Published : April, 2010 Amount : 2,000 copies

Corporate Headquarters
1 Siam Cement Road, Bangsue, Bangkok 10800, Thailand
Tel : 66-2586-3333, 66-2586-4444, Fax : 66-2586-2974
Website : www.scg.co.th

SCG ensures this handbook is environmentally friendly.

All paper is 100% made from EcoFiber using Green Process by SCG Paper.
Contents


Introduction 2

1 Structure, Composition, Duties, Responsibilities, 3

and Operation of the Board of Directors

1.1 Structure of the Board of Directors 4
1.2 The Scope of Duties and Responsibilities of the Board of Directors 5
1.3 Qualifications and Nomination of the Board Members 7
1.4 Directors’ Terms of Office 7
1.5 Remuneration for Directors 7
1.6 Evaluating the Performance of the Board of Directors and of Special Committees 8

1.7 Directors’ Development 8

2 Practical Guidelines Concerning Management 9

and Internal Controls

2.1 The Business Philosophy and Code of Conduct 10
2.2 Communication between the Board and the Management 10
2.3 Systems of Internal Control and Auditing 10
2.4 Risk Management 11
2.5 Dealing with Conflicts of Interest 11
2.6 Controlling the Use of Inside Information 11
2.7 Appointment and Succession of Senior Executives 11
2.8 Evaluating the Performance of the President 12
2.9 Compensation for Senior Executives 12
2.10 Supporting the Work of SCG’s Board of Directors and Management 12

3 Conduct Towards Stakeholders 13
3.1 Conduct towards Shareholders 14
3.2 Shareholders’ Meetings 14
3.3 Respect for the Rights of Various Groups of Stakeholders 14
3.4 Information Disclosure 15
3.5 Channels of Communication 15
3.6 Responsibility to Society 15

Conclusion 16
02

Introduction
SCG has grown and prospered alongside the Thai society for over 90
years. Since the group’s founding, each successive Board of Directors
and management has consistently adopted a business philosophy
which emphasized the importance of professionalism in management,
corporate practice which are ethical and fair to all stakeholders, and
corporate values based on social responsibility. While throughout these
years, the country and the region have also continued to evolve socially,
economically and politically, SCG has always been able to adapt to the
changes while retaining and sustaining the core philosophy.

The Board of Directors regards corporate governance as fundamental in

managing organization of an international stature. To this end, SCG’s
business philosophy and principles governing corporate practices were
compiled to form the SCG’s Handbook of Corporate Governance, the first
edition of which was published in 2003.

Recent social and commercial developments have been accompanied by
efforts from the global business community to establish standard principles
and practices of good corporate governance that can both win the
confidence of stakeholders and support lasting corporate growth. Such
standards are increasingly imperative. At the same time, the realization of
additional scope, detail, and clarity in these matters has convinced the Board
of Directors that the materials of SCG’s Handbook of Corporate Governance
needs to be updated to reflect this awareness. The same basic ideas have
been reorganized into new categories, beginning with the Board of Directors
as the main proponent of corporate oversight, and more details have been
provided. The material has been divided into three main sections, namely:
1. The Structure, Composition, Duties, Responsibilities, and
Operations of the Board of Directors
2. Practical Guidelines concerning Management and Internal Controls
3. Conduct towards Stakeholders of Various Types
1
Structure, Composition,
Duties, Responsibilities, and
Operations of the Board of
Directors
04

1.1 Structure of the Board of Directors

Corporate governance at SCG emphasizes the role of the Board of Directors as the shareholders’
representative when determining various policies regarding administration and risk management.
These roles include considering and approval of financial, budgetary strategies, plans, and goals, in
addition to overseeing management’s objective achievement with the utmost efficiency, openness,
transparency, and accountability. Fulfillment of this role enhances the Company’s credibility and value
in the eyes of shareholders, and helps protect the interests of all stakeholders.

1.1.1 Composition of the Board of Directors

SCG is well aware that the composition of the Board of Directors has a crucial impact on how
effective the Board will be in performing its duties. Its size and its constituent members should be
appropriate to the multifaceted and variety of businesses to be supervised.
SCG has, at present, decided that the Board of Directors should consist of no less than nine members
and no more than twelve members, to be appointed and dismissed by a meeting of shareholders.
Additionally, to ensure that policies and managerial oversight are in the general interests of
all shareholders and stakeholders, SCG has structured the Board of Directors primarily with
non-executive directors, while the sole executive director is appointed from the Board of Directors
to fill the post of President & CEO of the Company. This is to facilitate the co-ordination of
management direction and co-operation between the Board of Directors and management, and
to ensure that there is a sufficient number of independent directors.
1.1.2 Special Committees
For supervision of matters that require specialized knowledge, the Board of Directors has appointed
special committees responsible for directing and reviewing such matters. These committees are
1) the Audit Committee, 2) the Governance and Nomination Committee, and 3) the Remuneration
Committee. Other special committees may be set up as required and appropriate for changing
circumstances. The special committees have specific areas of responsibility as stipulated in each special
committee’s charter. They must regularly report on their performance to the Board of Directors.
The Audit Committee
The Audit Committee has an important role to play in guiding management within the constraints
of the law, supervising risk management, and evaluating the efficiency of the Company’s operations.
The Audit Committee is composed of no less than three directors who are fully independent, while
at least one of the directors must possess knowledgeable and experienced in examining
the credibility of financial statements. The Audit Committee’s task is to investigate whether operations
are proceeding according to corporate policies, rules, and regulations, as well as the laws,
procedures, and directives of all regulatory agencies. This committee must also promote
 05
improvements in the Company according to internationally accepted systems for reporting
accounts and finance and ensure that the Company’s internal control, internal auditing, and risk
management systems are appropriate, up-to-date, and effective.
The Audit Committee performs its duties and expresses its opinions autonomously. The Company’s
Office of Internal Audits reports directly to the Audit Committee and performs such practical
functions as regular consultations with the Auditor, and advisers and experts in law and accounting.
The Governance and Nomination Committee
The Governance and Nomination Committee is assigned the task of proposing, reviewing, and
directing the work of corporate governance at SCG. It is also expected to consider who is suitable
for appointment to replace directors whose terms have expired or are vacating their posts for other
reasons. Furthermore, this Committee reviews the operational assessment system of the Board of
Directors and the other various special committees.

The Governance and Nomination Committee comprises no less than three members. Each member
must be knowledgeable and experienced, and understands how management according to good
corporate governance works.
The Remuneration Committee
The Remuneration Committee comprises no less than three members, whose task is to study,
consider, and monitor changes and trends in remuneration for the directors and executives of SCG.
They propose policies of compensation that will offer incentives for management progress and
encourage the best and brightest people to continue working with SCG.
1.1.3 The Roles of the Chairman and the President & CEO
With the significant differences between the roles of the Chairman (provides leadership in policy
matters) to that of the President & CEO (who is leader of management and execution),
the Company has concluded that no one person may assume both positions at the same time. These
two functions are thus clearly separated while their authorizations are properly balanced.

1.2 The Scope of Duties and Responsibilities

of the Board of Directors

The Board of Directors’ duty is to determine the business vision, mission, and policies that enable plans
and develop competencies for SCG to compete at a global level. They are also to evaluate the
performance of SCG which reflects the operational results of senior management. They should
supervise the generation of SCG’s risk management and corporate governance system as means for
attaining international standards of recognition. Each director must devote both self and time towards the
Company, without seeking any illicit personal gain for his or her self or any other party, nor should he or
she do anything that would conflict or compete with the Company’s benefit.
06

The ultimate aim of these duties and responsibilities is to assure stable, balanced, and sustainable
corporate growth for the benefit of all concerned parties, and to produce continuous increase in
shareholder value. The Board of Directors adheres to the laws and regulations of the Securities Exchange
Commission (SEC), the Stock Exchange of Thailand (SET), the Capital Market Commission, and other
relevant agencies. It is furthermore, committed to strict compliance with the rules of the Company itself,
of the Board of Directors, and of the various special committees, as well as the ideals, code of ethics,
and principles of SCG corporate governance.
1.2.1 Reports of the Board of Directors
The Board of Directors arranges for the production of balance sheets and income statements as of the
final day of the fiscal year. This Annual Report is submitted to a meeting of shareholders, as required
by law. The Board’s explanation that it is responsible for the production of these reports is included
with the Auditor’s report in the Annual Report.
To ensure that these reports conform to the requirements of the SEC, the SET, the Capital Market
Commission, and all relevant legislation, the Board of Directors assigns to the Audit Committee the
task of reviewing and updating these reports. In this way, the corporate and consolidated financial
statements can be harmonized with generally accepted principles of accounting.

1.2.2 Meetings of the Board of Directors
The Board of Directors meets at least eight times per year. For each meeting, throughout the year,
an agenda is clearly predetermined by both the Chairman and the President & CEO. With the
agenda, detailed information is sent to each director to study and consider in advance. Each item
on the agenda must be fairly considered in light of the interests of shareholders and stakeholders.
Each director must be given an opportunity to freely express his or her opinion, and each item is
allotted sufficient time for a comprehensive discussion. The Chairman controls the meeting and
makes sure that time is used wisely during the meeting.
Should there be any relevant matter whereby any director has an interest, that director must absent
himself for herself or not participate in the decision-making with regard to the issue. Other directors
may thus have full freedom to express their opinions concerning that matter.
After every meeting, the Secretary to the Board shall produce minutes of the meeting and send
them to each director to review and corroborate their accuracy and completeness before the
Chairman signs and approves them. The Corporate Secretary has the duty of storing the minutes of
meeting to ensure that they remain safe, orderly, and accessible.

 07

1.3 Qualifications and Nomination of the Board

Members
The Governance and Nomination Committee is in charge of selecting directors from qualified
individuals possessing a diversity of professional backgrounds and talents. They are expected to have
experience and success in managing large organizations. They should have attributes of leadership,
wide-range vision, good morals and ethical principles, a clear and unblemished career record, and the
ability to express their opinions freely.
If a director is being sought to replace a director whose term has expired, the Governance and
Nomination Committee shall propose the appropriate replacement to the Board of Directors for
consideration. If accepted, that person’s name shall then be proposed for approval and appointment
during the annual general shareholders’ meeting. In this case, persons whom minority shareholders
nominate for selection as directors shall also be considered, according to the Company’s procedures.
In the event of vacancy due to other circumstances, whatever the cause, the Governance and
Nomination Committee shall consider and nominate a person whom they consider suitable to the Board
of Directors for appointment as director to the vacant position. In this event, the newly appointed
director shall occupy this position for the remaining term of the director he or she replaced.

1.4 Directors’ Terms of Office

The company’s Articles of Association state that one third of all directors’ positions in the Board of
Directors must be vacated at each annual general shareholders’ meeting. A director whose term of office
has expired in this manner may be re-elected to the position of director, depending on the resolutions of
each shareholders’ meeting.
Terms of office for directors of special committees are three years, and their expiry dates coincide with the
dates of annual general shareholders’ meetings likewise. The Governance and Nomination Committee shall
consider and review annually which position becomes vacant, and propose nominees to be appointed by
the Board of Directors.

1.5 Remuneration for Directors

The Company has instituted a system for awarding suitable remuneration to directors. The Board of
Directors has given the Remuneration Committee the task of deliberating upon this matter and
making proposals to a meeting of the Board of Directors, and then to a meeting of shareholders. Even
though there is no change to the remuneration rate, the rates will nevertheless be informed of at
the annual shareholders’ meeting, in accordance with the principles of good corporate governance.
08
The remuneration amounts to be proposed to a shareholders’ meeting are based on the rates paid to
directors of the Board and of special committees of the stock market’s leading corporations in the same
field of industry. Such information is clearly declared in every year’s Annual Report.
Remuneration for directors of the Board consists of monthly salaries and annual gratuitie calculated
as a percentage of the dividends paid to shareholders. Remuneration for directors of special committees
consists of annual salaries and meeting fees that are paid according to the number of meetings
actually attended.

1.6 Evaluating the Performance of the Board of

Directors and of Special Committees

The Board of Directors and the special committees conduct annual assessments of their performance
by way of 1) individual self-evaluations and 2) general evaluations of the entire board or committee.
The Board of Directors will study these assessments, make conclusions, and devise measures to expedite
improvements and greater operational effectiveness of the Board and the special committees.

1.7 Directors’ Development

SCG encourages the Board of Directors to continually enhance their personal skills and competencies
required for its diverse range of business interests. The Company’s ‘Director Induction Program’ has been
established as a practical set of preparatory guidelines for a new director, enabling him or her to begin
work as soon as possible. The Corporate Secretary acts as a coordinator in this transition period in three
ways:

1. by gathering data that describes the legal and supervisory role of the director in performing his or
her duties.
2. by providing necessary information concerning the director’s duties for preliminary reference and
study material.
3. by arranging meetings between the director and the Chairman, other directors, the
management, and department managers. The new director will thus be able to learn and inquire
in depth the operations of SCG.
For directors who are already engaged in their duties, the Company supports their ongoing
participation in seminars and courses benefiting to their work, and also organizes get-togethers where
they can exchange ideas with other directors and members of management.
2
Practical Guidelines
Concerning Management and
Internal Controls
10

2.1 The Business Philosophy and Code of Conduct

The Board of Directors has established a corporate business philosophy and code of conduct, and has
overseen and supported their constant implementation by staff ever since the Company was founded. These
principles have been written down to serve as guides to good conduct for employees of all levels from their
first day on the job at SCG. The Board of Directors, of course, must primarily be role model of such behaviors.
Furthermore, SCG has set policies of good corporate citizenship that apply wherever it has operations.
In any locality or jurisdiction, SCG takes care to strictly comply with all laws, pay taxes in full, contribute
to social well-being, and conduct its business in a fair and transparent manner.

2.2 Communication between the Board and

the Management

Each director may communicate individually, appropriately, and directly with the management. Such
communication must not take the form, however, of interference in the normal business operations of
the Company.

In addition, the management may be invited to meetings of the Board of Directors to report on the
performance of various business units, to propose plans for the Board’s approval, or to obtain more
understanding of the Board’s policies and recommendations, thereby facilitating more rapid and
effective implementation.

2.3 Systems of Internal Control and Auditing

The Board of Directors requires staff of all levels to maintain their moral and ethical awareness, and
therefore has emphasized the importance of internal control and auditing systems. These systems, while being
effective throughout the organization, must not impede the way of smooth business operations, and must
be simple enough for staff to use them to control, direct, evaluate, and investigate the work on their own.
The purpose of these systems is to reduce the incidence of fraud and authority abuse, like a moat
of morality protecting the corporate fortress from illegal activities. Other related systems for staff are
systems of consultation, complaint, and fact-finding. Through these channels, staff can put forward
questions, anxieties, doubts, and reports of wrongdoing. A whistleblower policy is properly in place to render
confidence and fairness to all staff who make complaints.
SCG’s Office of Internal Audits reports directly to and is under the direction of the Audit Committee.
It conducts precautionary audits in various aspects of the Company’s operations to ensure that they
 11

comply with corporate policies, plans, operational authority, and regulations. It also provides an extra
vantage point by which to assess the Company’s risk management and internal controls for suitability
and effectiveness.

2.4 Risk Management

The Board of Directors is well aware of the importance of risk management, and thus has
established risk management methods in consistent with international standards throughout the
organization. The Audit Committee has been assigned a leading role in directing, controlling, and
evaluating risk management within the Company. Warning signals have been set up, effective assessment
tools have been adopted, and regular reports are made to the Board of Directors. Furthermore, the Board of
Directors has entrusted to management the task of risk management on three levels, namely general
(all of SCG), group-specific, and company-specific. Reports are regularly passed upwards from level to
level, and ultimately to the Audit Committee and the Board of Directors.

2.5 Dealing with Conflicts of Interest

The Board of Directors’ approach to the matter of conflicts of interest is comprehensive, fair, and
transparent. All information concerning these matters of interest is to be disclosed. Any director who
stands to gain or lose from such transactions under consideration by the Board must not participate in
the decision-making process. Furthermore, the SCG Code of Conduct clearly prescribes the practical
guidelines that apply to staff who have conflicts of interest, and these principles have long been in effect.

2.6 Controlling the Use of Inside Information

It is the policy of the Company that no director, executive, or employee involved with information that
could affect the Company’s stock price should buy or sell securities during the blackout period, i.e. while
financial statements or other information affecting stock prices are being disclosed. Furthermore, at no
time should an employee who has obtained information or anything pertaining to SCG that has not
been disclosed to the public seek any benefit therefrom. SCG’s rules concerning insider trading have
been clearly explained in the SCG Code of Conduct, in the section regarding conflicts of interest, to
serve as a guide for all staff.

2.7 Appointment and Succession of Senior Executives

The Company’s method of selecting senior executives of various levels needs to be both reasonable
and transparent. The selection process is to convince the public that SCG executives are chosen for
12
their professionalism and are free of the influence of major shareholders or other parties. Plans for
implementing this process are annually considered and reviewed by the Board of Directors. To prepare
for their upcoming promotion, the persons who succeed to such important positions receive individual
development courses to enroll.

2.8 Evaluating the Performance of the President

The performance of the President & CEO is assessed by the operational results of the business and the
Company, his or her qualities of leadership, exemplary conduct, and ability to implement the policies
given by the Board of Directors. The Remuneration Committee considers this information in determining
his or her remuneration, which is then proposed to the Board of Directors for approval.

2.9 Compensation for Senior Executives

The Board of Directors decides on compensation for senior executives, following a review process
undertaken by the Remuneration Committee. The rate of compensation is determined by considering
the duties and responsibilities of the position, individual performance, operating results of the business
group in which the executive is serving, along with the operating results of the Company as a whole and
together with the compensation rates of leading corporations in the same or similar fields of business.

2.10 Supporting the Work of SCG’s Board
of Directors and Management

The Secretary to the Board of Directors has the task of co-ordination between the Board of Directors
and the management. The Corporate Secretary Office is responsible for supervising legal matters and
related corporate rules and regulations, as well as the activities of the Board of Directors. This Office
also co-ordinates matters to ensure that resolutions of the Board of Directors are put into practice, and
properly compiles and stores all relevant important data and documents.
3
Conduct Towards Stakeholders
14

3.1 Conduct towards Shareholder

The Board of Directors is well aware of its duty to protect the rights and interests of shareholders, both
large and small, with all due fairness. Shareholders have the right, moreover, to protect their own
interests by expressing their opinions and making recommendations through various channels provided
by the Company, and by jointly making decisions on important matters through voting on resolutions at
shareholders’ meetings. They may also nominate individuals to become directors and replace directors
whose terms of office have expired, determine compensation levels for directors, appoint an Auditor
and determine his or her audit fee, and other matters that have a significant impact on their interests.
They are entitled, furthermore, to receive accurate, complete, open, and transparent information, which
they may examine on the Company’s website.

3.2 Shareholders’ Meetings

The Board of Directors is to arrange for an annual general meeting of shareholders within three months
after the final day of the Company’s fiscal year. The notice of the meeting contains the agenda of the
meeting, with clear recommendations from the Board of Directors regarding each item of the agenda.
This notice is sent well in advance to all shareholders, both in Thailand and abroad, so that they may
all have an equal opportunity to express their opinions and make inquiries in the meeting concerning
each item of the agenda.
In addition, the Board of Directors may call for an extraordinary meeting of shareholders at any time.
Likewise, shareholders whose holdings constitute at least one fifth of all shares issued by the Company,
or twenty-five shareholders whose holdings constitute at least one tenth of all shares issued by the
Company, may subscribe their names in a letter requesting the Board of Directors to call an
extraordinary meeting of shareholders at any time deemed appropriate according to the company’s
Articles of Association. In such cases, the reason for the meeting must be clearly stated.

3.3 Respect for the Rights of Various Groups of

Stakeholders

The Board of Directors is to conduct its business with fairness and respect for the rights of stakeholders,
comprising shareholders, employees, joint venture partners, creditors, business partners, clients, product
and service suppliers, various communities, society as a whole, and the environment. To this end, it has
made policies and entrusted to management the task of implementing systems for interacting with
these groups, thereby instilling confidence in all stakeholder segments that SCG takes responsibility for
dealing justly with.
 15

3.4 Information Disclosure

Disclosure of financial, investment-related, and other corporate information, because it affects the
decisions of investors and stakeholders, must be controlled and subject to direction. Because
of its impact on shareholders, legal and accounting standards require that such information be
accurate, complete, sufficient, credible, timely, and open to examination. The Company has assigned the
responsibility for disclosing corporate information to the President & CEO or whomever the President &
CEO has delegated this task.

3.5 Channels of Communication

The Board of Directors has delegated to the management the task of ensuring that the communication
of corporate information to investors, the mass media, and other stakeholders is accurate, complete,
and timely. Various channels are made available, including printed materials, newspapers, radio,
television, meetings, press releases, the corporate website, and e-mail, the latter being particularly
good for speed and accuracy. The management also arranges for regular informational visits between
investors and analysts and select executives. The Investor Relations Office is responsible for organizing
these activities.

3.6 Responsibility to Society

SCG’s business philosophy is based on moral principles and the sense of responsibility to society.
SCG aims to be a good corporate citizen wherever it operates. This involves helping to build up
communities and contribute to improvements in their living standards, as well as promoting and
supporting social activities in various fields on a consistent basis.
Conclusion
Because the Board of Directors recognizes the importance of good
corporate governance, and believes that implementing these
principles has already produced considerable success, SCG will
continue to adhere to the guidelines by its core philosophy and
sustain the work system under the principles of good corporate
governance. It is the Board’s function and responsibility to
determine policies and conduct the Company’s business in ways
that are correct and effective, and encourage and educate all staff
to practice these principles and the ethical code of SCG throughout
the organization.

SCG believes that the effective application of principles of good

corporate governance to corporate management will not only enhance
the short-term and long-term competitiveness of the Company but also
increase the confidence that investors, financial institutions, and
business allies have in doing business with SCG, and will raise SCG’s
value for shareholders. The benefit to be obtained thereby is one in
which the interests of all stakeholders, the society and the environment,
will be balanced and ever sustained.