the role of chairman. this is a simple point, but quite often overlooked, that is during the meeting, the chairman should always try to create an atmosphere conducive for independent participation of all board members. it is also much more effective if the positions of chairman and ceo are not held by one and the same person. if one individual performs both roles simultaneously, then other board members cannot fully perform their duties of providing a check - and - balance. this is inevitable in the context of our culture which tries to avoid being disrespectful to others. moreover, if the ceo acts as chairman, he can easily influence the agenda and delay bringing certain issues to the attention of the board. eighth, on the appointment of an independent director, an independent director should not conduct any business relating to banking operations. by doing so, it may give rise to the problem of conflict of interests. an independent director should be one who is willing to stake out an independent view honestly. however, to expect a suitable individual to have no business background or business connection at all may be somewhat too ambitious. such requirement will screen out individuals with understanding of banking businesses to assume the duty of bank directors. the requirement about business affiliation is merely a broad and general guideline. all in all, i want to focus on certain qualities which are more imperative to achieving good governance. this must start from personal qualities, such as an affinity to be independent, individualistic with high moral grounds and integrity ; and a desire to express his opinion independently and honestly. ninth, is the issue i raised last year on “ the remuneration of board members ” which has been added to the principles of good directorship. i would like to propose that board remuneration not be tied to the future stock price of the bank nor solely linked to profits alone. the point is that if the bonus of board members is tied to the future stock price, it might critically affect the bank in the way that occurred in the cases of enron or world com. when management proposes any project that might raise the company ’ s stock price, although a high risk project, board member might give less weight to the risk aspect. thus, the check - and - balance of management power will automatically decline. moreover, the increased price of stock may not only result from the specific bank operation, but also attributed to general improvement in economic conditions and favourable stock market environment. if the remuneration of board members varies solely with the profits of

would also responsible for setting up measures to deal with those types of risk, including the process on risk assessment and control. the contingency plan is needed to control risks in timely manner and minimize those risks to be at the acceptable level. this includes the reporting process on risk status to the committee and board of directors with simple and clear message. with such practices, the board of directors could fully monitor risk management with appropriate decision, supporting by the risk management committee. on the division of responsibility between the board and the risk management committee, the committee should have authority to directly oversee all risks arising from normal course of business, while the board of directors should be responsible for approval of the risk management policy framework proposed by the risk management committee, such as approval of aggregate exposure limit to fx risk, and individual limit by transactions and traders ; maximum value at risk for interest rate risk ; on credit risk, setting aggregate, individual, as well as group large exposure limit to certain types of credits and borrowers, or certain groups, to prevent over concentration. on top of setting proper risk management framework and risk limits, the directors should also be on guard against situations where normal risk management cannot fully cover. most important among these are : improper lending to related parties if directors or senior management ; improper lending to influential personality to maintain the goodwill and relationship, improper lending to clients in exchange for the right to equity participation or to benefit sharing from their businesses ; and the improper profiteering by management from large procurement projects. the directors should be alert and on the look out for such situations. sixth, the long - term future of a bank rests on continued acceptability from clients and society at large. therefore, the directors must pay special attention to ensure that clients are treated in a fair manner. of even more importance is the social perception of the bank. if there is a social perception that the bank has not conducted its business in high moral standings, or fails to look after the interest of the country, then social mistrust and sanction can lead to reputational risk, and the damage may have far reaching implications and difficult to restore. the directors can play a very important role here. typically, high - flyer managements tend to aggressively pursue growth and profits, often at the expense of social perception. directors, on the other hand, tend to comprise more eminent personalities, who are relatively more mature and broadly experienced than management who may have been in one profession all along. seventh, this principle applies to the person performing