Governance Structure and PTT Board of Directors 

Governance structure and Board of Directors

PTT has implemented a governance framework comprising committees appointed by shareholders to oversee the Company's operations. These committees, totaling five, assist in filtering essential tasks. They include the Audit Committee, the Nomination Committee, the Remuneration Committee, the Corporate Governance and Sustainability Committee, and the Enterprise Risk Management Committee, with the Management Executive responsible for overall business operations and management and the Chief Executive Officer and President being the highest executive of the Company.

The PTT Board of Directors plays a vital role in setting organizational strategies, vision, policies, and significant operational guidelines. This includes approving annual operational plans and budgets, determining compensation, and managing risks. They consider various economic, social, and regulatory risks that may impact business operations. They oversee management operations by reviewing performance reports, both financial and non-financial, at quarterly BOD meetings. They also monitor management activities through specialized committees to comprehensively filter crucial tasks. This ensures the effective execution of strategies and policies, promotes business competitiveness, and ensures ethical business conduct in line with governance principles. It ensures transparency, fairness, accountability, and balanced treatment of shareholders, as well as providing equitable returns to shareholders.

The Management Departments wield authority and carry out their duties in managing the Company in strict accordance with approved plans or budgets from the PTT Board of Directors. Their actions are guided by unwavering diligence, integrity, and honesty, ensuring the utmost benefit for the Company and its shareholders. Through the PTT Management Committee (PTTMC) and 55 other management-level committees, they oversee and manage internal affairs with the aim of maximizing efficiency.

PTT Board of Directors

The PTT Board of Directors operates within a one-tier system, consisting of a minimum of 5 and a maximum of 15 directors. Presently, there are 12 independent directors and 2 non-executive directors. Notably, the Chairman of the Board is distinct from the Chief Executive Officer and President and does not hold an executive position within PTT. This practice has been consistently adhered to since 2001 to ensure transparency and accountability throughout the organization.

The PTT Committee is composed of individuals with knowledge, abilities, expertise, and experience that greatly benefit PTT. They demonstrate dedication and allocate ample time to fulfill their responsibilities. Appointed by shareholders, the PTT Board of Directors oversees PTT’s operations, appoints management teams to lead business operations, establishes specialized committees to handle specific assignments, appoints company auditors and secretaries, and ensures compliance with legal requirements. Additional details regarding the Board of Directors’ policies and practices can be found in Form 56-1 One Report, including disclosure of the background and position details of each director in the Annual Report/56-1 One Report of 2023, and on the PTT website. 

Process of Board of Directors Nomination and Selection

The Company’s Board of Directors is appointed through a rigorous selection process overseen by the Nomination Committee. Currently, there are four non-executive directors who possess industry experience relevant to the energy sector, meeting the criteria set by the Global Industry Classification Standard (GICS) Level 1. However, PTT places significant emphasis on board diversity, seeking not only qualified and experienced individuals but also those from diverse professional backgrounds crucial for effective corporate governance. This includes individuals with expertise in energy/petroleum business, law/legal affairs, and accounting/finance. Moreover, importance is given to social diversity, considering factors such as ethnicity, gender, religion, beliefs, and culture. In 2023, the Board welcomed one female director, Ms. Pongsawat Neelayothin. Besides, average tenure of the directors is 2.5 years.

In 2023, the participation rate of PTT directors in board meetings averaged 97%, exceeding the Company's target of 80%.

 

Sustainability-related Roles and Responsibility of the Board of Directors

Sustainability-related roles and responsibility of the Board of Directors 

PTT has implemented a robust governance framework to steer the business towards sustainability. This framework delineates clear structures, roles, and responsibilities across various levels, including the Board of Directors, management, executives, and internal units. Its primary objective is to drive, support, monitor, and review key management issues and sustainability impacts comprehensively, ensuring efficient and effective attainment of objectives as shown in the diagram below.

• Organizational Structure: At the operational level, the Executive Vice President of Sustainability Management operates under the Senior Executive Vice President of Corporate Strategy and Sustainability. This unit is directly responsible for sustainability management, tasked with setting policies, strategies, and driving various departments to implement relevant initiatives.
• PTT Board of Directors and Management Committee consist of:

  - The Governance Risk and Compliance Management Committee (GRCMC), responsible for overseeing the overall sustainability and filtering details before proposing to the Corporate Governance and Sustainability Committee (CGSC), entrusted by the PTT Board to guide operations in sustainability matters for further consideration.
  - The PTT Group Sustainability Management Committee (GSMC), tasked with assessing, advocating, and supporting sustainable business practices across the PTT Group, ensuring alignment in the same direction.

Management and Governance

Sustainability material topics and sustainability impacts of PTT, PTT Board of Directors, and management-level committees under the prescribed governance structure play crucial roles in providing guidance, advice, monitoring operations, and endorsing various initiatives to drive the organization towards sustainability as follows:

• Endorsing and reviewing the Company's vision, strategic framework, and business plans.
• Supporting policies that demonstrate a commitment to responsible business practices, including sustainability management policies, corporate governance policies, human rights declarations, and 
• other pertinent policies.
• Approving strategic directions, management processes, sustainability management master plan.
• Sanctioning the identification and assessment of sustainability material topics that may affect the economy, environment, stakeholders, and human rights of the organization.
• Offering guidance, consultation, and assistance to strengthen relationships with relevant stakeholders, such as governmental bodies and diverse collaborative networks, in managing the impacts of sustainability material topics.
• Monitoring progress and regularly evaluating the effectiveness and efficiency of managing the impacts of sustainability material topics for the organization on a quarterly basis.

Knowledge and Potential Development for the Board of Directors

The PTT Board of Directors and senior executives place significant emphasis on participating in training seminars relevant to enhancing their knowledge and capabilities in fulfilling their governance responsibilities consistently (Details of these training sessions are outlined in Section 8 of the Corporate Governance Report on PTT Directors Development in Annual Report/56-1 One Report 2023). Over 90% of PTT board members have received training from the Thai Institute of Directors (IOD) and other leading organizations and institutions. They have also actively participated in seminars related to their roles. Additionally, PTT arranges lectures by experts from prominent consulting firms and internal units to provide valuable insights for sustainable business practices through In-house Briefings. Furthermore, board members are encouraged to visit various organizations and company as appropriate, fostering perspectives that are beneficial for the sustainable growth of PTT's business.

In 2023, board members actively engaged in training sessions and seminars designed to enrich their expertise in executing their roles and contributing to the Company's endeavors. Some notable examples include:

• Attending lectures on hydrogen-related technology and business operations.
• Participating in seminars on legal regulations relevant to the natural gas operations of PTT.
• Engaging in discussions hosted by the NBI Think Tank on geopolitics and strategizing Thailand's trade and investment policies, including those of the PTT Group.
• Listening to presentations on updates regarding insider trading risks.
• Knowledge sharing sessions focusing on the rejuvenation of DNA through Genetic Stability Molecule.

In addition, PTT board members actively engage in other company activities, including businesses visit of PTT and its subsidiaries, both locally and internationally. They also conduct operational visits, such as those to the GSM Shipper Control Center, overseen by the Audit Committee, among others.

Performance Evalution and Compensation

Performance evalution for the Board of Directors

PTT conducts regular performance evaluations of the Board of Directors annually, following its good corporate governance principles. The evaluation consists of five forms: Board Evaluation, Individual Self-Assessment, Peer Evaluation, Specific Committee Evaluation (committee members evaluate the operations of the Specific Committee they serve), Chairman Evaluation, and Satisfaction Evaluation of Specific Committees and the Chairman of each Specific Committee (evaluated by all committee members) as detailed in the Form 56-1 One Report 2023 under Section 8 Key Performance Results of Corporate Governance regarding the self-assessment of the Board of Directors.

The Board of Directors can utilize the information obtained from these evaluations to review the performance, identify issues, and address challenges encountered in the past year. This helps in enhancing the effectiveness of the Board's duties at PTT. The evaluation results are disclosed in the Form 56-1 One Report 2023. Additionally, since 2017, key performance indicators (KPIs) have been used to measure the Board's performance, aiding in the consideration of board member compensation.

The PTT Board of Directors also undergoes evaluations of their duties, conducted independently. These evaluations are conducted annually by the State Enterprise Policy Office, Ministry of Finance, and biennially (or as per the schedule set by the Thai Institute of Directors) by the Thai Institute of Directors (IOD). PTT has established a policy for fair and rational director compensation, with the Remuneration Committee tasked with reviewing it. This review considers the appropriateness and alignment with the directors' responsibilities, the Company's financial status, PTT's performance under the Performance Agreement (PA) system, and comparisons with companies in similar industries.

Director Remuneration Policies

PTT has instituted a comprehensive policy for fair and justified director compensation. The Remuneration Committee is responsible for thoroughly reviewing director remuneration to ensure its fairness. The committee adheres to industry best practices when evaluating compensation for both regular directors and members of specific committees within PTT for 2023. Various factors are taken into account during this assessment, including the practices of companies in the same industry, leading companies at national and global levels, principles of governance for state enterprises, financial performance, business scale, board responsibilities within PTT, and economic growth indicators. Compensation is structured to include monthly pay, meeting allowances, and bonuses. Furthermore, directors serving on other specific committees receive additional compensation commensurate with their expanded duties. The approved director compensation for the fiscal year 2023 was endorsed at the Annual General Meeting of Shareholders held on Wednesday, April 12, 2023, as outlined below:

1) Director compensation and meeting allowance for PTT board members include:

• Monthly compensation: 30,000 baht per member, with the Chairman of the Board receiving twice the amount of regular members.
• Meeting allowance: 60,000 baht per meeting for attending members. The Chairman of the Board may receive more than 25% of regular members, with a restriction of up to 1 meeting per month. In exceptional circumstances, the allowance may exceed 1 meeting but should not exceed 15 meetings per year.

2) Compensation and meeting allowance for specialized committees appointed by the PTT board remain unchanged as follows:

2.1 Audit Committee

• Monthly compensation: 15,000 baht per member, consistent with the previous rate, with the Chairman of the Committee receiving the same amount as regular members.
• Meeting allowance: 45,000 baht per meeting, limited to a maximum of 1 meeting per month for attending members. The Chairman of the Committee may receive more than 25% of regular members, and the Secretary receives a monthly compensation of THB 7,500 (unchanged).

2.2 For other committees such as the Nomination Committee, Remuneration Committee, Corporate Governance and Sustainability Committee, Risk Management Committee, and other subcommittees that may be appointed by the Board as necessary and appropriate in the future, the compensation remains unchanged as follows:

• Monthly compensation: There is no monthly compensation as before.
• Meeting allowance: 30,000 baht per meeting, limited to attending members. The Chairman of the Committee may receive more than 25% of regular members.
• Other benefits: There are no other benefits as before.

3) PTT Board of Directors’ bonuses for 2023

The bonus compensation for the Board of Directors for 2023 will be determined based on the Company's performance or net profit of PTT. The bonus rate will be 0.05% of the net profit for 2023, and it will be calculated and paid according to the tenure within the limit of 60,000,000 baht for the entire Board. The Chairman of the Board of Directors of PTT will receive a bonus higher than that of other directors at a rate of 25% (paid according to the existing policy).

Furthermore, individual compensation received by the directors for 2023 has been disclosed in Section 8 Key Performance Results of Corporate Governance on the compensation of PTT Board of Directors in the Annual Report/Form 56-1 One Report 2023.

Chief Executive Officer and President Remuneration Policies

For the evaluation of the performance of the Chief Executive Officer and President, the Remuneration Committee of PTT will determine compensation to reflect performance management as well as the practices and standards of leading businesses in the same industry under clear, transparent, and fair criteria. The salary increase rate and annual bonus rate will be aligned with the scores of Key Performance Indicators (KPIs) and current performance (short-term), as well as the long-term strategy of PTT, which demonstrates the organization's vision and value creation/enhancement in the long run. Principles and appropriate compensation amounts will be presented to the PTT Board of Directors for consideration and approval. Key factors in evaluating performance include: Factor 1) Performance according to the State Enterprise Assessment Model (SE-AM), Factor 2) Performance according to the vision presented to the PTT Board of Directors, Factor 3) Management and leadership capabilities, Factor 4) 360-degree assessment.

High-ranking Executive Remuneration Policies

PTT disburses employee salaries monthly, adhering to a structured salary framework aligned with the roles and responsibilities of executives and staff across different job levels. This framework ensures that the salary levels for each position reflect the corresponding duties and responsibilities. Moreover, PTT benchmarks total compensation for executives and staff against industry standards to ensure that the salary structure remains competitive and appropriate. Additionally, PTT conducts annual reviews of employee salaries based on individual Key Performance Indicators (KPIs) to ensure fair and equitable compensation.

PTT assesses the provision of motivational incentives to its executives and staff through annual bonuses. These proposals are brought before the PTT Board of Directors for review and approval. Factors taken into consideration include the Company's performance for the fiscal year, the effectiveness of PTT's initiatives, inflation rates, and market research comparing bonus structures across peer companies in the Oil & Gas sector. Additionally, PTT implements a variable bonus program for executives and managerial personnel, aligning with individual KPI assessments to encourage goal achievement within the organization.

The Clawback Provision of the Company complies with Section 85 of the Public Limited Companies Act, B.E. 2535 (A.D. 1992) and Sections 89/7 and 281/2 of the Securities and Exchange Act, B.E. 2535 (A.D. 1992), as amended in 2008. This law stipulates that in conducting its business, executives must fulfill their duties with responsibility and comply with the law, the company's objectives, regulations, and resolutions of the Board of Directors, as well as decisions made at shareholder meetings. In cases where executives are found to have failed in their duties, lacked prudence, or acted dishonestly and unethically, the Company has the right to reclaim any benefits and profits received (Clawback) from the executives. This is determined based on the executives' performance that does not meet the Company's criteria, and the executives may face both civil and criminal liabilities.

Fixed and Variable Incomes 

PTT pays for employee salary once a month. Employees earn their salary based on their salary structure which aligns with their job weighs and levels. Salary structure of each job level is set to comply with the scope of responsibilities of executives and employee at each level. PTT benchmark salary structure with its industry peers to ascertain an appropriate salary structure. To this, PTT will increase the salary for their employees according to their performance every year.

PTT pays annual bonuses as a motive for their executives and employees once a year. PTT will present the employee bonus payment policy to the Board for consideration and approval. The factors which the Board consider are PTT performance of that year, and outcomes of the overall performance of PTT, benchmarked with companies in Oil & Gas business and other state-owned companies. Executives and employees who act as team leads or heads will receive variable bonuses reflecting their KPIs results. These are the motives that PTT uses to achieve the goals of the company.

PTT complies with Clawback Provision, referring to the Section 85 of the Public Company Limited Act, B.E. 2535 (1992), and Section 89/7, and 281/2 Securities and Exchange Act, B.E. 2535 (1992), additional revision B.E. 2551 (2008). The Acts have stipulated that the executives shall perform their duties with full responsibilities, while strictly complying with the laws and corporate rules, and abiding by the Board’s and shareholders’ resolutions. In case that executives fail to perform their duties and involve in misconducts, the company can command them to return their bonusses and compensations. They may also be subject to the civil penalties and/or criminal punishments.

Retirement Benefits

In addition to providing retirement benefits according to the rates specified in the announcement of the State Enterprise Labor Relations Committee when executives and employees reach retirement age, PTT recognizes the importance of financial planning for executives and employees. Therefore, a reserve fund for retirement is established to ensure sufficient savings for future expenses after retirement and to provide assistance to executives, employees, and their families in terms of healthcare after retirement. PTT has arranged for executives, employees, and their families to have the right to receive medical check-ups and treatment at PTT's healthcare facilities without incurring any expenses.

The process of determining the compensation for the directors and performance results

Compensation for board members is disclosed individually, while executive compensation is presented as a total sum. Both sets of data undergo thorough examination by the Company's auditors and Audit Committee to ensure transparency and accuracy.

The process of determining the total compensation for the PTT Chief Executive Officer and President and performance results

The Company's Board has mandated that the Chief Executive Officer and President presents the annual performance results to the Remuneration Committee for consideration. Subsequently, the Committee determines the compensation for the Chief Executive Officer and President based on performance, encompassing both financial and non-financial aspects. However, these outcomes remain undisclosed.

Performance evaluation criteria are designed to cover challenging targets aligned with the Company's short and long-term strategies, including social, community, and environmental responsibilities.

As a state enterprise and a company listed on the stock market, PTT operates efficiently under the Thai government, utilizing the State Enterprise Assessment Model (SE-AM) prescribed by the State Enterprise Policy Office under the Ministry of Finance to monitor and evaluate its performance. Consequently, evaluating the compensation of top management involves four criteria: SE-AM KPI (30%), performance aligned with the Company's vision as proposed by the Chief Executive Officer and President to the PTT Board (30%), managerial capabilities and leadership qualities (30%), and 360-degree assessments (10%).

The financial performance indicator relevant to the CEO's compensation is the Return on Invested Capital (ROIC).

Moreover, the CEO's vision emphasizes the 4R strategy, including Resilience, Reenergize, Reimagination, and Reform, with a particular focus on Reimagination. This aspect underscores expanding business operations to adapt to forthcoming changes, shaping the next normal. This expansion includes energy sectors still showing growth potential, such as LNG and electricity, as well as accelerating the development and expansion of new business models beyond hydrocarbon industries. This encompasses both future energy businesses and ventures beyond the energy business.

The Remuneration Committee will assess the financial performance of the PTT Group by comparing its Return on Invested Capital (ROIC) with companies in the same industry. The evaluation of ROIC efficiency aligns with the CEO's compensation to ensure confidence that PTT's compensation structure is appropriate and competitive.

Total compensation of the PTT Chief Executive Officer and President in 2023 (Unit: baht) 

The process of determining the compensation for senior executives and performance results

In 2023, the Key Performance Indicators (KPIs) transmitted to executives and employees encompassed the organization's management of its economic, environmental, and social impacts. These KPIs aimed to drive operational efficiency by enhancing the value of PTT's products and services while reducing greenhouse gas emissions. This strategic approach fosters the sustainable development of the PTT Group.

PTT establishes compensation for executives and employees that aligns with the Company's performance both in the short and long term through performance management, a continuous and systematic process. This process aims to drive the organization's performance towards business objectives and aligns with the assessment criteria of state-owned enterprise quality systems. It focuses on linking performance goals at the organizational, departmental, and individual levels, consistent with PTT's strategic direction, to ensure that performance outcomes align with PTT's business plans.

The evaluation of executives' and employees' performance is conducted based on individual performance outcomes, reviewed annually. Key Performance Indicators (KPIs) are utilized for management, performance assessment, and compensation determination. These KPIs are divided into two main categories: Corporate KPIs and Functional KPIs (business/operational/individual KPIs). Individual KPIs are linked to the Balanced Scorecard's four perspectives: Financial, Customer, Internal Process, and Learning and Growth. PTT has added two additional critical perspectives: Product and People, to align with current performance (short term) and the Company's long-term strategic plans, ensuring sustainable goal achievement.

The process of performance evaluation and compensation determination for senior-level executives (from vice president level and above) involves the top executive as the evaluator and decision-maker. After the top executive evaluates performance and sets compensation, it must be presented to the Remuneration Committee of PTT for acknowledgment. Additionally, there will be regular performance assessments every six months to ensure ongoing monitoring of performance.

Executive Compensation

The Management Departments are responsible for overseeing the overall operations and administration of the Company. The Chief Executive Officer and President holds the highest authority and responsibility for managing the Company according to plans and budgets approved by the PTT Board of Directors. He/she strictly upholds the principles of integrity, honesty, and transparency, ensuring the best interests of the Company and shareholders are preserved. The Management Departments exercise their authority through the PTT Management Committee (PTTMC) and various other management committees, totaling 50, which oversee and manage internal affairs to maximize efficiency. Compensation considerations for the Management Departments adhere to policies and criteria set by the PTT Board of Directors. This includes evaluating PTT's performance based on the State-Owned Enterprise Assessment Model (SE-AM KPIs) established by the State Enterprise Policy Office (SEPO) under the Ministry of Finance, as well as Corporate KPIs covering environmental, social, and governance aspects comprehensively. The Management Departments at every level collaboratively sets indicators and group-level objectives annually. These serve as guidelines for conducting business and are used to evaluate operational performance. In 2023, indicators linked to sustainability issues include GHG emissions, Safety Management Effectiveness, Employee Engagement Score, and Non-Compliance.