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2008/IEG/SEM1/021 Agenda Item: 4

CSR: Experiences of Leading Thai Companies

Submitted by: Thailand

Seminar on Good Governance on Investment PromotionLima, Peru

19-20 May 2008

1

Bonggot AnurojInternational Affairs Bureau

Office of the Board of Investment, Thailand

Presented at APEC Seminar Good Governance on Investment Promotion

19-20 May 2008Lima, Peru

CSR: Experiences of Leading Thai Companies

Presentation Contents

• Introduction: - Corporate Governance (CG) - The Stock Exchange of Thailand’s (SET) concept

- Corporate Social Responsibility (CSR) - The Securities and Exchange Commission (SEC) concept

• CSR: Experiences of PTT Public Company Limited

• CSR: Experiences of Siam Cement Group (SCG)

2

SET concept of Corporate Governance (CG)

• In 2002, SET proposed 15 principles of good corporate governance for listed companies to implement.

• In 2006, SET reviewed CG principles by using the 2004 OECD Principles of Corporate Governance and World Bank’s Reports on the Observance of Standards and Codes to enhance and standardize CG principles.

• SET’s CG principles are not obligations but guidelines for listed companies. However, listed companies are required to demonstrate how they apply the principles in their annual registration statement and annual reports.

SET Concept of Corporate Governance (CG)

(cont.)The 2006 CG principles are divided into 5

groups.• Rights of shareholders• Equitable treatment of shareholders• Interests of other stakeholders• Disclosure and transparency• Role and responsibilities of the board

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SEC Concept of Corporate Social Responsibility (CSR)

• Concept: The company should not only take care of its business interests, but also the interests of all stakeholders. It should take into equal consideration the interests of stakeholders, both within and outside the organization, making sure that people live and work together happily and peacefully.

SEC Concept of Corporate Social Responsibility (CSR)

(cont.)• CSR principles set by the Thai SEC as practical

guidelines for listed companies and other businesses in general are divided into 8 sections:– Organizational governance– Fair operation practices– Human rights and labor practices– Consumer issues– Contribution to community and society

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SEC Concept of Corporate Social Responsibility (CSR)

– Environment– Communication on social

responsibility innovations– Social and environment

reports

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PTT

2

• Established in 1978• Total Sales Amount in 2007: 1,496 billion baht (US$

45.33 billion)• Employees : 7,843 (as of 2005)• PTT Share holding: Thai 81 % Foreign 19 %• PTT Group of Companies

– Direct ownership of 40 Companies– Direct & Indirect ownership of more than 100

Companies

General Information

2

3

Company DevelopmentCompany Development

• PTT Business areas:

Exploration & Production of oil

Gas: NGV, LPG, NGV Station

Refining: RRC, SPRC, IRPC, BPE

Petrochemical: TAC, TOC, NC,

Marketing: new model of gas station, Gasohol & Bio Diesel

Trading: Out-Out Trading Activities

Research & Technology Institute: R&D, Engine Lab Test

4

“Building the Thai Premier Multinational”

Growth :A leading regional integrated energy and petrochemical company with a strong base in Thailand and growing international presence

Attributes :Achieving superior results through capital efficiency, operational excellence, and a high performing collaborative organization with an innovative and motivated leadership team

Values :Committed to social responsibility and adhering to good corporate governanceas our core values and culture

SustainableSustainableGrowth Growth StrategyStrategy

High Performance Organization

HPO

CGCSR

Corporate SocialResponsibility

CorporateGovernance

PTT Vision

3

5

Corporate GovernanceCorporate Governance

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• 3 persons, elected from members of PTT board of directors

CG Committee

Overview of PTT’s CG Structure

CG Working Group• 7 persons, each representing CG related departments; namely HR, IR, Legal Division, Planning, PR, Internal Audit, CEO office.

Sub CG - Working Group • Staff from CG related departments

PTT Group’s CG Policy Supervision Committee

• Appointed representatives from PTT Group companies

4

7

Main principles of CGMain principles of CG

EQUITABLE TREATMENTEQUITABLE TREATMENTTRANSPARENCYTRANSPARENCY

RESPONSIBILITYRESPONSIBILITYACCOUNTABILITYACCOUNTABILITY

ETHICSETHICSVISION VISION TOTO CREATECREATE LONLONGGTERM TERM VALUEVALUE

8

PTT Code of Conduct toward stakeholdersPTT Code of Conduct toward stakeholders

Take responsibility and participate in social and environmental development and quality of life to communities

Social and environmental Responsibility

Support development of abilities continuously and give confidence on quality standards in the working environment

Responsibility toward employees

Make good relations to create win-win situations, not giving competitors a bad reputation and following obligations to creditors

Relationship with suppliers / competitors / creditors

Satisfy customers with a high standard of products and services, and fair prices

Relationship with customers and public

Conduct business in order to achieve sustainable growth & profits, keeping in mind investments with good returns

Responsibilities toward shareholders

5

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Important Areas where PTT introduces CG practicesImportant Areas where PTT introduces CG practices

• Human Resources Development

• Finance and accounting

• Internal Audit

• Conflict of Interests

• Giving gifts, property/assets, and other benefits

• Keeping secrets

• Trading in securities

• Use of information technology and communication

• Quality control, safety and environment

• Procurement

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1. 1st Handbook published in 2003,revised in 2005

1. 1st Handbook published in 2003,revised in 2005

5. CG Web via Intranet

3. CG Mail Box for CG enquiries3. CG Mail Box for CG enquiries

2. Motto: (translated from Thai)PTT moves forward with transparency

2. Motto: (translated from Thai)PTT moves forward with transparency

4. CG Sticker for

individual’s PC

4. CG Sticker for

individual’s PC

• PTT CG Activities /1

EE--mail :mail : cg@pttplc.comcg@pttplc.com

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9. CG Column in PTT monthly magazine

9. CG Column in PTT monthly magazine

7. VCD:

The “Do/Don’t” VCD

PTT code of conduct

8. CG Poster:Posted on informationboard in the elevators

8. CG Poster:Posted on informationboard in the elevators

6. CG Information on website

www. pttplc. com

• PTT CG Activities /2

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11. What’s new

CG News update via intranet on each PC

11. What’s new

CG News update via intranet on each PC

10. CG Handbook(2004)

10. CG Handbook(2004)

13. Testing staff knowledge on CG occasionally

13. Testing staff knowledge on CG occasionally

14. In-house broadcasting of CG news and documentary (Tuesday & Thursday)

14. In-house broadcasting of CG news and documentary (Tuesday & Thursday)

12. CG Evaluation by TRIS

In 2004, PTT was evaluated by TRIS gaining the score of 8.19 (Excellent)

• PTT CG Activities /3

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15. Seminars for CG staff of all companies in PTT Group 18. Organizing quarterly

Analyst Meetings

17. CG Knowledge Exchange within PTT Group, through HR Division17. CG Knowledge Exchange within PTT Group, through HR Division

16. Seminars on CG for interested companies & organizations

• PTT CG Activities / 4

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19. Organizing CG meetings for executive and employees periodically

20. Shareholder Meetings: PTT organizes an annual shareholder meeting; recognized as high-quality by SEC

• PTT CG Activities /5

8

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21. Shareholders’ visit to PTT Sites

22. Join activities organized by SET/TSD or other institutes

23. Special talk sessions at PTT

• PTT CG Activities /6

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PTT CG Group Day : PTT PTTEP PTTCH TOP ATC and RRC 19 December 2006

• PTT CG Group Day

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CG Evaluation by TRIS in 2004

In 2004, PTT was ranked second among all competing companies by TRIS’s evaluation on CG, gaining the score of 8.19 out of 10, which is equivalent to Excellent.

TRIS: Thai Rating and Information Services

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CG Evaluation by supervisory authorities on public company

Annual general meeting Checklist

(annually)

Evaluation of listed companies(annually)

• Securities and Exchange Commission

• Thai Investors Association

• Thai Listed Companies Association

• National CG Committee• The Stock Exchange of Thailand• The Thai Institute of Directors Association

by by

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Result ofResult of AGM Checklist AGM Checklist

PTT was among 19 companies (out of 460) which achieved a score over 100 for high quality in organizing annual general meeting.

Evaluation result of AGM 2007

Evaluation result of 2006

In 2006, PTT was selected as 1 of the 9 companies being rated “excellent”(totally 402 companies)

PTT received two awards1. Board of The Year for

Exemplary Practices 2006-2007

2. Special award for continuous outstanding performance of the Board Committee

Board of the Year Award

CG Evaluation by supervisory authorities on public company

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Best in Corporate Governance in Thailand 2005

Best Investor Relation 2004 / 2006Best Corporate Governance 2005 /2006

Most Improved in Corporate Governance 2003Best Company in Thailand for Corporate Governance 2006Best for Disclosure and Transparency in Thailand 2006Best for Shareholders’s Right and Equitable Treatment in Thailand 2006

CG Regognition Awards 2006 /2007

Investor Relations Ranking Award 2003Thailand Best Investor Relations 2005

Award Recognitions for CG / CSR

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Success factors of PTT’s CGSuccess factors of PTT’s CG

Strong Support by Executives

CG is part of corporate culture, not just a regulation

Assigned as one of KPIs for all departments

Continuous campaigns on CG’s importance

Trust in CG, daily practices, and beliefs

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“Conduct business with Morality; Good Management; Responsibility to Society,

Community, and the Environment in order to achieve sustainable economic

and social development ”

CSR Philosophy (translated from Thai)

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PTT CSR Framework

1) Responsible Core Business Activities• Workplace• Marketplace• Supply Chain

2) CommunitiesStrategic philanthropy, Social Investment, Community development and consultation

3) System-Level (Industry-wide, national or global)Public policy; advocacy; Institution building; rules; standards

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SouthernSouthern 2020 villagesvillages

NortheasternNortheastern2929 villagesvillages

Eastern Eastern 88 villagesvillages

Supporting 95 Villages by PTT Village Development Fund

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

ภาคเหนอื ภาคใต ภาคตะวันออกเฉยีงเหนือ ภาคตะวันออก

Starting Fund 13.9 mill.baht

Existing Fund 48.4 mill. baht

434.41%

175.39%

57.44%

68.62%2,431,56

5

7,258,138

4,610,000

1,442,000

8,826,350

3,205,000

31,850,997

5,960,000

NorthernNorthern

3838 villagesvillages

PTT Group CSR : Corporate Social & Environmental Activities

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PTT Group CSR : Corporate Social & Environmental Activities

Sustainable Development :Planting Vetiver grass to restore the forest after gas pipeline construction

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84 Districts are the base to build up CSR Projects

84 Districts

• PTT Development Village• Protecting the forest project

Vetiver grass

Planting forest 1 million Rai Govt. / Private Network

Surrounding PTT sites/gas pipe

lines

• Education

• Arts

• Social and community

• Others

Other activitiesdreamSchool

Small business

PTT Group CSR : Corporate Social & Environmental Activities

14

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Business Partners

• building up confidence in PTT/ increase in stock values

• facilitation in terms of taxation and regulations

• paying attention in news related to PTT/ goodimage of PTT

Gains from Good Practice of CG and CSR

PTT gains trust from stakeholders, such as investors, shareholders and others This will result in “sustainable development”

Shareholders/Investors

Government Agencies

Media

Customers

Social and community

• receiving good products and services/ loyalty to PTT

• being good business partner (win-win situation)

• PTT being accepted by society & communities

28International Market Analysis Div.

1. PTT (Thai) 48.4 528.3 16103 30 85.1 1565 59 162.2 9.7 38.1 6 6/4 Energy

SCG

SCG businessSCG business

• SCG: Siam Cement Group• Established in 1913 as a cement producer• SCG Business at present

chemicals (49% of total revenue)papercementbuilding materialsdistribution

• Sales amount: 267 billion baht (about US$ 8 billion) in 2007

• Overseas investments: Indonesia, Cambodia, The Philippines, Malaysia, Vietnam

• No. of employees: 25,130 (including overseas staff)

SCG businessSCG business

Adherence to Fairnessproviding customers the best quality products

and services at appropriate and fair pricesproviding shareholders with good returns on

investment at appropriate ratesproviding employees with good remuneration,

fringe benefits and quality of lifebeing fair to all stakeholders

SCG’ s Philosophy

Dedication to ExcellenceBelief in the Value of the IndividualConcern for Social Responsibility

SCG’ s Philosophy (cont.)

• The SCG Board first formulated and published the SCG code of conduct in 1987

• The aim is to provide directions on how to behave with integrity in conformance with SCG’s philosophy

• In 2007, the code was amended to keep up with business and corporate trends, changing socio-economic situations.

SCG Code of ConductSCG Code of Conduct

• After the Asian financial crisis, SCG launched its corporate governance campaign in 1999, which included:

CG documentation Documentary programs on TV and radioExchange views on CG by executives at seminarsHalf of the Board of Directors must be individual

membersWhistleblower Campaign

SCGSCG’’s concept of CGs concept of CG

SCG commits to be a Good Corporate Citizen, contributing to the Sustainable Growth of ASEAN.

“…By 2015, we see SCG as a regional market leader, contributing to the sustainable growth of ASEAN, and the local communities where it operates…”

SCG CommitmentSCG Commitment

CSR practices in SCG have two dimensions:

1. Human Development2. Environment

How SCG practices CSRHow SCG practices CSR

• Human Development in ScienceSCG-Science Camp (more than 20 years)Essay contest in ScienceSCG Thailand Rescue Robot ChampionshipOutstanding scientist / science teacher Award

• Human Development in SportSponsoring badminton tournaments (more than

20 years), including Thailand OpenSCG Badminton Academy

• Human Development in ArtYoung Thai Artist AwardArt camp for youth

• Scholarships SCG Talent ScholarshipsContinuous ScholarshipsOverseas Scholarships

• Total budget for CSR activities in 2007 was 635 million baht (about US$ 20 million)

• EnvironmentUtilise environment-friendly technology in

SCG businessIntroduce environmental concerns

• 3 R’s for water managementReduceRe-use / RecycleReplenish

• “Building 400 Check Dams” Campaign

• If you want to be a good company, your employees must be good people

• Good human resources are the foundation of all activities, including CSR

• CSR is a good concept, but you need to do it earnestly and sustainably

Lessons learned from SCGLessons learned from SCG

The business sector • has manpower and capital. can improve

educational opportunities for more people• can enhance social life in the community• Its commitment in CSR would support

sustainable development.

How can CSR practices How can CSR practices complement the efforts of the host complement the efforts of the host

countries?countries?