Management 

(1) Management Structure

 

Names of Management or Controlling Persons

Board of Directors comprises

  ----- -------------------- ------------------- ---------------------------
  1.    Mr. Chirayu          Isarangkun Na       Chairman
                             Ayuthaya            

  2.    Air Chief Marshal    Sindhvananda        Independent Director
        Kamthon                                  

  3.    Mr. Snoh             Unakul              Director

  4.    Mr. Sumet            Tantivejkul         Independent Director

  5.    Mr. Pricha           Attavipach          Independent Director

  6.    Mr. Panas            Simasathien         Director

  7.    Mr. Yos              Euarchukiati        Director

  8.    Mr. Arsa             Sarasin             Independent Director

  9.    Mr. Chumpol          NaLamlieng          Director

  10.   Mr. Tarrin           Nimmanahaeminda     Independent Director

  11.   Mr. Pramon           Sutivong            Director

  12.   Mr. Kan              Trakulhoon          Director, President & CEO

        Mr. Worapol          Jennapar            Secretary to the Board
  ----- -------------------- ------------------- ---------------------------

Top Executives of Siam Cement Group (SCG) comprises

+---+--------------------+-------------------+--------------------------+
| 1 | Mr. Kan            | Trakulhoon        | President & CEO, SCG     |
| . |                    |                   |                          |
+---+--------------------+-------------------+--------------------------+
| 2 | Mr. Chaovalit      | Ekabut            | Vice President – Finance |
| . |                    |                   | and Investment & CFO,    |
|   |                    |                   | SCG                      |
|   |                    |                   |                          |
|   |                    |                   | President, SCG           |
|   |                    |                   | Investment               |
+---+--------------------+-------------------+--------------------------+
| 3 | Mr. Aree           | C                 | Vice President –         |
| . |                    | havalitcheewingul | Corporate                |
|   |                    |                   | Administration, SCG      |
+---+--------------------+-------------------+--------------------------+
| 4 | Mr. Cholanat       | Yanaranop         | President, SCG Chemicals |
| . |                    |                   |                          |
+---+--------------------+-------------------+--------------------------+
| 5 | Mr. Roongrote      | Rangsiyopash      | President, SCG Paper     |
| . |                    |                   |                          |
+---+--------------------+-------------------+--------------------------+
| 6 | Mr. Pramote        | Techasupatkul     | President, SCG Cement    |
| . |                    |                   |                          |
+---+--------------------+-------------------+--------------------------+
| 7 | Mr. Pichit         | Maipoom           | President, SCG Building  |
| . |                    |                   | Materials                |
+---+--------------------+-------------------+--------------------------+
| 8 | Mr. Kajohndet      | Sangsuban         | President, SCG           |
| . |                    |                   | Distribution             |
+---+--------------------+-------------------+--------------------------+

Since January 1, 2011, SCG has announced its new organizational
structure with some changes as follow:

1.  Mr. Roongrote Rangsiyopash was retired from the position of Vice
    President & CFO of SCG and was appointed as President of SCG Paper.

2.  Mr. Chaovalit Ekabut was retired from the position of President of
    SCG Paper and was appointed as Vice President – Finance and
    Investment & CFO of SCG and President of SCG Investment.

3.  Mr. Aree Chavalitcheewingul was appointed as Vice President –
    Corporate Administration of SCG.

4.  Mr. Damri Tunshevavong was retired from the position of President of
    SCG Investment.

The Attendance of the Directors in Relevant Committee Meetings in 2009
(number of times)

+---+----------------+---------+--------+---------+--------+----------+
| D |                | Board   | The    | The     | The    | The 2009 |
| i |                | of      | Audit  | Gov     | Remune | Annual   |
| r |                | Di      | Com    | ernance | ration | General  |
| e |                | rectors | mittee | and     | Com    | Meeting  |
| c |                |         |        | Nom     | mittee | of       |
| t |                |         |        | ination |        | Shar     |
| o |                |         |        | Co      |        | eholders |
| r |                |         |        | mmittee |        |          |
| s |                |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
|   |                | (Total  | (Total | (Total  | (Total | (Total   |
|   |                | 12      | 4      | 5       | 3      | 12       |
|   |                | Dir     | Me     | M       | Me     | Di       |
|   |                | ectors) | mbers) | embers) | mbers) | rectors) |
|   |                |         |        |         |        |          |
|   |                | Total   | Total  | Total 4 | Total  | on March |
|   |                | 12      | 9      | Tim     | 6      | 25, 2009 |
|   |                | Tim     | Time   | es/Year | Time   |          |
|   |                | es/Year | s/Year |         | s/Year |          |
+---+----------------+---------+--------+---------+--------+----------+
| 1 | Mr. Chirayu    | 10/10   |        |         |        | 1/1      |
| . | Isarangkun Na  |         |        |         |        |          |
|   | Ayuthaya       |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 2 | ACM Kamthon    | 9/10    | 8/8    |         |        | 1/1      |
| . | Sindhvananda   |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 3 | Mr. Snoh       | 10/10   |        | 3/3     |        | 1/1      |
| . | Unakul         |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 4 | Mr. Sumet      | 10/10   | 7/8    | 3/3     |        | 1/1      |
| . | Tantivejkul    |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 5 | Mr. Pricha     | 10/10   | 8/8    |         |        | 1/1      |
| . | Attavipach     |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 6 | Mr. Panas      | 10/10   |        | 3/3     |        | 1/1      |
| . | Simasathien    |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 7 | Mr. Yos        | 9/10    |        |         | 6/6    | 1/1      |
| . | Euarchukiati   |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 8 | Mr. Arsa       | 9/10    |        | 2/3     |        | 1/1      |
| . | Sarasin        |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 9 | Mr. Chumpol    | 10/10   |        |         | 6/6    | 1/1      |
| . | NaLamlieng     |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 1 | Mr. Tarrin     | 10/10   | 8/8    | 3/3     |        | 1/1      |
| 0 | N              |         |        |         |        |          |
| . | immanahaeminda |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 1 | Mr. Pramon     | 10/10   |        |         | 4/4    | 1/1      |
| 1 | Sutivong       |         |        |         |        |          |
| . |                |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+
| 1 | Mr. Kan        | 10/10   |        |         |        | 1/1      |
| 2 | Trakulhoon     |         |        |         |        |          |
| . |                |         |        |         |        |          |
+---+----------------+---------+--------+---------+--------+----------+

Notes : 1.The five independent directors are number 2, 4, 5, 8 and 10.

2. The four Audit Committee members are number 2, 4, 5 and 10.

3. The five Governance and Nomination Committee members are number
3,4,6,8 and 10.

4. The three Remuneration Committee members are number 7, 9 and 11.

Independent Directors’ Training

Conducted by Thai Institute of Directors Association (IOD)

+-----------------------+--------------+--------------+---------------+
| Independent Dir       | Trai         |              |               |
| ectors of the company | ning Courses |              |               |
+-----------------------+--------------+--------------+---------------+
|                       | Directors    | Directors    | Audit         |
|                       | C            | A            |               |
|                       | ertification | ccreditation | Committee     |
|                       | Program      | Program      |               |
|                       |              |              | Program       |
|                       | (DCP)        | (DAP)        |               |
|                       |              |              | (ACP)         |
+-----------------------+--------------+--------------+---------------+
|                       |              |              |               |
+-----------------------+--------------+--------------+---------------+
| 1. ACM Kamthon        | -            | Class 18 /   | -             |
| Sindhavananda         |              | 2004         |               |
+-----------------------+--------------+--------------+---------------+
| 2. Mr. Sumet          | Class 30 /   | -            | Class 11 /    |
| Tantivejkul           | 2003         |              | 2006          |
+-----------------------+--------------+--------------+---------------+
| 3. Mr. Pricha         | Class 39 /   | -            | Class 11 /    |
| Attavipach            | 2004         |              | 2006          |
+-----------------------+--------------+--------------+---------------+
| 4. Mr. Arsa Sarasin   | -            | Class 5 /    | Class 11 /    |
|                       |              | 2003         | 2006          |
+-----------------------+--------------+--------------+---------------+
| 5. Mr. Tarrin         | -            | -            | -             |
| Nimmanahaeminda       |              |              |               |
+-----------------------+--------------+--------------+---------------+

The Board of Directors and Top Executives of SCG

The Board of Directors

  Authorized directors whose signatures shall bind the company

Two of the five directors, namely, Mr. Snoh Unakul, or Mr. Yos Euarchukiati, or Mr. Panas Simasathien, or Mr. Pramon Sutivong, or Mr. Kan Trakulhoon jointly signed their names.

  Directors' term of office

The number of years in position during each term of office

The Articles of Association of the company has specified the number of years each director can serve in each term of office according to Public Limited Companies Act. At an annual general meeting of shareholders, one- third of the directors shall retire. However, if the number of directors is not a multiple of three, the number of directors closest to one-third shall retire. The director who has held office longest shall retire. Currently, the board consists of 12 directors, each of which shall hold office for a three-year term. However, the director who vacates office maybe re-elected again.

Number of terms served as director

The company believes that every director of the company elected at the general meeting of shareholders are highly qualified and possessing knowledge and capabilities at the forefront of Thailand. More importantly, they have strong track records in corporate governance, morale & ethics, and strong performance in overseeing the development and progress of SCG. As a result, if the shareholders are confident of their trustfulness and elect them for another term, the company shall respect the shareholders’ right and decision. With the aforementioned reasons, the company, therefore, does not limit the number of consecutive terms of office of the directors.

  Scope of Authority of the Board of Directors

  The Board of Directors has the following authorities:

1.  Fiduciary Duty: act in a fiduciary capacity to administer the
    corporate affairs for the best interests of the shareholders by
    closely observing the following duties:

    1.  Duty of Care: cautiously and carefully perform its duties.

    2.  Duty of Loyalty: perform its duties with faithfulness and
        honesty.

    3.  Duty of Obedience: strictly observe the laws, the objectives,
        the Articles of Association and the resolution of shareholders’
        meeting.

  1.4 Duty of Disclosure: disclose accurate, complete and transparent
  information to the shareholders.

2.  The Board is responsible for establishing corporate vision, the
    mission statement as well as the policy and strategy to align and
    sustain the interests of all stakeholders and create long-term
    shareholders’ value.

3.  The Board is responsible for reviewing the operating plan and
    ensuring maximum competitiveness in global level.

4.  The Board shall oversee and review the performance of SCG as well as
    evaluate the performance of the top executives.

5.  The Board maintains proactive risk management systems as well as
    oversees and review corporate governance to ensure compliance with
    internationally accepted practice.

6.  The Board must devote their time and efforts to the company without
    seeking benefits for themselves or others, and shall not act in a
    conflict of interests or in competition with the company or SCG.

7.  The Board directs the company’s operations in compliance with laws,
    the objectives, the Articles of Association and the resolutions of
    shareholders’ meetings in good faith and with care to preserve the
    interests of the company.

8.  The Board conducts their duty in line with SCG Corporate Governance
    as well as the Stock Exchange of Thailand’s Code of Best Practice
    for Directors of Listed Companies and Guidelines of Securities and
    Exchange Commission.

9.  The Board is responsible for overseeing and monitoring the
    performance of each business unit and overall performance of SCG by
    conducting performance report periodically. The Board also gives
    policies to improve the company’s operations and employee
    development.

10. The Board promotes awareness of the importance of morale and ethics
    among employees at all levels. It also promotes internal control and
    internal audit to ensure that corporate integrity is maintained and
    to prevent any fraudulent practice and illegal act.

11. The Board treats all shareholders, both major and minor
    shareholders, equally with regard to the right equitably.
    Shareholders can actively exercise their rights and access to
    corporate information with correctness, full disclosure,
    transparency and auditability.

12. Being fully aware of its duties and responsibilities, the Board
    shall respect the rights of shareholders, fairly and equally treat
    the shareholders and stakeholders, transparently manage the
    business, and disclose accurate and adequate information.

13. The Board’s performance shall be annually assessed in two
    categories: assessment of the entire Board as a whole and
    self-assessment of each individual director. The results of both
    shall be reviewed by the Board.

14. Directors must attend all meetings of the Board and shareholders.
    Under the unavoidable circumstances that the directors are not able
    to attend the meeting, they must notify the Chairman of the Board or
    the Secretary to the Board in advance.

The Board may seek external consultation or professional advice from
independent consultants or specialists, as deemed necessary and
appropriate.

The Audit Committee

The Audit Committee comprises the following four members:

  ---- -------------------- ------------------- ---------------------------
  1.   ACM Kamthon          Sindhvananda        Chairman

  2.   Mr. Sumet            Tantivejkul         Member

  3.   Mr. Pricha           Attavipach          Member

  4.   Mr. Tarrin           Nimmanahaeminda     Member
  ---- -------------------- ------------------- ---------------------------

The Audit Committee’s term of office

The Audit Committee is subject to a three-year term. Nevertheless, a
retiring director is eligible for re-election.

Scope of Authority of the Audit Committee

  The Audit Committee is authorized to fulfill the following duties:

1.  Review that the company has appropriate financial reporting system
    and the company regularly disclosed its financial statements in
    accordance with the legally defined accounting principle with
    transparency, correctness, and adequacy.

2.  Support the establishment of financial report development in
    compliance with the international accounting standards.

3.  Review that the company has appropriate and effective internal
    control and internal audit systems, which comply with the
    international accepted approaches and standards.

4.  Review that company has in place preventive operation systems to
    enhance operating effectiveness and efficiency.

5.  Review corporate risk management system.

6.  Review that the company is in full compliance with the laws on
    Securities and the Stock Exchange, and other laws relating to the
    company’s business.

7.  Review the report on dishonesty and establish preventive measures.

8.  Review the correctness and effectiveness of the information
    technology system relating to internal control, financial reports,
    and risk management and suggest an up-to-date improvement
    occasionally.

9.  Consider the connected transactions or those of possible conflict of
    interests to ensure compliance with all pertinent laws and
    requirements of SET.

10. Review that the assessment of the entire Audit Committee’s
    performance and the self-assessment of each individual member’s
    performance take place annually.

11. Review and comment on the operation of the audit office and
    coordinate with the company’s auditor.

12. Prepare reports on the supervision of activities of the Audit
    Committee with disclosure in the company’s annual report which is
    duly signed by the chairman of the Audit Committee and contains
    opinions as required by SET.

13. Consider, select, propose the appointment, remuneration, and assess
    the performance of the company’s auditor.

14. Set up meetings with the company’s auditor, which exclude the
    management, at least once a year.

15. Review that the evaluation of the audit office is in compliance with
    international standards.

16. Consider the budgets and manpower of the audit office.

17. Give a comment to appoint, remove, transfer or terminate of
    employment of the director of the audit office.

18. Consider the independence of the internal audit office based on the
    scope of works, reports and line of command.

19. Take other actions in compliance with the law or assigned by the
    Board of Directors.

To fulfill its duties under the scope of authority, the Audit Committee
is authorized to call for and order management, heads of offices, or
employees concerned to present opinions, attend meetings or submit the
necessary documents. In addition, the committee may seek external
consultations and professional advice from independent consultants or
specialists, as deemed appropriate, at the company’s expenses.

The Audit Committee performs duties within the authority and
responsibility under the order of the Board of Directors. The Board is
responsible for the company’s operations and is directly accountable to
shareholders, stakeholders and the public.

Responsibilities of the Audit Committee

1.  In the case that the Audit Committee is informed by the auditor
    about suspicious behaviors of directors, managers or persons
    responsible for business operation of the company, which may violate
    the paragraph 2 of Section 281/2, the Section 305, 306, 308, 309,
    310, 311, 312 or 313 of the Securities and Exchange Act, it is to
    investigate the case and submit preliminary report to the Stock
    Exchange Commission (SEC) and the auditor within 30 days of the date
    it is informed.

2.  Upon finding or having doubt about the following actions or
    transactions, which may significantly affect the financial position
    and performance of the company, the Audit Committee is to report
    such events to the Board of Directors in order to find remedy within
    a period deemed appropriate by the Audit Committee.

    (1) Transactions which may cause conflict of interest

    (2) Frauds or irregular events or material flaws to the internal
    control system

    (3) Violation of law pertaining to SEC, the regulations of SET, or
    other laws relating to business operation of the company.

    Should the Board of Directors or management fail to remedy the
    issues within a timeline as specified by the Audit Committee; a
    member of the Audit Committee may report the issue to SEC or SET.

    The Governance and Nomination Committee

    The Governance and Nomination Committee of the company comprises the
    following five members:

  ---- -------------------- ------------------- ---------------------------
  1.   Mr. Sumet            Tantivejkul         Chairman

  2.   Mr. Snoh             Unakul              Member

  3.   Mr. Panas            Simasathien         Member

  4.   Mr. Arsa             Sarasin             Member

  5.   Mr. Tarrin           Nimmanahaeminda     Member
  ---- -------------------- ------------------- ---------------------------

The Governance and Nomination Committee’s term of office

  The Governance and Nomination Committee is subject to a three-year
  term. Nevertheless, a retiring director is eligible for re-election.

Scope of Authority of the Governance and Nomination Committee

The Governance and Nomination Committee is authorized to fulfill the
following duties:

  Corporate Governance

1.  Draw up a framework and policy on SCG Corporate Governance and
    present it to the Board of Directors.

2.  Make recommendations and give advices to the Board of Directors
    regarding the best practices in corporate governance.

3.  Oversee and monitor the effectiveness of the company’s Board and
    management with reference to SCG Corporate Governance.

4.  Review the company’s corporate governance affairs and compare them
    with those of leading international companies. The committee also
    recommends plans for further improvement of the company’s corporate
    governance from time to time.

5.  Review independency of the Board of Directors and the issues of
    conflict of interests.

6.  Should there be any alteration made to the Directors’
    qualifications, the committee shall review the appropriateness for
    directorship.

7.  Recommend a process of assessing the performance of the Board of
    Directors and the committees and report the assessment results to
    the Board of Directors for the improvement of performance
    efficiency.

8.  Annually review the process of assessing the performance of the
    Board of Directors and the committees.

9.  Regularly make a progress report on the results of performance and
    submit it to the Board of Directors after the meetings of the
    Governance and Nomination Committee.

10. Review and give advices on the structure, roles and responsibilities
    and practices of the Board of Directors and the committees. Should
    there be any alteration to the Charter of the Board of Directors and
    the committees, the Governance and Nomination Committee shall review
    and make appropriate recommendations in keeping it up-to-date.

11. Perform other duties as assigned by the Board of Directors.

  Nomination of Directors and Top Executives

1.  Specify qualifications of a person to be nominated for directorship
    and lay down the director nomination process to replace the retiring
    director, considering diversified candidates with skills,
    experiences and expertise.

2.  Identify qualified candidates to replace directors retiring at the
    end of their terms, or whatever the case maybe, and submit a list of
    nominees to the Board of Directors’ and/or shareholders’ meeting for
    resolution.

3.  Recommend a plan for the succession of the company’s president and
    top executives to the Board.

4.  Perform other duties as assigned by the Board of Directors.

  To fulfill its duties under the scope of authority, the Governance and
  Nomination Committee is authorized to call for and order the
  management, head of offices or employees concerned to give opinions,
  attend the meetings or submit the necessary documents. In addition,
  the committee may seek external consultations and professional advice
  from independent consultants or specialists, as deemed appropriate, at
  the company’s expenses.

The Remuneration Committee

The Remuneration Committee of the company comprises the following three
members:

  ---- -------------------- ------------------- ---------------------------
  1.   Mr. Chumpol          Na Lamlieng         Chairman

  2.   Mr. Yos              Euarchukiati        Member

  3.   Mr. Pramon           Sutivong            Member
  ---- -------------------- ------------------- ---------------------------

The Remuneration Committee’s term of office

  The Remuneration Committee is subject to a three-year term.
  Nevertheless, a retiring director is eligible for re-election.

Scope of Authority of the Remuneration Committee

The Remuneration Committee is authorized to fulfill the following
duties:

1.  Propose guidelines and methods of payment of remuneration, including
    annual bonus and attendance fee, to the Board of Directors and the
    committees appointed by the Board.

2.  Propose policy on management incentives, including salary and annual
    bonus, in line with the company’s operating results, and the
    performance of each executive. Whenever it deems appropriate, the
    committee shall consider the hiring of consulting firms to advise on
    project implementation.

3.  Prior to the submission of the President’s remuneration for the
    Board of Directors’ approval, the Remuneration Committee shall
    assess the President’s performance on an annual basis.

4.  Prior to the submission of remuneration of each top executive for
    the Board of Directors’ approval, the Remuneration Committee shall
    assess the performance of each top executive on an annual basis,
    based on the president & CEO’s recommendations.

5.  Consider, before presenting to the Board of Directors, the budget
    for the salary increase, change of wage/ remuneration and annual
    bonus of the top executives.

6.  Regularly review, study and track the changes and trends in
    remuneration for the Board of Directors and top executives and
    report its findings to the Board for approval.

7.  Consider the remuneration for the Board of Directors and top
    executives, as compared to the remuneration offered by other listed
    companies operating in the same business, to ensure that SCG retains
    its leadership in that industry and to motivate them to foster the
    continuing development of the company.

8.  Regularly make a progress report on the results of performance and
    submit it to the Board of Directors after the meetings of the
    Remuneration Committee.

9.  Assess the Remuneration Committee’s performance and report the
    results to the Board of Directors.

10. Should there be any alteration to the Charter, the Remuneration
    Committee shall review and recommend appropriate improvements or
    revisions to the Board of Directors for its resolution in keeping it
    up-to-date and applicable.

11. Perform other duties as assigned by the Board of Directors.

    To fulfill its duties under the scope of authority, the Remuneration
    Committee is authorized to call for and order the management, head
    of offices or employees concerned to give opinions, attend the
    meetings or submit the necessary documents. In addition, the
    committee may seek external consultations and professional advice
    from independent consultants or specialists, as deemed appropriate,
    at the company’s expenses.

The twelve members of the Board of Directors have no forbidden
qualification as follows:

1.  Never dishonestly committed and offence against property

2.  Never entered into any transaction which may cause conflicts of
    interest against SCG during the year.

SCG Top Executives

SCG top executives are empowered with an authority to operate business
under the policy, strategies and goals directed by the Board of
Directors, which approves a clear and definite scope of responsibilities
to ensure transparency and flexibility of operation.

The eight members of top executives have no forbidden qualification as
follows:

1.  Never dishonestly committed an offence against property.

2.  Never entered into any transaction which may cause conflicts of
    interest against SCG during the year.

    (2) Nomination of Directors and Executives

Rules and Procedures for the Election of Directors are as follows:

1.  The Governance and Nomination Committee proposes the names of
    persons to replace directors who are due to retire by rotation to
    the Board for consideration prior to the annual general meeting of
    shareholders for election. All shareholders have an equal right to
    propose other candidates. The authority to select directors rests
    with the shareholders.

2.  In case the number of candidates nominated for directors does not
    exceed the number of directors required for that election, the
    general meeting of shareholders shall elect all of them as
    directors.

3.  In case the number of candidates nominated for directors exceeds the
    number of directors required for that election, it shall be decided
    by vote at the shareholder’s meeting. The shareholders may elect the
    candidates nominated for director, but not exceeding the number of
    directors required for that election and the directors shall be
    individually elected. Each shareholder or proxy shall have one vote
    for each share he/she holds or represents for the election of each
    director. The candidates shall be ranked in descending order from
    the highest number of votes received to the lowest, and shall be
    appointed as directors in that order until all of the director
    positions are filled. If the votes cast for candidates in descending
    order are tied, which would otherwise cause the number of directors
    to be exceeded, the remaining appointment shall be made by the
    chairman of the meeting who shall cast the deciding vote.

  At the 2009 annual general meeting of shareholders, the four Board
  members who due to retire by rotation were 1) Mr. Snoh Unakul 2) Mr.
  Panas Simasathien 3) Mr. Arsa Sarasin and 4) Mr. Chumpol NaLamlieng.
  According to the company’s Articles of Association, one-third of the
  directors must retire from the office and the director who has longest
  serving shall retire. In nomination process, each director has
  proposed appropriate persons to the Governance and Nomination
  Committee. The Committee, which excluded Mr. Snoh Unakul, Mr. Panas
  Simasathien, and Mr. Arsa Sarasin who have a conflict of interests as
  they have to retire by rotation in 2009, has selected five qualified
  persons, four of which were former directors and the other is the
  outsider. The Governance and Nomination Committee nominated four
  qualified nominees namely, 1) Mr. Snoh Unakul 2) Mr. Panas Simasathien
  3) Mr. Arsa Sarasin and 4) Mr. Chumpol NaLamlieng, all of which were
  elected by the majority votes as per the resolution passed in the
  annual general meeting of shareholders held on March 25, 2009.

Selecting Top Executive Replacement

  The top executive nomination process for SCG starts with selecting
  talented and ethical people. The Group seeks young talent with the
  potential to develop into senior management through the high potential
  employee assessment. Each employee will have an individual development
  plan that includes challenging job assignments and job rotation
  throughout the organization to ensure they gain a broad knowledge and
  skills as a result they are properly prepared to replace the positions
  at all level that may become vacant. The Board of Directors will
  select employees who show the high potential and have the appropriate
  credentials for the placement in top executive positions.

(3) Director and Executive Remuneration

  Director Remuneration

  In the 11th annual general meeting of shareholders held on March 24,
  2004, a resolution passed concerning the remuneration and bonus of
  directors. Monthly remuneration for all directors was set at 1,800,000
  Baht and shall be distributed amongst the directors in such manner
  they may themselves consider appropriately. Regarding bonuses,
  permission was granted that the Board itself would determine the
  appropriate amount, but that amount shall not exceed 0.5% of total
  dividends paid to shareholders and shall be distributed amongst the
  directors in such manner they may themselves consider appropriately.
  This would be in effect from the day the resolution was passed by a
  vote of the shareholders onwards until the shareholders’ meeting
  determined otherwise.

  The Apportionment of Board Remuneration and Bonuses

  Monthly Remuneration

  The Board of Directors passed a resolution to pay the Chairman a
  remuneration of 1.5 portion, or 216,000 Baht per month, and the other
  11 board members of one portion, or 144,000 Baht per month.

Director Bonuses

The Board of Directors passed a resolution to pay the Chairman a bonus
of 1.5 portion and each of the other 11 board members bonuses of one
portion of total bonuses as approved in the shareholders’ meeting.

  Remuneration for the Committees

  The Board of Directors passed a resolution to remunerate members of
  the committees on the basis of fixed fee and attendance fee, as
  follows:

  Unit: Baht

+----------------------------------+-----------------+-----------------+
|                                  | Annual fixed    | Attendance fee  |
|                                  | fee             |                 |
+----------------------------------+-----------------+-----------------+
| The Audit Committee              | 96,000          | 24,000          |
|                                  |                 |                 |
|   Chairman                       | 64,000          | 16,000          |
|                                  |                 |                 |
|   Director                       |                 |                 |
+----------------------------------+-----------------+-----------------+
| The Governance and Nomination    | 72,000          | 18,000          |
| Committee                        |                 |                 |
|                                  | 48,000          | 12,000          |
|   Chairman                       |                 |                 |
|                                  |                 |                 |
|   Director                       |                 |                 |
+----------------------------------+-----------------+-----------------+
| The Remuneration Committee       | 72,000          | 18,000          |
|                                  |                 |                 |
|   Chairman                       | 48,000          | 12,000          |
|                                  |                 |                 |
|   Director                       |                 |                 |
+----------------------------------+-----------------+-----------------+

The Chairman of the committees’ remuneration gets 1.5 portion while each
member of the committees get 1 portion.

The Remuneration for the Board of Directors and the Committees paid in
2009

Unit: Baht

+---+----------------+-------+------+--------+-------+-------+------+
| D |                | Re    |      |        |       | Direc | T    |
| i |                | muner |      |        |       | tors’ | otal |
| r |                | ation |      |        |       | bonus |      |
| e |                |       |      |        |       | paid  |      |
| c |                |       |      |        |       | in    |      |
| t |                |       |      |        |       | 2009  |      |
| o |                |       |      |        |       |       |      |
| r |                |       |      |        |       |       |      |
| s |                |       |      |        |       |       |      |
+---+----------------+-------+------+--------+-------+-------+------+
|   |                | The   | The  | The    | The   |       |      |
|   |                | Board | A    | Gove   | Re    |       |      |
|   |                | of    | udit | rnance | muner |       |      |
|   |                | Dire  | C    | and    | ation |       |      |
|   |                | ctors | ommi | Nomi   |       |       |      |
|   |                |       | ttee | nation | Comm  |       |      |
|   |                |       |      | Com    | ittee |       |      |
|   |                |       |      | mittee |       |       |      |
+---+----------------+-------+------+--------+-------+-------+------+
| 1 | Mr. Chirayu    | 2,59  | -    | -      | -     | 684   | 9    |
| . | Isarangkun Na  | 2,000 |      |        |       | 0,000 | ,432 |
|   | Ayuthaya ¹     |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 2 | ACM Kamthon    | 1,72  | 288  | -      | -     | 4,56  | 6    |
| . | Sindhvananda ² | 8,000 | ,000 |        |       | 0,000 | ,576 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 3 | Mr. Snoh       | 1,72  | -    | 84,000 | -     | 4,56  | 6    |
| . | Unakul         | 8,000 |      |        |       | 0,000 | ,372 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 4 | Mr. Sumet      | 1,72  | 176  | 1      | -     | 4,56  | 6    |
| . | Tantivejkul ³  | 8,000 | ,000 | 26,000 |       | 0,000 | ,590 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 5 | Mr. Pricha     | 1,72  | 192  | -      | -     | 4,56  | 6    |
| . | Attavipach     | 8,000 | ,000 |        |       | 0,000 | ,480 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 6 | Mr. Panas      | 1,72  | -    | 84,000 | -     | 4,56  | 6    |
| . | Simasathien    | 8,000 |      |        |       | 0,000 | ,372 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 7 | Mr. Yos        | 1,72  | -    | -      | 12    | 4,56  | 6    |
| . | Euarchukiati   | 8,000 |      |        | 0,000 | 0,000 | ,408 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 8 | Mr. Arsa       | 1,72  | -    | 72,000 | -     | 4,56  | 6    |
| . | Sarasin        | 8,000 |      |        |       | 0,000 | ,360 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 9 | Mr. Chumpol    | 1,72  | -    | -      | 18    | 4,56  | 6    |
| . | NaLamlieng ⁴   | 8,000 |      |        | 0,000 | 0,000 | ,468 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 1 | Mr. Tarrin     | 1,72  | 192  | 84,000 | -     | 4,56  | 6    |
| 0 | N              | 8,000 | ,000 |        |       | 0,000 | ,564 |
| . | immanahaeminda |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
| 1 | Mr. Pramon     | 1,72  | -    | -      | 12    | 4,56  | 6408 |
| 1 | Sutivong ⁵     | 8,000 |      |        | 0,000 | 0,000 | ,000 |
| . |                |       |      |        |       |       |      |
+---+----------------+-------+------+--------+-------+-------+------+
| 1 | Mr. Kan        | 1,72  | -    | -      | -     | 4,56  | 6    |
| 2 | Trakulhoon     | 8,000 |      |        |       | 0,000 | ,288 |
| . |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+
|   | Total          | 21,60 | 848  | 4      | 42    | 57,00 | 80   |
|   |                | 0,000 | ,000 | 50,000 | 0,000 | 0,000 | ,318 |
|   |                |       |      |        |       |       | ,000 |
+---+----------------+-------+------+--------+-------+-------+------+

Remark: 1. Chairman of the Board of Directors

2. Chairman of the Audit Committee

3. Chairman of the Governance and Nomination Committee

4. Chairman of the Committee Remuneration Committee

* The directors’ bonus paid in 2009 consisted of the bonus payment based
on the final dividend of the year 2008 paid to shareholders on April 22,
2009 and the interim dividend of the year 2009 paid to shareholders on
August 27, 2009 as represented in the item of “Directors’ remuneration”
on the consolidated statements of income.

  Executive Remuneration

The total remuneration for eight executives in the form of salaries,
bonus, variable pay and other compensation amounted to 172,077,200 Baht.
For 2010, the company made the contributions of 8,291,400 Baht to the
provident fund for the executives, being the company’s employees.

1. The Remuneration for the directors and executives of subsidiaries,
which are SCG’s core business (as at the year ended December 31, 2009)

1.  Director Remuneration listed according to the core business

  Directors of the core businesses, which encompass SCG Chemicals, SCG
  Paper, SCG Cement, SCG Building Materials and SCG Distribution, are
  the executives who are not subjected to remuneration paid for being
  the directors. Names of the directors in each business are listed
  here.

  ----------- --------------------------- ------------- -------------- -----------------------
  SCG                                                   SCG Building   
  Chemicals                                             Materials Co., 
  Co., Ltd.                                             Ltd.           

  1)          Mr. Kan Trakulhoon *                      1)             Mr. Kan Trakulhoon *

  2)          Mr. Pramote Techasupatkul                 2)             Mr. Kajohndet Sangsuban

  3)          Mr. Roongrote Rangsiyopash                3)             Mr. Pramote
                                                                       Techasupatkul

  4)          Mr. Cholanat Yanaranop **                 4)             Mr. Roongrote
                                                                       Rangsiyopash

                                                        5)             Mr. Pichit Maipoom **

                                                                       

  SCG Paper                                             SCG            
  Public                                                Distribution   
  Company                                               Co., Ltd.      
  Limited                                                              

  1)          Mr. Kan Trakulhoon *                      1)             Mr. Kan Trakulhoon *

  2)          Mr. Kajohndet Sangsuban                   2)             Mr. Pramote
                                                                       Techasupatkul

  3)          Mr. Pramote Techasupatkul                 3)             Mr. Damri Tunshevavong

  4)          Mr. Damri Tunshevavong                    4)             Mr. Cholanat Yanaranop

  5)          Mr. Pichit Maipoom                        5)             Mr. Pichit Maipoom

  6)          Mr. Cholanat Yanaranop                    6)             Mr. Roongrote
                                                                       Rangsiyopash

  7)          Mr. Roongrote Rangsiyopash                7)             Mr. Kajohndet Sangsuban
                                                                       **

  8)          Mr. Chaovalit Ekabut **                                  

                                                                       

  SCG Cement                                                           
  Co., Ltd.                                                            

  1)          Mr. Kan Trakulhoon *                                     

  2)          Mr. Kajohndet Sangsuban                                  

  3)          Mr. Pichit Maipoom                                       

  4)          Mr. Damri Tunshevavong                                   

  5)          Mr. Roongrote Rangsiyopash                               Remark * Chairman

  6)          Mr. Pramote Techasupatkul                                ** President
              **                                                       
  ----------- --------------------------- ------------- -------------- -----------------------

2.  The total remuneration for executives of subsidiaries which are
    SCG’s core business

  1) Remuneration paid as money such as monthly salary, bonus and
  Variable Pay

  2) Other compensation such as provident fund contributions.

  Details of remuneration are as follows:

  Unit : Baht

  ---- ------------------------- ------------ ------------------ --------------
       Subsidiaries which are    Number of    Total Remuneration Other
       core businesses           executives   in the form of     compensation
                                              money              

  1.   SCG Chemicals Co., Ltd.   10           34,696,400         2,336,400

  2.   SCG Paper PLC.            7            24,531,100         1,666,920

  3.   SCG Cement Co., Ltd.      7            38,473,600         2,436,480

  4.   SCG Building Materials    8            27,878,275         1,877,520
       Co., Ltd.                                                 

  5.   SCG Distribution Co.,     7            20,602,500         1,470,600
       Ltd.                                                      
  ---- ------------------------- ------------ ------------------ --------------

 Therefore, number of executives and remuneration for the above-mentioned executives, exclude the presidents of subsidiaries that are the SCG’s core businesses because they have been already included in the number and remuneration of the top executives of The Siam Cement Public Company Limited, as appeared under section 3 - Executive Remuneration.

(4) Principles of Corporate Governance

SCG conducts business with responsibility and fairness, adhering to
long-practiced principles defined by its ethical framework and
constantly improved in view of economic and social changes, while
balancing sustainable benefits with respect towards all stakeholders.

SCG considers corporate governance to be a basic part of its business
policy, which the Board of Directors has agreed to review and evaluate
on an annual basis. In addition, the Company makes improvements,
amendments and changes in corporate governance in line with the changing
economic and social situation. The Board of Directors has assigned the
Governance and Nomination Committee to take charge of corporate
governance matters as well as to consider trends and new developments at
the international level. For example, the Committee compares rules and
practices of the world’s leading companies and stock exchanges with
those of SCG in order to find areas for improvement. The Board of
Directors, moreover, specifies corporate governance as one of the main
items on the agenda at the Board of Directors’ meeting. The Company
publishes booklets on SCG’s corporate governance policy and Code of
Conduct and distributes them to employees. To ensure that employees
understand these policies clearly and put them into practice
effectively, the Company conducts related informational events. SCG
expects all employees to adhere strictly to the SCG Code of Conduct,
which is a prime factor considered in the annual evaluation of employees
at the supervisory level and above. Employees and the public are welcome
to study the content and details of these policies as described on SCG’s
website, www.scg.co.th.

In 2007, SCG updated the SCG Code of Conduct by adding guidelines for
each business, illustrative examples, clearer practices, and a
whistleblower policy that protects any employee who files a complaint or
reports on improprieties or suspected violations of laws, SCG rules,
regulations, or the SCG Code of Conduct. Moreover, the Company has
formed a working team responsible for devising the policies and
providing consultancy regarding the SCG Code of Conduct. This team is
chaired by SCG’s vice president & CFO, and includes top management from
business functions responsible for ensuring compliance with the SCG Code
of Conduct and from business units in charge of monitoring. This working
team will monitor performance and give advice on relevant issues.
Moreover, the Internal Audit Office is also responsible for maintaining
communication channels to receive complaints and implementing the
whistleblower policy.

In 2010, the working team has monitored adherence to the SCG Code of
Conduct, sharing of knowledge about it, and its promotion to employees.
The team also tracked the provision of related consultancies via the SCG
Code of Conduct website, SCG Code of Conduct guidance system and
whistleblower policy system. The team reported its findings to the
Governance and Nomination Committee on a regular basis to ensure that
all practices are correct and in compliance with the Code. The record
shows that in 2010, SCG employees utilized the SCG Code of Conduct
website on 2,447 occasions and filed 15 complaints using the
whistleblower system. Investigations of all these complaints have been
concluded, two of which are regarded as be instances of fraud.

SCG sees its corporate governance policy and Code of Conduct as
essential guidelines for the organization; therefore, it puts strong
emphasis on principles and practices concerning responsibility and
fairness towards all stakeholders. The principles include a clear
outline of the structure, components, duties, independence and
performance of the Board of Directors; transparency of information
disclosure; a strict auditing system; and strict risk management
policies. These build trust among shareholders and create additional
value for them. SCG has disclosed related information through a growing
variety of media to give stakeholders easier access to the information.
Among these media and information channels are the Annual Report, 56-1
Form, website of the Stock Exchange of Thailand (SET), and SCG website.

In addition, stakeholders have the opportunity to participate in
improving the Company’s operating results through communications with
the Investor Relations Department via e-mail: invest@scg.co.th. All
suggestions will be considered carefully prior to reporting to SCG’s top
executives and the Board of Directors for acknowledgement and
consideration.

In 2010, SCG won four awards from FinanceAsia magazine in its annual
rank of Asia’s top companies. These awards were Best Corporate
Governance, Best Corporate Social Responsibility and Best Investor
Relations, while Mr. Kan Trakulhoon, SCG’s president and CEO, was voted
Thailand’s Best CEO.

Guidelines to SCG Corporate Governance

The Rights of Shareholders

SCG ensures that shareholders, both as investors and owners of the
Company, are entitled to all basic rights meeting widely accepted and
reliable standards, which include the right to freely trade or transfer
their own shares, the right to receive dividends from the Company, the
right to attend shareholders’ meetings, the right to propose the meeting
agenda, the right to nominate a person to be a director, the right to
express opinions independently, and the right to make decisions on
important affairs of the Company, e.g., the election of directors,
approval of significant transactions influencing the Company’s
direction, amendment of Memorandum of Association and Articles of
Association of the Company, etc. Shareholders have the right to vote at
meetings according to the number of shares owned by each shareholder,
whereby one share entitles one vote, and no particular share allows them
privilege over the rights of other shareholders. Apart from the
abovementioned rights of the shareholders, SCG has made additional
efforts to encourage and facilitate shareholders to exercise their

rights as follows:

1. SCG provides essential, clear, and up-to-date information for
shareholders regarding the Company’s

business. Even though some information is not required to be disclosed
by law, if SCG considers that it is of significance to shareholders, the
Company will notify shareholders of the information through SCG’s
website and the SET.

2. SCG sends all shareholders significant and sufficiently detailed
information concerning the Shareholders’ Meeting date and the Meeting
agenda prior to the date of the meeting. Such information will be posted
on SCG’s website around two months before the related documents are
submitted to shareholders, and not less than 14 days prior to the
Meeting. The shareholders’ right to attend the Meeting and the right to
vote on resolutions will be clearly stated in the Meeting notice
submitted by

the Company.

3. Any shareholder who is unable to attend a Meeting is entitled to
appoint a representative, e.g., an independent director or other person,
to act as proxy, using the proxy form attached to the notice of the
Meeting. The Company has prepared the proxy form in compliance with the
specifications defined by the Ministry of Commerce whereby the
shareholders can exercise their voting rights as wished. The proxy forms
can also be downloaded from SCG’s website. For shareholders’
convenience, SCG provides them with the duty stamp to be sealed on the
proxy form. Shareholders who arrive after the Meeting has commenced are
able to vote on the agenda item being considered provided that a
resolution is not yet made. They shall constitute part of the quorum
starting from the agenda item

for which they are in attendance and can exercise their voting rights
unless the Meeting states otherwise.

4. Prior to the Meeting, one or several shareholders holding in
aggregate at least 5% of all issued shares of the Company have the right
to suggest issues to be included in the agenda of the Annual General
Meeting of Shareholders for the year 2011. Shareholders were allowed to
exercise this right from November 1 - 30, 2010 so that the Governance
and Nomination Committee could screen the issues before presenting them
to the Board of Directors for consideration. Should the proposed issue
be included on the Meeting agenda, the Company shall specify in the
notice of the Meeting that the agenda item was proposed by a
shareholder. However, in case the proposed agenda item is rejected, the
Company shall inform shareholders of the reasons at the Annual General
Meeting of Shareholders. Moreover, any shareholder is entitled to
nominate in advance any qualified candidates for the election of Board
members. The Governance and Nomination Committee shall consider the
proposed nominees together with other nominated persons according to the
Company’s criteria for the nomination of directors. The Committee then
presents the nominees to the Board for consideration before proposing
them to the Shareholders’ Meeting for approval. In 2010, the Company
made available a form for advance proposals for the Meeting agenda and
director candidates, for the convenience of shareholders. However, no
shareholder proposed any agenda item or candidate prior to the Meeting.

5. In 2010, the SCG Annual General Meeting of Shareholders was held on
March 31, 2010, whereby all

12 directors attended the Meeting. This marked the first year of the
Meeting’s change of venue from the SCG Headquarters in Bangkok’s Bangsue
district to Athenee Crystal Hall on the 3rd floor of Plaza Athenee
Bangkok A Royal Meridien Hotel. The change was made in consideration of
the increasing numbers of shareholders attending the Meeting each year,
because SCG would like to make it easier for them to attend, raise
questions, and express opinions all in the same room in order to ensure
a smooth and effective meeting.

6. On the date of the Meeting, the Company uses a barcode system for
registration to ensure convenience for shareholders based on the
reference number already included in the registration form and proxy
form. In addition, for each agenda item, the Company will collect the
ballot papers from shareholders who vote “disapprove” or “abstain” in
order to deduct the votes from the total entitled voting rights. The
Company applies the e-voting system to perform the calculation using
electronic PDAs and barcode scanners in order to ensure immediate voting
results in time for announcement right after the end of each agenda
item. Shareholders are entitled to verify each voting result after the
Meeting.

7. One-third of the directors must retire from office on a rotational
basis in each Annual General Meeting of Shareholders, and the election
of directors to replace the retired directors takes place during the
Meeting. Shareholders will be informed that if the number of nominated
persons does not exceed the number of directors required for that
election, all of them shall be elected as directors. However, if the
number of candidates exceed the number of directors required, each
candidate is then elected individually. During the Meeting, shareholders
are entitled to freely propose names of individuals for

directorship of the Company.

8. At the Meetings, shareholders are allowed to freely express their
opinions, give suggestions, and raise questions on any agenda item
before casting votes, so that shareholders can obtain sufficiently
detailed information on the matter in question. Should shareholders have
questions or inquiries, specialists in specific fields are available to
answer queries under the authority of the Board.

9. For any item on the agenda at the Shareholders’ Meeting, the
shareholders can call for a casting of votes by secret ballot if one
shareholder makes such request with the approval of five other
shareholders. The Shareholders’ Meeting shall resolve to approve the
casting of votes by secret ballot upon a majority of votes.

10. An agenda item regarding the Board’s remuneration is included to
inform shareholders of the amount and type of remuneration received by
each director including meeting allowance and bonus. Full details can be
found in the Company’s Annual Report on pages 73.

11. The agenda of the 2010 Annual General Meeting of Shareholders was
considered chronologically as it appeared in the invitation letter
submitted to shareholders prior to the Meeting, without any changes or
request for the Meeting to consider any agenda item other than those
specified in the invitation letter.

The Equitable Treatment of Shareholders

SCG shall provide equitable treatment to every individual shareholder,
major or minor, as well as institutional or foreign investors. To that
effect, the Company strives to find tools to ensure equality, especially
for minor shareholders, which include:

Assigning Independent Directors to Take Care of Minor Shareholders

Minority shareholders can contact the independent directors directly to
give suggestions, express opinions or file complaints, via e-mail:
ind_dir@scg.co.th. The independent directors are responsible for
handling each matter appropriately. For example, in case of a complaint,
the independent directors will investigate and seek a proper solution.
On the other hand, if there is a suggestion that is considered to affect
the stakeholders or the business, the independent director will report
it to a Board of Directors

meetings for consideration and include it in the agenda of the
Shareholders’ Meeting.

Establishing Sound Relationships with Shareholders

In 2010, SCG invited interested shareholders to participate in the
Company’s CSR activities alongside our directors and employees, which
helped promote good relations with shareholders while contributing to
society and the environment. In this regard, SCG provided equal rights
for both major and minor shareholders. Two such CSR activities were held
during the year. SCG hosted a lunch for residents of Fuengfah Home for
mentally handicapped, deaf and blind children, in Nonthaburi Province on
July 14, 2010. The Company held a “Return Elephants to the Wild” event
at Sub Lanka Wildlife Sanctuary in Lop Buri Province on November 8,
2010. Shareholders expressed great interest and participated fully in
both activities. SCG will hold more of these events because we are
determined to maintain and grow good relationships with shareholders.

Internal Information Control

The Board of Directors has established measures to control the use, and
prevent misuse, of internal information (insider trading) for the
personal benefit of concerned persons, namely the Board of Directors,
SCG’s top executives, and employees, including their spouses and
children who are minors.

  • All concerned persons are prohibited from trading Company shares for
  a two-week period prior to release of the Company’s quarterly and
  annual financial statements, and for 24 hours after the release
  (blackout period).

  • Should they have knowledge of confidential information that could
  have any impact on the Company’s share price, they are prohibited from
  trading Company shares until 24 hours after the public disclosure.

  • The secretary to the Board and the corporate secretary will inform
  the directors, SCG top executives, and related employees, of the
  prohibition period not less than one week prior to such period.

  • In addition, the Board of Directors will monitor all required
  actions in accordance with the related measures. Any changes in a
  director’s shareholding must be reported in the Board of Directors’
  meeting.

Preventing Conflicts of Interest

The Board has established policies and measures regarding conflicts of
interest, as follows:

  • SCG has a clear and transparent shareholder structure. There is no
  cross-holding among major shareholders, thereby preventing any
  conflict of interest or transfer of benefits from one party to
  another. The shareholder structure of SCG and its subsidiaries is
  published in the Company’s annual report, as are each Board member’s
  holdings of ordinary shares and debentures.

  • There is a clear separation of duties and responsibilities between
  the Board, management, and shareholders, thereby ensuring no overlap
  of duty or responsibility. Any director or executive who may have a
  vested interest in any agenda item under consideration must not attend
  the meeting or must abstain from voting on such agenda item. This is
  to ensure that the Board and executives make decisions in a fair
  manner for the utmost benefit of shareholders.

  • The Company has an established policy governing the use of internal
  information and has incorporated it into employee regulations in
  writing, with penalties for the executives or employees in the event
  the internal information is disclosed to the public or used for
  personal benefit.

  • Directors, top executives, employees responsible for related
  functions as well as their spouses and minors are prohibited from
  trading stock futures linked to SCC ordinary shares in order to ensure
  compliance with SCG’s Corporate Governance Policy.

  • The SCG Code of Conduct includes additional guidelines that prohibit
  employees from using the Company’s assets or spending working hours to
  search, contact or conduct share-trading activities on a regular basis
  for personal gain or on behalf of others without justifiable reason
  and not for SCG’s interests.

The Role of Stakeholders in Corporate Governance

SCG conducts business with the highest awareness of its responsibility
to ensure sustainable and mutual benefits to all related parties. The
Board of Directors oversees our management system to ensure that the
Company acknowledges the rights of stakeholders, both as stated by law
and as clearly written in the SCG Corporate Governance Policy and SCG
Code of Conduct. The Company guarantees that those rights are protected
and the shareholders, employees, customers and business partners are
treated equally.

Shareholders: Besides the basic rights of shareholders and the rights
stipulated by law and the Company’s Articles of Association, such as the
right to request a verification of the number of shares; the right to
receive share certificates; the right to attend the shareholders’
meetings; the right to

vote at the meetings; the right to freely express opinions at the
shareholders’ meetings; and the right to receive a fair return; SCG also
gives shareholders the right, as the owners of the Company, to make
suggestions and comments on the Company’s affairs to the independent
directors. Each comment and suggestion will be carefully considered and
presented to the Board of Directors.

Employees: SCG truly believes that its employees are its most valuable
assets and is determined to ensure that every employee is proud of and
confident in the organization. During the previous year, the Company
organized activities to promote a collaborative working environment to
drive innovation and enhance the competence of employees, readying them
to work overseas and to cope with the volatile economic situation.
Furthermore, we focused on promoting employees’ health and safety,
excellent working conditions, and competitive remuneration.

Customers: SCG puts great importance on providing customers with maximum
benefits in terms of quality and price. Likewise, the Company is
determined to develop and maintain sustainable relationships with
customers. It has set up a support office to provide product
information, solve

problems and receive complaints in order to ensure total satisfaction
for customers.

Business partners: SCG operates its business within a competitive
context by strictly upholding its promises, the SCG Code of Conduct, and
commitments to trading partners, including guarantees of product quality
and on-time delivery.

Competitors: SCG operates its business within a competitive context by
being fair and strictly following the laws and SCG Code of Conduct.
During the year, there were no disputes with competitors.

Creditors: SCG complies with the terms of loans and obligations to its
creditors such as business creditors and depositors. The Company,
moreover, organizes various projects in order to keep good relations
with creditors such as debenture holders.

Society: SCG ensures that its business operations are fair to related
parties according to its business philosophy. The Group supports
activities that promote quality of life and create happiness for
communities and the public wherever we operate, both in Thailand and in
other ASEAN countries. We organize various activities for the benefit of
society, especially projects to develop the potential of young people in
different fields, namely, science, technology, sports, and the arts. In
addition, we provide relief at times of disaster. Furthermore, SCG
encourages its employees and related parties to take part in activities
that benefit local communities and the general public in achieving
sustainable growth. Even amid the economic downturn, the Group continues
to devote its creativity, knowledge, and capabilities to enhance the
efficiency of these projects to maximize benefits for local communities
and the public.

Environment: SCG sets guidelines for sustainable development in respect
of environmental management and conservation under the concept of 3Rs
(reduce, reuse/ recycle, replenish), which are applied to operations in
all its businesses. These guidelines shape the design of our plants,
help us develop and improve production processes, and lead us to utilize
eco-friendly technology. The Company ensures that systematic management
is in place for its production processes, products and services as well
as for the restoration and improvement of natural resources. In
addition, the Company constantly promotes awareness regarding
environmental conservation and encourages its employees and related
parties to participate in protecting the environment. We have introduced
the SCG eco value label for eco-friendly products and services that are
produced by using special technologies that minimize impact on the
environment, based on the ISO 14021 standards.

In 2010, SCG, in cooperation with other businesses in the Map Ta Phut
Industrial Estate, established the “Community Partnership Initiative”
and reached a mutual agreement on development of a prototype factory of
higher environmental standards than the legal requirements, with an aim
to promote the harmonious co-existence and sustainable growth of both
industry and the community. SCG continues its focus on water
conservation. The “SCG Conserving Water for Tomorrow” project has been
progressing with support provided to communities for the building of
check dams, which restore the balance of nature and lead to sustainable
growth of local agriculture and business. Through the end of 2010, SCG,
together with communities and networks, have built more than 20,000
check dams. Moreover, the Company strives to raise awareness among the
public and communities about conservation of water and the environment
in order to achieve sustainable growth. Details of SCG’s environmental
and social activities are available in our annual Sustainability Report,
which has been published each year since 2001, at www.scg.co.th.

Adhering to its responsibility to stakeholders, buoyed by changing
social, environmental and business trends and the fact that stakeholders
nowadays are more sophisticated with higher expectations regarding
treatment, the expression of opinion, and decisions and actions taken on
matters affecting them, SCG published a written “SCG Stakeholder
Engagement Policy” in 2010 so that employees have clear guidelines on
how to do business by adding value to shareholders in the long run while
at the same time always considering impacts on other stakeholders. The
Company upholds its commitment to be a good citizen in society,
especially in communities where its operations

are located, by doing business with a sense of respect to the rights of
stakeholders and ensuring that they are given fair treatment. The
Company listens to opinions and concerns, promotes understanding among
stakeholders, supports creative cooperation on matters of interest to
stakeholders, and assists in development of society and the environment,
all of which are intended to ensure that SCG conducts business on the
grounds of fairness to all involved parties. The policy, which is
published on the SCG website, covers four main areas:

  • Definition of stakeholders.

  • Policy on treatment of stakeholders.

  • Guidelines on treatment of stakeholders.

  • Management duties.

Disclosure and Transparency

SCG realizes the importance of information disclosure because this
greatly affects decision-making by investors and stakeholders. It is
therefore necessary to define and administer measures concerning the
disclosure of information, both financial and non-financial. Information
disclosed via the SET Community Portal and SCG’s website shall be
complete, sufficient, reliable and up-to-date, written in both Thai and
English. SCG is committed to obeying the law, the regulations and
obligations mandated by the Securities and Exchange Commission (SEC) and
the SET, and other relevant government bodies. Regular amendment takes
place to ensure that SCG is up-to-date in its adherence to laws,
regulations, and obligations, and to guarantee SCG’s transparency in
conducting business. For example, we:

  1. Disclose accurate, complete and timely financial information and
  non-financial information.

  2. Prepare a report on the Board’s responsibility for financial
  statements and present it along with the Audit Committee’s report in
  the Annual Report.

  3. Require the Company’s directors and executives report their own
  interests, and those of any related persons, which are vested
  interests relating to management of the Company or its subsidiaries,
  via the corporate secretary, who will gather and store the documents
  and submit them

  to the chairman of the Board of Directors and the chairman of the
  Audit Committee for acknowledgement within seven days after the
  Company receives the documents.

  4. Announced a policy in 2010 requiring all directors to disclose
  and/or report their securities trading and holdings to the Board of
  Directors’ meeting.

  5. Disclose procedures about Board member selection and the Board’s
  performance assessment.

  6. Disclose the performance and attendance record of each member of
  the Committee.

  7. Disclose detailed information on the operations and investment
  structure of subsidiaries and associate companies.

  8. Disclose information on the remuneration each director receives as
  a member of the Committee.

  9. Disclose the policy on the remuneration of directors and top
  executives, including forms, types and amount of remuneration for each
  committee member.

  10. Disclose policy on environmental and social responsibility and
  related performance.

  11. Report on corporate governance policies and related performance.

  12. Reveal significant investment projects and relevant impacts of the
  projects via the SET Community Portal of the Stock Exchange of
  Thailand and SCG website. In 2010, the Company disclosed its 25% share
  acquisition in GTC Technology US, LLC in the United States of America
  and the Project on Capacity Expansion of Fibre-Cement Products at the
  Tha Laung facility in Saraburi province.

  Moreover, in 2010, the Board of Directors still upheld information
  disclosure guidelines related to SCG so as to systematize the
  Company’s information disclosure and avert any damage caused by
  improper disclosure. This reassured shareholders, investors, the
  general public, and all

  stakeholders that SCG is committed to disclosing information clearly,
  equitably, and in compliance with the law. To that effect, the
  existing practices have been compiled and formulated in SCG’s
  Disclosure Policy set forth in 2008. The Company has designated the
  persons responsible for disclosing non-public information as well as
  establishing guidelines on disclosure of different types of
  information to the public and setting up critical periods in which
  extreme caution should be taken prior to the disclosure of information
  to the public. Details of the guidelines are available for
  stakeholders and the general public on SCG’s website.

  The Investor Relations Department of SCG is responsible for
  communications with institutional investors, retail investors,
  shareholders, analysts, and related government bodies on an equal and
  fair basis. Should the shareholders require additional information,
  they can contact the Investor Relations Department directly via
  invest@scg.co.th.

  In 2010, SCG arranged activities for the president and CEO and the
  vice president to meet retail investors, institutional investors and
  analysts on a regular basis, whereby the operating results, financial
  statements and position, management discussion and analysis, and
  industry trends were presented. During the year these activities
  included :

  • Newly introduced domestic roadshows, where SCG visited over 30
  institutional investors whose offices are in Bangkok in order to
  provide clarification and summary of SCG’s general information.

  • Six investor meetings for the president and CEO as well as vice
  president to meet with domestic institutional investors at the SCG
  Headquarters in Bangsue, where clarifications and summary of general
  information were provided.

  • Analyst conferences held on a quarterly basis.

  • A total of nine overseas roadshows.

  • Various company visits as well as direct replies to inquiries from
  investors via telephone and emails on a regular basis.

  • SCG’s booth at the 2010 SET in the City fair, where it arranged for
  its employees to provide information to interested investors and
  shareholders, from November 18 - 21.

In 2010, SCG won the Best Investor Relations award in the ranking of the
Asia’s Top Companies 2010 by FinanceAsia, a leading financial magazine,
in which results were based on the opinions of more than 300 investors
and analysts from throughout Asia.

The Board of Directors: Its Responsibilities, Structure, and Committee

The Structure of the Board of Directors

The Board of Directors comprises nationally respected, knowledgeable,
and competent persons who are responsible for drawing up corporate
policy and collaborating with the top executives in making operating
plans, both short-term and long-term, including financial policy, risk
management policy, and organizational overview. The Board plays an
important role in overseeing, monitoring, and assessing the performance
of the Company and top executives on an independent basis.

The number of directors is currently limited to twelve, comprising
eleven non-executive directors and one executive director, who is the
Company’s president & CEO.

The five independent directors namely, ACM Kamthon Sindhvananda, Mr.
Sumet Tantivejkul, Mr. Pricha Attavipach, Mr. Arsa Sarasin, and Mr.
Tarrin Nimmanahaeminda, have qualifications in accordance with the
requirements of the Capital Market Supervisory Board.

The Board has further established the Audit Committee, Governance and
Nomination Committee, and Remuneration Committee to be responsible for
their specific areas and report directly to the Board for its
consideration or reference.

In this regard, SCG put in place its Committee Charter specifying rights
and duties, which is published on the Company’s website. An evaluation
of the committees’ performance and review of their operational results
are conducted at least once a year. Moreover, the Board of Directors is
entitled to form other committees to handle any specific situations as
seen appropriate.

Non-executive directors hold a meeting among them to evaluate the
performance of the president on an annual basis. So as to ensure that
the non-executive directors can express their opinions independently,
the president is excluded from attending this meeting.

In addition, for the months in which the Board of Directors meeting is
not held, all directors will be continuously informed of the operating
results, because the Company submits to the directors relevant
documents, together with information about any significant developments
that occurred during the month, in order to keep them informed.

The Audit Committee

Comprises four independent directors, all of whom are well accepted and
have a full understanding of, and experience in, accounting or finance.
Mr. Tarrin Nimmanahaeminda, with his extensive knowledge and experience,
is responsible for reviewing the reliability of the financial
statements. The Audit Committee members’duties include a review to
ensure that operations have been carried out in accordance with the
Company’s Articles of Association as well as the laws and regulations of
compliance-related agencies. Moreover, the Committee is committed to
promoting the advancement of SCG’s financial and accounting report
system to meet international standards and to ensure that the Company
has an appropriate, modern, and efficient internal control system,
internal audit system, and risk management system.

The Audit Committee acts and expresses opinions independently, with the
Internal Audit Office acting as an operations unit reporting directly to
the Audit Committee. The Audit Committee also works regularly with
external auditors, consultants, and specialists in the areas of law and
accounting. The Audit Committee must set up meetings with the Company’s
external auditor, which exclude the management, at least once a year in
order to hear their comments. In addition, the Committee may seek
external consultation and professional advice from independent
consultants or specialists, as deemed appropriate, at the Company’s
expense.

The Governance and Nomination Committee

Comprises five of the Company’s directors, all of whom are non-executive
directors. The chairman of the Governance and Nomination Committee is an
independent director. The Committee is responsible for proposing,
revising, and supervising the Company’s corporate governance matters.
The Committee is also in charge of the nomination of persons qualified
to become directors to replace those who are retired by rotation, or as
the case may be.

In addition, the Committee reviews the performance evaluation system of
the Board of Directors and other committees, as well as the succession
plan for the position of president.

The Remuneration Committee

Comprises three of the Company’s directors. The Committee is responsible
for monitoring and studying changes and trends in the remuneration of
the Board of Directors and SCG top executives to suggest remuneration
policies that can motivate these executives to lead the Company towards
success as well as to retain intelligent, ethical employees within the
organization.

Limitation of Numbers of Listed Companies in which a Director May Hold
Directorship

The Board of Directors has set a policy to limit the number of listed
companies in which each director may hold a directorship. This policy
aims to protect the Company’s best interests because it allows directors
to manage the time dedicated to their duties in an efficient manner. The
Board of Directors has agreed that each director should hold
directorship for a maximum of five listed companies, unless otherwise
allowed by the Company. In addition, SCG has a guideline in case the
president & CEO is appointed as director of another company. The matter
will be proposed to the Board of Directors for approval. The Board of
Directors endorsed the appointment of the president & CEO as an outside
director of Kubota Corporation, Japan.

Separation of the Roles of the Board of Directors and the Management

The Company defines clear roles and responsibilities regarding the Board
of Directors and the management. The Board shall be responsible for
establishing the policies and overseeing the management’s implementation
of those policies. The top executives, on the other hand, shall be
responsible for implementing the policies formulated by the Board, and
ensuring that these are carried out as planned. Therefore, the chairman
and the president & CEO of the Company shall not be the same person, and
each must be nominated and elected by the Board in order to ensure their
appropriateness. Furthermore, the Board is responsible for establishing
a succession plan covering the top executives, which is subject to
annual review. The chairman shall not be a member of the management and
shall not participate in management of SCG’s business; nor shall the
chairman be authorized to sign binding agreements on behalf of the
Company. This is to clearly define separate roles between supervision of
the Company’s overall policy, and management of the business. In 2010,
SCG’s top executives comprised eight executives including the president
& CEO, vice president

  - Finance and Investment & CFO, and vice president - Corporate
  Administration as well as the presidents of five main businesses - SCG
  Chemicals, SCG Paper, SCG Cement, SCG Building Materials, and SCG
  Distribution

  - who report directly to SCG’s president & CEO The eight executives
  are authorized to manage the Company’s operations in accordance with
  the policies set by the Board; take responsibility for the Company’s
  operating results; control expenses and capital expenditures within
  limits approved by the Board in the annual operating plan; manage
  human resources in line with the prescribed policy; resolve problems
  or conflicts that affect the Company; and maintain effective
  communication with the stakeholders.

Board of Directors’ Meetings

It is the duty of each member of the Board to consistently attend the
Board’s meetings to stay informed of SCG’s operations, and make
decisions regarding them. The Board holds at least eight scheduled
meetings per year, making sure that the agendas are set forth clearly
prior to each meeting. In addition, the Board may organize special
meetings to consider and decide urgent matters.

At the meetings, the chairman and the president & CEO of the Company
jointly determine which agenda items are relevant to the meetings. Every
individual member of the Board is entitled to propose agenda items.

In 2010, the Board held ten meetings, eight scheduled meetings and two
special meetings. Prior to each meeting, all members received the agenda
and supporting documents well in advance to allow adequate time for
preparation.

When considering the matters presented to the Board, the chairman of the
Board presides over and duly conducts the meetings. All members of the
Board are allowed to express their opinions independently. Resolutions
are passed with a majority vote, whereby one director is eligible for
one vote. A director with a vested interest in the issue under
consideration or a director ineligible to vote shall be excused and/or
abstain from voting. In case of a tied vote, the chairman of the meeting
will cast his or her vote to reach a resolution.

SCG executives are allowed to attend the Board’s meetings to provide
useful information to the Board, and to learn directly about the Board’s
initiatives and policies for effective implementation. However, the
executives are not allowed to attend the meeting for certain agenda
items which are reserved only for the Board of Directors or for
non-executive directors in order to ensure independence

of consideration.

In addition, the Board attaches significance to managing conflicts of
interest of the concerned parties with prudence, fairness, and
transparency. The information shall be fully disclosed. Any director
with a vested interest in the matter under consideration must not be
involved in the decision process.

After the Meeting, the corporate secretary is responsible for preparing
the minutes for all directors. The minutes must then be approved at the
first agenda of the following meeting of the Board, which is duly signed
by the chairman. Directors may make comments, corrections, or additions
to ensure maximum accuracy and completeness.

After approval, minutes of the meeting are stored securely in the
corporate secretary’s office together with all related documents, which
are backed up electronically to facilitate data searches.

The Secretary to the Board of Directors and the Corporate Secretary

The Secretary to the Board

The Board appointed Mr. Worapol Jannapar as the secretary to the Board
of Directors responsible for providing advice to the Board regarding the
performance of duties in compliance with the law, preparing the minutes
of the Board’s meetings, and attending every Board meeting. He is deemed
by the Board to be highly knowledgeable and experienced, especially in
legal matters, allowing him to provide appropriate advice to the Board
regarding laws, rules, regulations, and SCG Corporate Governance.

The Corporate Secretary

Effective from April 1, 2010, the Board appointed Ms. Pornpen Namwong as
the corporate secretary responsible for organizing the meetings of the
Board, committees, and shareholders. The corporate secretary is also in
charge of preparing the minutes of the Board’s meetings, the minutes of
shareholders’ meetings, and Annual Report as well as filing documents as
stipulated by law. She is deemed by the Board to be appropriate because
she is knowledgeable in managing corporate secretarial work, having
served as director of the corporate secretary office, which supports the
corporate secretarial work involving compliance with laws, rules,
regulations, and SCG Corporate Governance.

Remuneration for the Board and the Top Executives

SCG sets appropriate remuneration for members of the Board and the top
executives at rates comparable to those of leading companies listed in
the SET, and other top companies in the same industries. Remuneration
for the Board is also considered based on SCG’s operating results,
before being proposed for approval in the Shareholders’ Meeting.
Remuneration for the top executives is set by the Board of Directors,
based on their responsibilities and performance, and the operating
results of each business.

Apart from ordinary remuneration, the Shareholder’ Meeting on March 24,
2004 passed a resolution approving the Company to pay a bonus to the
Board of Directors in an amount not exceeding 0.5% of total dividends
paid to shareholders. The Board of Directors is responsible for
consideration of the appropriate amount of bonus and the amount to be
paid to each director. The resolution is effective from the date of
approval until any subsequent resolution. The bonus for directors will
be considered based on the growth of profits of the Company, while the
bonus of top executives is considered based on performance of each
business as well as individual performance.

Details of remuneration for the Board of Directors, both monthly payment
and annual bonus, as approved by the Shareholders’ Meeting, including
the remuneration for members of committees in 2010, are reported for
each individual on pages 74 of the Annual Report.

Performance Appraisal and Knowledge Enhancement

Performance Appraisal of the Board

SCG makes available the performance evaluation form of the chairman. The
directors are required to appraise the chairman’s performance, since his
role in defining policy and ensuring good corporate governance is
essential to the Company. In addition, the evaluation forms for
directors consist of group assessment and self-assessment forms. The
assessment results are reviewed in order to find ways to continue to
improve the Board’s performance. SCG improved its handbook for
directors, which includes the summary of laws, rules, and regulations
related to the directors, in order to ensure that the information is
clear, up to date and in compliance with current practice. The handbook
is distributed to all directors for use as reference regarding basic
information. For new directors, SCG established a Director Induction
Program to facilitate their prompt performance of duties. SCG has
commissioned the corporate secretary to coordinate the work in three
areas:

  1. To compile the necessary information for directors to ensure their
  compliance with laws, rules, and regulations related to the directors.

  2. To provide important information essential for the directors’
  performance of duty such as the Articles of Association, SCG’s
  director handbook, the handbook for directors of listed companies, and
  summary of operating results, for use as quick reference.

  3. To arrange for a meeting with the chairman and directors and the
  executives or head of each business unit to stay informed and make
  queries about SCG’s business in depth.

Moreover, SCG encourages all members of the Board and the top executives
to attend various seminars and courses beneficial to their
responsibilities, allowing them to constantly meet, and exchange
opinions with, directors and top executives of different organizations.
Some of these courses are organized by SCG Human Capital Institute, and
some by governmental agencies or independent organizations, such as the
Thai Institute of Directors Association. The SEC requires directors of
all listed

Compa ies to complete at least one of the following training courses:
Directors Certification Program (DCP), Directors Accreditation Program
(DAP) or Audit Committee Program (ACP). Experience gained from these
courses is useful to SCG’s development. To support the Board’s
responsibilities, SCG has assigned the secretary to the Board and
corporate secretary to work in coordination with the Board and the top
executives. In addition, the Corporate Secretary Office is responsible
for overseeing legal matters, relevant standard practices and activities
of the Board to ensure implementation of the Board’s resolutions.

Performance Assessment of SCG President and Top Executives

The Board and the Remuneration Committee assess the performance of the
president & CEO based on the Company’s operating results, implementation
of the Board’s policies, and the overall socio-economic circumstances.
The Remuneration Committee will then consider the appropriate
remuneration for the president & CEO and top executives of SCG and
propose such amount to the Board for approval, taking into account the
following information regarding the current and previous years:

  1. The business unit’s operating results based on percentage of EBITDA
  on operating assets. The target EBITDA percentage for each business
  unit of SCG shall be set forth each year for assessment and comparison
  purposes.

  2. The operating results of the business unit compared to those of
  other companies in the same industry, both locally and
  internationally.

  3. The executive’s capability to develop the business unit.

In addition, a survey on manager-level employees’ opinions regarding the
president & CEO and the top executives is included in the Remuneration
Committee’s consideration each year.

Nomination of Board Members

The Governance and Nomination Committee is responsible for selecting
qualified candidates to replace the directors who are retiring on
rotation at the end of their terms, or whatever the case may be, and
proposing a list of nominees to the Board for resolution at the
Shareholders’ Meeting. The Governance and Nomination Committee selects
the candidates with credentials in a wide range of professions,
excellent leadership, breadth of vision, a proven record of ethics and
integrity, and able to share their opinions independently.

Furthermore, the Governance and Nomination Committee shall consider the
personal qualities of the candidates proposed for selection as Board
members, as regards:

• Integrity and accountability.

• Informed judgment.

• Maturity and stability, being a good listener, and ability to express
individual, independent opinion.

• Commitment to work principles and professionalism. Special expertise
and certain knowledge required for the Board are also taken into
consideration, so that the Board can formulate strategies and policies
and oversee implementation of the strategies effectively.

Internal Control and Audit System

1. Internal Control

Internal control is a crucial process assisting the organization in
achieving targets. SCG prioritizes this process by stipulating the
duties of the Audit Committee to include review of internal control
systems, internal audit activities, and risk management to ensure that
they are strict, appropriate, cutting-edge, and efficient. The Company
uses enterprise risk management (ERM) as a management tool to strengthen
the risk management process and internal control activities. SCG has
upgraded internal control systems to comply with international standards
according to the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), a joint committee with members from five professional
institutes in the United States. SCG has already incorporated into its
business operations five components of enterprise risk management,
including internal environment, risk assessment, control activities,
information and communication, and monitoring. Likewise, three
additional COSO risk components have been integrated, as follows:

  1. Objective setting Management defines objectives for reporting and
  regulatory compliance at both strategic and operational levels.
  Employees use these objectives as policies in carrying out their
  duties.

  2. Event identification The risk committee of each business unit
  regularly meets to identify major external and internal factors
  affecting business operations in order to ensure complete coverage of
  risk factors signaling difficulties. Such risk factors are managed and
  monitored cautiously.

  3. Risk response The management and the risk committee of each
  business unit collaborate to devise strategies to control risks to the
  acceptable level. The results are consistently satisfactory.

  During 2010, SCG has developed, in addition to the abovementioned
  controls, various systems and procedures in order to achieve efficient
  and effective internal controls contributing to sustainable
  development. Such developments are summarized as follows:

1.  Fraud prevention programs for major business functions

  Preventing risk of fraud is now one of the Company’s internal control
  priorities. Strict risk controls diminish the potential for fraud to
  occur and reduce its potential impact. With this in mind, SCG has
  stipulated preventive measures, audit activities, and corrective
  measures. The Company instills ethical values in employees at all
  levels beginning with our employee orientation program. SCG regularly
  trains staff on compliance with its code of conduct. The Company has
  established a sound oversight system. In addition, the Board of
  Directors acts as a role model to employees.

  The Company has developed fraud prevention manuals for all major
  business functions in order to raise employees’ awareness and
  standards of ethics in performing duties. The manuals define
  objectives, principles, potential circumstances involving risk of
  fraud, and prevention guidelines for use in daily work. In addition,
  SCG has stipulated the use of control self assessment (CSA). The
  Internal Audit Office conducts a fraud audit whereby employees can
  inform it about non-compliance with regulations, rules, and laws, and
  suspected fraudulent activities via a whistle-blower system. When
  fraudulent activities are suspected, an investigation committee is
  appointed to ensure fairness to all concerned parties. Each particular
  instance of fraud is recorded for use as a case study and lesson
  learned, allowing specific preventive measures to be developed.

2.  Development of information technology control self assessment system
    (IT CSA)

  Based on successful use of control self assessment systems in several
  applications, the Company has applied the same principle to
  information technology. The objectives are: to make the system
  efficient, effective, reliable, secure, and able to deliver timely
  information; to ensure compliance with rules and regulations; and to
  create an efficient IT governance system. The Internal Audit Office
  collaborated with relevant business operations to develop work
  procedures for prevention and self assessment of contract arrangement
  and various computer systems, and to create IT control self assessment
  forms in such critical areas as hiring of contractors to enhance
  computer systems, computer system security, user rights assignment,
  and evaluation of computer system efficiency.

3.  Integration of preventive systems for sustainable development

  SCG conducts business by bearing in mind its responsibilities to the
  economy, society, and environment, in order to achieve sustainable
  development. Important preventive systems, i.e., good corporate
  governance, risk management, and control self assessment, have been
  integrated to synergize internal control and audit systems. The
  process commences from evaluation of weaknesses arising from
  non-compliance with corporate governance principles. Next, risks are
  assessed and prioritized according to impact levels. The most
  significant risks are identified in order to further develop control
  self assessment according to priority levels. The results are
  monitored; causes of difficulties are examined; and relevant
  corrective processes are developed. This contributes to the formation
  of a stock of knowledge capital that is shared with responsible
  persons on an ongoing basis.

2. The Internal Audit

As per its charter, the Audit Committee supervises the Internal Audit
Office to ensure that it works with independence, integrity, and proper
ethics. It does so by assessing the sufficiency and efficiency of
internal control systems and enterprise risks so as to guarantee that
operations are in line with SCG’s vision and the changing business
environment. In 2010, the Committee implemented the following actions:

1.  Audit enhancement to create sustainable value-added

  To create sustainable value-added, the Internal Audit Office
  emphasized the preventive audit approach, which is based on four
  generally accepted concepts: control self assessment (CSA), advisory
  system, assessment of risk management, and good corporate governance.
  The Internal Audit Office applies these four concepts on a continuous
  basis to develop efficient and effective audits.

  The Internal Audit Office’s first vision statement, issued in 2005,
  focused on the “innovative preventive audit” approach, identifying key
  issues to audit each year in alignment with its vision. This year, the
  Audit Office has set its vision for 2011 to 2013, again supporting
  SCG’s company wide vision, as an “innovative proactive audit in order
  to create sustainable value-added in domestic and overseas
  operations”. The Internal Audit Office’s five key mission statements
  are as follows:

  • Advance from preventive auditing towards professional proactive
  auditing, to create value for clients.

  • Create significant and sustainable value in the audit work itself,
  and in the work being audited, by collaborating with all business
  units of SCG.

  • Leverage auditors’ skills to gain competencies for continuous
  advancement.

  • Implement methodology and information technology for internal
  control, control self assessment (CSA), and risk management to insure
  that overseas units and affiliates achieve the same standard as SCG.

  • Insure that the quality of audit work attains international
  standards.

  In order to achieve the mission statements, the Internal Audit Office
  has developed annual action plans in pursuit of “global auditing
  excellence”. Accordingly, the Office will benchmark SCG audit
  practices against those of leading professional internal audit firms,
  perform audit work that brings high value-added to clients, and
  support auditors’ development to gain competencies for continuous
  advancement. Moreover, the Internal Audit Office developed IT systems
  to support the internal control process while also integrating good
  corporate governance principles, assessment of risk management, and
  control self assessment (CSA) to accomplish operational efficiency.

2.  Auditors’ competency development

  To increase each auditor’s knowledge to reach compliance with
  international standards, the competency management and development
  system is used as a tool for determining an individual development
  plan for each auditor. Competency is defined in two ways:

  • Common competency is the major ability supporting the audit mission.
  It is considered in terms of knowledge and behavior.

  • Functional competency is the ability necessary for specific audit
  tasks. It is considered in terms of knowledge and skill.

  The competency management and development system requires auditors to
  firstly perform self-assessment according to the established model.
  The Human Resources Committee of the Internal Audit Office then
  considers the self-assessment results of each auditor. The Committee
  then provides recommendations to each individual auditor for use as
  guidelines for continuous improvement in each competency level.
  Monthly in-house training sessions enable auditors to become more
  effective and efficient while adhering to uniform standards.
  Self-study and self-assessment activities are provided using
  e-learning, with a focus on key audit tasks and a systematic
  management of methods. In addition, the Internal Audit Office supports
  its auditors’ efforts to attain audit certification at the
  international level.

3.  Development of IT Audit

  In 2010, the IT Development Department developed IT audit systems to
  improve IT workflow and become more effective in preventive terms. The
  Department developed several programs such as an SAP authorization
  audit system in order to audit right granting; electronic control self
  assessment system for inventory management; e-CSA for accounting, and
  e-CSA for credit management. The three e-CSA programs increase
  effectiveness in managing and following up inventory transactions,
  accounting transactions, and credit management.

  The Department also conducted information system (IT) assessments for
  overseas units and affiliates to improve their operations to be
  effective and in compliance with SCG’s standards. In addition the
  Department is developing other IT applications to increase the
  effectiveness of the internal control system and internal audit,
  especially in terms of preventive action. When the external auditor or
  Internal Audit Office discovers any weakness or problem in operations,
  it will be examined in coordination with the relevant department to
  determine measures for correction and systemic improvement.

4.  Development of audit procedures using total quality management (TQM)

  In order to increase the effectiveness and efficiency of audit work,
  keeping it up-to-date and relevant to ongoing change, the Internal
  Audit Office is implementing the total quality management (TQM)
  principle. SCG has been applying this concept as a guideline to
  improve the productivity of all departments. When applied to auditing,
  TQM means to audit with integrity, reasonableness, and awareness of
  value-added. The objective is to create value and benefit for every
  department. In 2010, the Office developed a new audit work procedure
  manual to be more up-to-date and relevant to the vision and work. This
  manual will follow the same standards for both audit work and ethics
  so that auditors will act consistently. Auditors can use the manual
  both for self-study, regarding theory, and for consultation in actual
  use.

(5) Internal Information Controls (page 116)

(6) Human Resource

At SCG, “Belief in the value of the individual” is one of philosophy.
Therefore, employees are the most valuable asset. We devoted to develop
their skills, capability, and quality of life with the appropriated
remuneration. Therefore, SCG has improved the human resource management
in correspondence with the business strategy. The Company draws up
tactics to foster the success by planning for the next 5 years as
following:

  1. Human resource preparedness to support the future investment

1.  Arrange manpower to serve an expansion

  Other than the readiness in the terms of International staffs and SCG
  staff in Overseas Operations to support the oversea business’s
  expansion, SCG also builds the brand to be recognized as employer of
  choice by generating the campus recruitment in leading education
  institutions, offering scholarships to students and local staffs for
  graduate to doctorial degree, and building strong relationship with
  the government, private sector, community, and leading corporate of
  the invested countries. Moreover, SCG arranges quarterly meeting with
  SCG coordinator of each country to make sure that the company’s policy
  on human resource management has been applying accordingly. Such
  meeting opens up additional information exchange channel in terms of
  business and human resource as a way of employee’s care of both local
  and international staffs.

2.  Employee capability development

  SCG focuses on creating atmosphere that allows employees to be
  inspired and learned through training sessions, knowledge sharing
  activities, knowledge improvement programs, and in-work experience.
  Employees would have attitude and behavior that suits the company as
  well as broaden their knowledge, skills and visions that enable them
  to adapt to constant changing environment both local and oversea. As a
  preparation for oversea expansion, SCG improves staff’s ability in
  working at international stage by teaching them language, culture, and
  business norms of each country through Cross-Cultural Exclusive
  Development programs and international business practice program.
  Furthermore, SCG has developed SCG Orientation International Program
  for local staffs to understand the SCG’s business strategy and
  promoting the proud of being SCG employees and building working
  network.

3.  Modification on human resource management to encourage for working
    overseas

  Aims to have same standard of human resource management with SCG and
  also suitable for different cultures, the overseas companies have
  implemented e-HR management software. SCG brings best practices, such
  as introducing SCG Career Camp projects, monitoring employees through
  HR committee, and applying HR development methods e.g. TQM, TPM,
  Safety to the overseas companies in order to illustrate its intention
  of sustainable and long-term investment and boost working
  effectiveness. Also, the intentioned programs allow local staffs to
  have career growth opportunity in the same playing field with others
  throughout SCG. The HR system platform is a key that allows HR system
  to be applied in foreign countries much more effectively. For top
  managements, SCG has a policy that requires them to have working
  experience in foreign countries.

  2. Encourage new culture lead to innovative organization

  2.1 Change the culture into innovative organization

  Through diverse activities, SCG aims to promote and alter working
  culture to be known as innovative organization as well as changing its
  employee’s working behavior. Every employees is required to adhere to
  SCG Business Philosophy and Code of Conduct which are guidelines for
  practices and also courageous to think and talk as well as having
  opened-mind and ability to change in order to create Innovative
  Workplace environment. SCG also initiated various activities such as
  Inno Award, Inno Idea Tank, Book Brief, and Eager to Learn. In
  addition, SCG sees the importance of adding number of researchers in
  subjects which are related to business direction because these staffs
  are the critical mass in driving innovation policy to be in effect
  rapidly.

2.  Develop employees’ competency who support innovative culture

  To develop employees’ competency in supporting innovative culture, SCG
  has arranged number of programs to develop them in each level. These
  programs are, for instance, Thinking Skills for Innovation, Coaching
  for Innovation, Leadership Development Program, and Inno Executive
  Coaching. In the mean time, SCG has developed SCG Inno Facilitators in
  every business to act as promoters of innovative culture within the
  organization.

3.  Modify human resource management to enhance innovative organization

  Human resource management is an importance tool in sustainability
  achieving innovation goal. The HR systems that support the mentioned
  policy are listed below:

-   Improve Recruitment Process by developing internal recruiting
    procedure to serve career part of employees via SCG Career Click.

-   Review Performance Management System to motivate employees and teams
    both output and working procedures in driving innovation

-   Define wage management and career development for researchers and
    specialists in each business.

-   Cooperate with external institutions for R&D such as AIT,
    Chulalongkorn University as well as develop skills for technicians
    in mechanical technology by cooperating with King Mongkut’s
    University of Technology North Bangkok and Model School Project , in
    cooperation with Vocational Education Committee to support SCG’ s
    future technology improvement.

SCG believes that its focus on HR development in knowledge, skill, and
ethic will allow the Company to achieve the goal of becoming
international company of innovation. Such adherence will lead the
Company to experience sustainable growth both local and in Southeast
Asia.

As at December 31, 2010, The Siam Cement Public Company Limited had 500
employees with a compensation of Baht 708 million. Total employees of
the Group were 30,820 with a compensation of Baht 20,234 million.
(Compensation includes salary, bonuses, provident fund, and welfare)

Number of Employees in Each Business of the Siam Cement Group

As at December 31, 2010

  -------------------------------------------- --------------------------
  Company / Business Unit                      Number of Employees

  The Siam Cement Public Company Limited       500

  SCG Chemicals                                4,585

  SCG Paper                                    8,248

  SCG Cement                                   5,022

  SCG Building Materials                       9,829

  SCG Distribution                             1,795

  Others                                       841

  Total                                        30,820
  -------------------------------------------- --------------------------