Governance

Cathay Pacific remains committed to maintaining a high standard of corporate governance and devotes considerable effort to putting best practices in place in accordance with our Code of Conduct on Corporate Governance.

Governance of sustainable development

Cathay Pacific remains committed to maintaining a high standard of corporate governance and devotes considerable effort to putting best practices in place in accordance with our Code of Conduct on Corporate Governance.

The governance of sustainable development at Cathay Pacific is led by the Chairman, with the Chief Executive being accountable for the Sustainable Development Strategy. A key component of this strategy is to encourage staff to make better decisions with the intention of minimising the individual social and environmental impacts of their day-by-day routine. This enables us to address and integrate sustainability issues into our business and support our ability to deliver ‘economic value’ – i.e. profits for shareholders. The following diagram shows the reporting lines of various sustainability committees.

Further details of our governance structure can be found in the section below, as well as in the Corporate Governance section of our Annual Report 2016 (p. 46–56).

Corporate governance and risk management

The company’s highest governance body is the Board of Directors, which is led by the Chairman and also comprises the Chief Executive and three additional Executive Directors. There are also 11 Non-Executive Directors, four of whom are independent. As well as dealing with our economic performance, the Board oversees the environmental and social initiatives undertaken in the company.

The Chief Executive is accountable for the Sustainable Development Policy, which outlines commitments including but not limited to regulatory compliance, effective environmental management throughout operations, staff education, stakeholder engagement and the target-setting process. This policy was developed to help create long-term value by embedding sustainable development principles and practices into the ways in which we govern the company, manage risk and seize opportunity. Our governance structures are linked to the Swire Group’s Environment and Risk Management Committees for internal audit purposes.

The Sustainable Development Steering Group oversees, makes decisions and provides guidance on the company’s Sustainable Development Strategy. They have a remit over a range of issues, including carbon management, supply chain management, procurement, food policies, sustainable biofuels, staff engagement and reporting, emissions trading schemes and carbon offsetting schemes – such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the European Union Emission Trading Scheme (EU ETS). The group is chaired by the Director of Corporate Affairs and comprises of General Managers and Heads of Departments representing a range of functions across the company.

Environmental management

The Environmental Affairs Department works with the operational teams to implement sustainability programmes. We participate in the Sustainable Development Steering Group, the Fuel Forum Steering Committee, and various other committees and working groups. This department reports directly to the Director of Corporate Affairs.

We also take part in sustainability committees and working groups within the Swire Group, including the Sustainability Committee, Energy Committee, Environmental Best Practice Working Group and the Supply Chain Sustainability Working Group.

An Environmental Management System (EMS) based on the ISO14001 standard has been in existence since 1997. Internal audits are undertaken twice a year and audited externally every year to monitor the design and implementation of the EMS against relevant environmental regulations and policies. Opportunities for continual improvement are also identified during the audits.

Safety management

Airline Safety Review Committees (ASRCs) individually dedicated to both Cathay Pacific and Cathay Dragon meet monthly to guide the management of safety in the two airlines. They are supported by departmental Safety Action Groups and Committees, of which the following four also meet monthly: Flight Operations, Engineering, Cabin and Ramp/Cargo. A Fatigue Risk Management System (FRMS) Committee meets bimonthly, and an Occupational Health & Safety (OHS) Action Group meets quarterly.

The ASRCs are made up of airline Directors and General Managers from key operational areas, as well as the heads of Quality, Medical and Security departments. The ASRC Chairmen report to their respective chief executives after each meeting. The outputs from both ASRCs are then brought together at a Group Airline Safety Review Committee (GASRC) and ultimately governed by the Board Safety Review Committee (BSRC). The GASRC and BSRC meet twice yearly and are both chaired by independent Safety Expert Dr. David King, who reports on safety performance to the main Cathay Pacific Board. David is a retired Chief Inspector of the UK’s Air Accidents Investigation Branch (AAIB), Non-Executive Director at the United Kingdom Civil Aviation Authority and Visiting Professor at Cranfield University.

Sustainable procurement management

We aim to ensure that all purchasing practices are governed by the highest professional and ethical standards. Our Procurement and Aircraft Trading Department manages most of the purchasing requirements for both Cathay Pacific and Cathay Dragon. Our Procurement and Purchasing Ethics Policies outline our expectations from our purchasing staff, including compliance with anti-bribery and anti-competition regulations. Our approach to sustainable procurement has been to encourage our suppliers to improve their sustainability practices through capacity building, knowledge sharing and the implementation of best practices.

The teams in our Procurement Department understand the need to apply sustainable purchasing and responsible supply chain principles wherever practical. Suppliers to Cathay Pacific must provide clear, accurate and appropriate reporting of their progress towards achieving the objectives of our Supply Chain Sustainability Code of Conduct. This is highlighted regularly during internal purchasing conferences.

Human resources management

Human resources issues are managed by the respective departments in Cathay Pacific, Cathay Dragon and our subsidiaries. This is headed by the directors at Cathay Pacific and by the head of personnel at Cathay Dragon.

The Corporate Code of Conduct sets out our principles for acting responsibly in the course of achieving our commercial success. The code applies to all the staff employed under Cathay Pacific and its subsidiaries and includes issues related to business ethics, conflict of interest, procurement, insider trading, lobbying, bribery, environment, health and safety, and respect in the workplace. Comprehensive policies have been developed to support the following issues:

  • Recognition of human rights

  • Non-acceptance of child/forced labour

  • Non-discrimination

  • Freedom of association

  • Public policy position

  • Anti-corruption and bribery

  • Competition and antitrust

  • Labour and management relations

  • Training and education

  • Performance management

  • Diversity and equal opportunity

  • Compensation management

  • Grievance and fair disciplinary procedures

We aim to ensure our employees are productive, competent, flexible, and operate within a healthy environment. This is achieved via a series of training and development programmes. We also strive to manage people in a way that recognises diversity.

Community investment management

Our commitment to communities is a core part of our Sustainable Development Strategy. Whilst we emphasise priority projects, we also have a flexible approach which enables us to respond to local needs and priorities. We also seek to engage our employees in all our community investment activities wherever possible.

Through ongoing dialogue with local communities, we can better understand and work to address the issues and concerns relevant to their needs. In Hong Kong, we partner with local community groups, NGOs and other institutions, such as neighbourhood councils, integrated service centres, district councils, universities and schools.

Our community investment must be measured by the impact we make for the local communities. We apply international best practices and appropriate management tools to help us measure the impact of these initiatives and to evaluate their outcomes.

Subsidiaries management

Our subsidiaries all adopt similar policies, committees and management responsibilities across all areas related to Cathay Pacific’s sustainable development, including environmental management, human resources issues, customer service, product responsibility and community engagement. Depending on the level of impact, our subsidiaries are responsible for managing those issues relevant to their business. These issues might cover the development of goals, staff training and the monitoring of data through environmental, health and safety databases.

Risk management

The Risk and Control Team (under the Corporate Services Section of the Finance Department) coordinates risk register reviews and provides advice on a range of functions and activities for Cathay Pacific, Cathay Dragon and the wholly-owned subsidiaries from risk management perspectives. The internal Corporate Risk Register is reviewed and presented to the Audit Committee annually. Our risk management and processes were established based on the AS/NZS 4360: 2004 Risk Management Standards.

The current risk management framework covers all Cathay Pacific departments in Hong Kong and all regional outports, as well as having been introduced to all the wholly-owned subsidiaries. Advice is given to help departments and outports to understand, assess and respond to risks. Risks are scored, ranked and documented in the risk registers of the business units and fed into the Corporate Risk Register.

Ownership and governance

Specific risks identified in the Corporate Risk Register are owned by specific directors. Action plans to respond to the risks are then developed via discussion with the relevant departments, subsidiaries or outports, and with endorsement from the directors. Progress is monitored and reported to the Management Committee on a regular basis to reduce the risk exposure of Cathay Pacific.

Our strategy towards specific types of risks, such as financial reporting, internal control, sustainable development and operational safety are reviewed by specific committees. The Audit Committee reviews the completeness and accuracy of the company’s accounts, as well as the adequacy and effectiveness of internal control and risk management systems. Sustainable development risks relating to commercial and operational delivery are assessed by the Sustainable Development Steering Committee. Airline operational safety risk is reviewed monthly by the Airline Safety Review Committee, which is chaired by the General Manager of Corporate Safety and comprises directors, the senior management of all operational departments as well as our operational partners.

Incorporating climate change risks

As awareness on sustainability grows, we recognise the importance of incorporating climate change issues into business plans. The Environmental Affairs Department works with all relevant departments to identify the key business units with risk exposure to climate change, which promotes awareness of these issues when the departmental risk registers are being reviewed.

Corporate compliance

It is the policy and intent of Cathay Pacific, Cathay Dragon and Hong Kong based 100% owned subsidiaries to operate in full compliance with all applicable laws and regulations at all times.

Following the introduction of the Hong Kong Competition Ordinance (the “Ordinance”) in December 2015, we revised our existing Antitrust Policy and Guidelines for Cathay Pacific and Cathay Dragon and introduced new policies to Hong Kong based 100% owned subsidiary companies. To further facilitate the understanding of the Ordinance by all employees, we have also developed a Traditional Chinese version of the Antitrust Policy and Guidelines. To begin with, we successfully conducted briefings with senior management teams and implemented face-to-face training sessions with relevant staff for high-risk Cathay Pacific’s business units, as well as Hong Kong based subsidiaries in 2015. Following on from this, we extended the face-to-face briefings and training sessions to all remaining Cathay Pacific business units. These briefings and training sessions were specifically tailored to take into account the risks faced by each business unit, in order to further minimise legal risk and ensure the company remains compliant with the Ordinance in all aspects of its business. As part of our commitment to ensure our employees understand the competition law, we will roll out a new Online Antitrust Training programme for all relevant staff including subsidiaries in 2017.

To support clear communication and ensure awareness of our Anti-bribery Policy and Guidelines, we hold ad-hoc face-to-face workshops for our employees and provide online training for new starters. In addition to this, we have extended our face-to-face workshops to a number of our outports in the Southeast Asia region, focusing on the specific risks that they are faced with.

The General Data Protection Regulation comes into force in the EU in 2018. In order to ensure compliance with the new laws, we will conduct a global data privacy review in 2017. Following the review, we will also update our Personal Data (Privacy) Policy and Guidelines to ensure we are compliant with the data protection regimes for the countries/territories in which we conduct business.

In 2016, we introduced an Internal Whistle-blower Policy in Hong Kong. This policy serves as an umbrella policy to our already existing internal whistle-blowing/confidential reporting mechanisms. This is intended to encourage employees to report issues of suspected wrongdoing through the assurance of strict confidentiality. Prior to the rollout of the policy outside of Hong Kong, we have commenced a jurisdictional review of the policy to ensure that it is compliant with applicable local laws and regulations in other jurisdictions in which we operate.