Inside Asian Gaming

INSIDE ASIAN GAMING | February 2014 40 In Focus of directors; between five and 11, a range that experts consider to be optimal. This percentage was unchanged over last year, although we anticipate an improvement in this area in 2014 based on several companies, such as Carnival, decreasing their board size. Other aspects of board make-up include the number of truly independent vs. insider members (half the companies had boards comprised of 25% or fewer insiders) and length of term (just over half of the companies put the entire board up for reelection annually vs. staggering elections). As previously stated, we added a section on board diversity. Companies received points for having a formal policy around gender and racial diversity, policy implementation and diversity representation on the board. We believe that board diversity is socially responsible as well as good for business. Committee Structure The Securities and Exchange Commission requires public company boards to have the following four committees: audit, compensation, governance and nominating. Like the prior year, six companies achieved a perfect score in this category. The number of committee meetings remained virtually unchanged, with an average of one fewer audit committee meeting and one more nominating and governance committee meeting. These committees play an important role in making sure management acts appropriately and in the best interests of shareholders. Much can be gleaned from the committee reports that are required in proxy statements. Insider participation on subcommittees of the board has virtually disappeared, with only two of 26 companies having an insider sitting on a committee compared with six out of 32 companies last year. This trend shows a commitment to maintaining objectivity and keeping shareholder interests at the center of decision making. Transactions with Related Parties The category “transactions with related parties” examines where conflicts of interest may arise due to a company insider or board member conducting business with the company in some other way. If any related party transaction is present, the company receives zero points for the category. Only eleven out of the 26 companies had a perfect score in this area. Although most of these “related transactions” were done at “market prices,” shareholders are a skeptical bunch. It appears that most companies are communicating these transactions to shareholders and that is a good thing. Evaluation and Communication Issues concerning the effectiveness of internal board operations, director evaluation and accessibility to shareholders were measured in the evaluation and communication area. Seven of the 26 The Securities and Exchange Commission requires public company boards to have the following four committees: audit, compensation, governance and nominating. Like the prior year, six companies achieved a perfect score in this category.