY, they helped us in making criteria of evaluation and assessment, but I
don’t know about the outcomes, the board surely have the outcomes.

Q18. There are directors Mr. Nasser N.S. Jaffer and Zaffar A. Khan, who were absent in one
meeting, did they provide any reason for not attending the meetings? Did they appoint any
alternate director?
Ans. I don’t know about the reason of their absences but they always give the notice.
 Board Committees
Q19. What is the background of Finance literate in your Audit Committee?
Ans. Rafi Basheer (Chairman of AC) has a strong finance background and he is GM planning and
appraisal in Shell. Naz Khan is also a member and he was a CFO of Engro so he must also has
strong finance background.

Q20. Is your Audit Committee putting more hours for attending the responsibility?
Ans. In Shell, executive directors of AC attend quarterly meetings, there’s an agenda of meeting, and
they discuss regarding each matter and give recommendations.

Q21. In your opinion, how many meetings should be held annually in HR&R Committee as
only one meeting was held last year?
Ans. There’s no restriction by law, however, HR&R Committee has a Term of Reference (TOR) so
whenever there is a need of HR&R Committee meeting, it will be held, otherwise not.
 Board Committees
Q22. What is the procedure for fixing the Directors’ remunerations other than the meeting fee?
Ans. No other remuneration, we give only meeting fee.

Q23. What is the procedure for fixing the CEO's compensation in Shell Pakistan?
Ans. By law it is approved by the board, but there is also an HR process he goes through that is based on
his performance.

Q24. The Audit Committee (AC) should have at least 3 members. Shell Pakistan has 3 AC members.
Do you think more members in the Audit Committee will make any meaningful contribution?
Ans. As long as we follow the law, we are okay.

Q25. Do you think that there should be Corporate Governance Committee in Pakistan same as
Corporate Governance Committee in Ney York?
Ans. I don’t know about the Corporate Governance Committee. I don’t see any value addition of such
committee.
 Code of Conduct
Q26. Do you have a whistle blower policy? If yes, is there any unethical case of
whistle blower ever occurred or reported? What was your likely action against it?
Ans. Yes, we have whistle blower policy named “Tell Shell”, if an employee thinks there’s
an unethical activity going on in company, he can raise his/ her voice against it. I can’t
disclose the unethical events occurred in past.

Q27. Does every Board member sign it or not?

Ans. It is not mandatory in Shell Pakistan to sign as we provide code of conduct to each
and every employee at the time of joining, in fact it is present at every working desk, and
therefore, nobody can deny that he didn’t get it. It is written in our offer letter that you
must abide by code of conduct.
 Director Training Program

Q28. On what ground Mr. Zaffar A. Khan and Mr. Farrokh Captain are
exempted from director’s training certification? As it is mandatory for
each director to attend the orientation and director training program
required by the Code 2012.

Ans. I have no idea.

 General Questions
Q29. To whom should the Head of Internal Audit report? In Shell Pakistan, Head of Internal
Audit reports to CFO or CEO?
Ans. Internal Audit Function is outsourced to BDO, and the requirement of law is that Head of Internal
Audit shall be permanent employee, so currently the Head of Internal Audit is Ms. Sonia Paracha, so
she reports to CFO. But independence is maintained, she only acts as a link between BDO and
Company, neither can she sign the report nor can she edit the report. BDO makes the report and
presents it.

Q30. In your view, have you seen any objections raised by external auditors upon non-
compliance?
Ans. No, I haven’t seen any.

Q31. What is the eligibility criteria for CEO and CFO?

Ans. According to the code.
 General Questions
Q32. In the directors’ report, why is the amount of taxation added to the
profit before taxation?
Ans. The reason for adding back the taxation is that we booked deferred tax asset
because we paid more tax last year, so we are claiming it back.

Q33. What would you like to comment about the amendments that have
been made in Code 2017? Which amendment do you think is in favor or
against of your company?
Ans. No amendments are against the company as the purpose of amendments is
always for the betterment of the governance within company. And you must
comply with the law without making any excuse, so there’s no point of going
against the law.
 Conclusion

 According to my evaluation , I would rate this company with A grade, as

they are following the code of Corporate Governance properly.

 I couldn’t find any flaw or misrepresentation in their Annual Report.

 Their Corporate Governance practices are commendable and upto the

mark.
Thank you! 