GOVERNANCE

Our governance structure is central to our ability and positions us to create value for our wide range of stakeholders. The internally developed code of conduct, policy statement of ethics and business statement, code of corporate governance and best available practices in corporate governance are guiding pillars for us. We conduct our business in compliance with the applicable laws and rules. Extensive information regarding code of conduct and related matters can be found on page 02 of our 2017 Annual Report which is available at our website https://ffc.com.pk/annual-reports.

“Our corporate governance principles define the managerial structure, organization and processes to provide transparency and guaranteed sustainable long-term success.”

BALANCED MANAGEMENT STRUCTURE

The highest management body is the Board of Directors where directors are re-elected after every three years. The Board of Directors comprises of thirteen directors; one executive director and twelve non-executive directors. Out of twelve non-executive directors four are non-executive independent directors including two directors representing minority/non-controlling interest. The independent directors do not have any material pecuniary relationship with FFC. Twelve members of the Board are male, and one board member is a female.

The Chairman of the Board of Directors is non-executive. His only relationship with FFC is his role as Chairman of the Board of Directors. Neither he nor any person related to him is employed by FFC or a company that does business with FFC or is affiliated through a consultancy or similar agreement. The Chairman and members of the Board Committees are selected from the board members. The Board has constituted Committees of Directors with adequate delegation of powers to effectively focus on the issues and ensure expedient resolution. These Committees meet as often as required to oversee the performance in respective areas. Each Committee has its own charter with goals and responsibilities.

The Committees of the Board are Audit Committee, System and Technology Committee, Project Diversification Committee, Human Resource & Remuneration Committee and Management Committees i.e., Executive Committee, Business Strategy Committee and CSR Committee. Extensive details on Board Committees can be found at page 21 of our 2017 Annual Report.

The Board of Directors meets at least once a quarter. The CE & MD, CFO and other members of the Executive Committee and/or other employees or third parties regularly attend the meetings of the Board of Directors at the invitation of the Chairman for the purpose of reporting or imparting information. The Committees report on their activities and results to the Board of Directors. They also prepare the business of the Board of Directors in their assigned areas.

The Board of Directors has delegated the executive management of the Company to the CE & MD for smooth operation of Company’s business.

MANAGEMENT PERSONNEL

In 2017, the Board of Directors of FFC consisted of twelve Pakistani citizens and one Danish citizen. The members of the Board of Directors were all at least 50 years old except one. FFC has not introduced any specific quotas for women, specific nationalities, ethnic minorities or special age groups for the Board of Directors. The members of the Board of Directors also hold significant positions in other companies, the details of which can be found in “Profile of the Board” section on page 16 of the 2017 Annual Report of the company for the year ended on December 31st, 2017.

The members of the FFC Board of Directors are elected through an election at the general meeting. The existing board members were re-elected in September 2015 at an extra-ordinary general meeting. The nominated directors are appointed by the sponsoring body and financial institutions. The applicable legal and regulatory framework which defines parameters regarding qualification and composition of the Board of Directors for smooth running of the business and promotion of good corporate culture is followed. FFC is an equal opportunity employer and members of the highest governing body are selected on merit. FFC has on its Board highly competent and committed personnel with vast experience, expertise, integrity, and with a strong sense of responsibility required for safeguarding stakeholders’ interest. The Board is comprised of qualified directors with diverse backgrounds in the field of business, finance, engineering and other disciplines.

We have a formal code of business ethics and anti-corruption measures in place to avoid conflict of interest among highest governance body members as well as among employees. The code clearly refrains from conflict of interest and in case a conflict of interest is not avoidable, it requires it to be reported to the highest governing body for resolution.

CSR COMMITTEE

We are committed to act ethically and sustainably in all of our business activities. Key structural and control responsibilities related to sustainability have been delegated to the CSR Committee which evaluates and guides all sustainability efforts as efficiently and effectively as possible at every level of the organization. The Chief Executive and Managing Director (CE&MD) chairs the Committee, while the heads of the following key functions are Committee members: Finance, Internal Audit, Marketing, Production, and CSR. This is designed to ensure that all relevant strategic sustainability initiatives and activities are agreed with FFC’s corporate governance bodies and are in line with FFC’s approach towards sustainable value creation.

The Committee evaluates challenges and trends, sets the company’s medium and long-term objectives and initiates sustainability initiatives accordingly. The Committee is entrusted with the responsibility of steering the direction of CSR activities from donations and welfare activities to mainstream sustainability initiatives aligned with international guidelines and standards and review and approval of annual sustainability report. The CSR Committee ensures that the Company, being a member of the United Nations Global Compact, strictly adheres to its principles and makes a notable contribution to the Sustainable Development Goals.

MANAGEMENT’S ROLE IN SHAPING SUSTAINABILITY POLICY

The Boards’ role in setting company’s purpose, values and strategy is implemented through Board Committees which provide input in development, approval and updating of Company’s purpose, values, mission statement, strategic policies and goals in respective areas. The Executive Committee and CSR Committee provide guidelines for sustainable operation and effective control thereof, and have the powers to define guidelines. The frameworks and measures are monitored by FFC’s Robust Risk Management System, a system to identify, evaluate and manage (relevant) risks to the company’s operations. FFC corporate risk management is designed to:

• Coordinate and develop entire organization’s risk management activities and integrate risk management into the business process. A differentiation is made between strategy, operational, financial, commercial and other corporate areas;
• Clearly allocate risk management responsibilities;
• Inform, train and motivate employees to effectively implement the risk management system;
• Identify and analyze risks reliably, carefully draw up meaningful reports, and avoid risks;
• Ensure that all significant risks and avoidance/counteractive measures are indeed reported to the respective Board Committees via the relevant managerial levels, and serious risks are presented to the Board of Directors via the CE&MD for appraisal.

The Board of Directors has delegated the responsibility to respective committees for ensuring that the Enterprise Risk Management (ERM) system is operational and working. The Committees therefore have managerial responsibility for the implementation and performance of the ERM system. The Committees also take into account stakeholders’ concerns identified through stakeholder engagement, while identifying and managing economic, environment and social impacts.

MONITORING SUSTAINABILITY EFFORTS

Sustainability efforts, focused to reduce negative impacts and increase value creation potential, require continuous monitoring. We have systems in place to ensure production safety to limit the impact of manufacturing operations on the health, safety and environment (HSE) as far as possible. One of the important corporate goals is to ensure human safety and protect the environment; therefore we have developed an extensive set of policies and measures as part of HSE management. Employee training sessions are held regularly in this connection. The processes, procedures and measures are continually monitored, both in-house and by external audits of the management systems.

We are aware that the sustainability management system is a component of strategy planning, objectives and processes. It includes an ongoing review of the activities undertaken to ensure that planned sustainability activities are effectively implemented and the impacts are being properly managed. We observe and analyze our operations to ensure efficient use of resources, effective waste handling, management of human rights impacts and societal impacts of our operations. The implementation is carried out through line manager and reviewed at departmental level. The final results are deliberated at CSR Committee meetings. The results of these activities are included in the risk control system, analyzed for urgency and relevance, and then implemented as per requirement.

We are also making efforts to include sustainability criteria in our business relationship with suppliers, contractors and service providers. The selection procedure that is part of procurement management currently takes into account only economic and UNGC Principles related aspects. We are keen to work with our supply chain on sustainability to manage our impacts in the supply chain as well as to improve the entire value chain.

REPORTING TO MANAGEMENT

The extensive information on potential risks and opportunities, environment and social impacts and factors affecting ability to create value over time, is shared with the management through the CE&MD. The Committees use the risk management system to record, analyze and present all relevant risks for consideration and action. The reporting is carried out throughout the year and discussed in the relevant Committees. The HSE related risks are communicated through the HSE department while other risks are reported separately through the Risk Management System of the company. The Audit Committee reviews major issues regarding the status of compliance with laws and regulations, and the code of conduct. The internal audit department reports to the Audit Committee with regard to the status of the compliance with laws, but also with regard to the code of conduct violations that occurred during the year, how they were investigated and, if necessary, how violators were disciplined and organizational measures were implemented to avoid similar violations in the future. Based on the inputs of different Board Committees, the Board of Directors formally reviews and discusses organizational impacts, risks and opportunities in its quarterly meetings.

EVALUATION OF CORPORATE PERFORMANCE

Human Resource and Remuneration Committee of the Board of Directors evaluates, on an annual basis, the degree to which objectives of the company as a whole and particularly those of the Executive Committee have been met. Based on the evaluation of the performance against operational and sustainability related goals, recommendations are made for approval of the Board of Directors. This procedure ensures that bonus payments to employees, including executives, are also in line with FFC’s overall performance and objectives. The members of the Board of Directors and especially the Executive Committee have expertise in managing economic, environmental and social issues. In order to ensure that they keep abreast of current trends and developments in the aforementioned areas, FFC ensures participation of its management and staff in relevant trainings and involvements in international and national conferences and meetings.

MANAGEMENT PAY

Our remuneration policy is focused on to providing remuneration, which is competitive and in line with market conditions – high performance high reward – transparent and goal oriented. The remuneration policy of directors aims at encouraging and rewarding good performance/contribution to the objectives. The directors’ performance is evaluated by setting specific, measurable, achievable and realistic goals for the year and evaluation of the performance of each member against these goals. The evaluation of the Board of Directors’ performance is a self-assessment against defined goals, carried out quarterly and discussed in the Board meetings to take necessary actions to meet the defined objectives. There were no changes in membership or organizational practice as a result of performance evaluation. The remuneration of CE & MD is paid as recommended by the Human Resource and Remuneration Committee and approved by the Board of Directors and Shareholders. A fee is paid to the directors to meet the expenses incurred by them in attending the Board meetings, which is also approved by the Board of Directors and is in accordance with applicable guidelines. FFC does not pay remuneration to non-executive directors, except for the directors’ fee.

To retain the best talent, our compensation policies are structured in line with current industry standards and business practices. The appraisal system practiced is comprehensive in nature and includes a performance review on financial and nonfinancial parameters. FFC does not disclose some of the information, being sensitive and proprietary in nature, i.e., ratio of annual compensation within the organization and the ratio of percentage increase in annual compensation within the organization.

The Human Resource and Remuneration Committee analyzes and discusses market developments and their possible impact on FFC for providing recommendations to the Board. FFC’s decision-making processes are very open and also involve key stakeholders in important decisions. The stakeholders’ input, with respect to the remunerations, is collected through annual meetings as well as Collective Bargaining Agents.

SHAREHOLDER AND EMPLOYEE RECOMMENDATIONS

We value the concerns/recommendations of our shareholders. The shareholders can give their feedback/recommendation in General Meetings of the company as well as by sending letters or emails to the corporate relations department using the address available on the company’s website. The concerned officials regularly evaluate the feedback and action is taken as per need.

The employees may submit requests or recommendations at any time to the company, its management, or the appropriate bodies through their supervisors or managers. The Board of Directors has delegated the collection of recommendations to the Executive Committee. FFC values the concerns of its employees with the aim of providing a balanced working environment for achieving the company’s objectives. Due consideration is given and suitable actions are taken on the suggestions/ideas of the shareholders and employees. However, this is subject to the suggestion being found practicable, appropriate and in the interests of the company.

The HR department at the head office and plants provide support in connection with issues relating to the ethically correct and legally compliant conduct of employees as per the code of conduct and company policies. In this regard, regular checks and inquiries are carried out by the HR department depending on the number of queries received in relation to compliance topics as well as particular issues and measures. The company has a dedicated system on intranet to further facilitate the process. In addition to the reporting of breaches of the code of conduct, it provides employees with the opportunity to ask questions anonymously via an intranet portal. These questions will then be answered by the concerned officers responsible within a reasonable period of time.

Through our robust governance systems, we support the following SDGs. Detailed information on linkage of our activities and SDGs can be found ahead in this report.

OUR GOALS

To create and sustain value over the long run, the external environment and the socio-economic context in which we operate matters immensely. We are aware that our future business prospectus are dependent on depleting natural resources, changing climate patterns and a thriving society and economy. We understand that to retain value creation ability for long term, we need to use the available resources cautiously and manage our activities affecting natural eco-systems and society adversely.

As a first step, we defined our medium-term targets last year. These targets help us to measure our progress towards the goals to become a sustainable organization delivering value with minimal impacts.

VALUE CREATION BUSINESS MODEL

Our value creation business model is hub of everything we do. It defines inputs we consume, activities we carry on, the relationships we depend on and the outputs and outcomes we desire to achieve while creating sustainable value for our stakeholders in short, medium and long term.