From the important news issue regarding the disappearance of Cesium 137 radioisotope from the power plant in Prachinburi province, it is important to note that Cesium 137 is an isotope of cesium and is a radioactive material with an atomic number of 55 and a half-life of 30 years. It decays by emitting beta and gamma radiation and is one of the products of nuclear fission. Cesium 137 is also a "carcinogen" and the chance of getting cancer must be from exposure to contaminated substances. When it enters the body, it spreads throughout, mostly accumulating in tissues, liver, and bones. For this reason, this issue is considered an important and close environmental and safety issue for the lives and property of communities in Prachinburi province and nearby communities.

Although the radioactive material in question is owned by NPP5A Co., Ltd., which operates the production and distribution of electricity and steam for industrial use as well as air conditioning systems, a closer look at the company's affiliations reveals that NPP5A is actually a subsidiary of the National Power Supply Public Co., Ltd. (NPS), a leading company in the energy and renewable energy business that provides comprehensive energy and public utility services to industrial customers. NPS also operates large-scale biomass power plants in the country. NPS owns 99.99% of the shares in NPP5A, making NPP5A a registered subsidiary of NPS as of October 10, 2008. NPS has a registered capital of THB 2,250 million, which has been fully paid.

In the above case, there is a lesson to be learned about general issues related to the supervision and management of subsidiaries or affiliated companies (subsidiary or group governance) to prevent possible issues. Nowadays, many companies, including those listed in the stock exchange, have considered establishing or investing in subsidiaries/affiliates. However, issues arise when these subsidiaries/affiliates face problems, although their legal status is separate from that of the parent company, causing various impacts and expectations on the parent company, who must take responsibility. Therefore, establishing policies or principles to govern subsidiaries/affiliated companies is an important way to ensure that parent companies, as well as representatives who become directors of subsidiaries/affiliates, can effectively govern them while aligning with the goals of both the parent and subsidiary/affiliated companies.

"The Board of Directors should allocate sufficient time for their oversight duties.”

The board is considered a crucial group of people who play a role in board leadership in driving sustainable growth of the company. They have a responsibility to monitor and oversee management to ensure that the goals and objectives of the company are being met. Therefore, closely monitoring performance and appropriately allocating time to all organizational positions that hold positions is important to help executives and employees feel trusted and confident that the board of directors prioritizes the efficiency and effectiveness of the company's operations."

Normally, the parent company usually assigns directors or executives of the company to sit in the subsidiaries/affiliated companies. Some directors or executives may be assigned to be the directors in multiple companies at the same time, while the executives themselves must also perform their duties in the parent company. This may cause them to be unable to supervise adequately. Therefore, the directors should consider the appropriate number of companies that they can join and effectively oversee. Sometimes, if the subsidiary has a large size or has a complex business structure, appointing directors from outside (external directors) can be considered to obtain an external and independent perspective. Additionally, this helps to create diversity among the board of directors, leading to more efficient performance of their duties.

"Group Risk Governance"

The Risk Management Committee is another subcommittee established to support the board's role in risk management. However, even though the Risk Management Committee is primarily responsible for directly overseeing the risk of the parent company, if a particular type of business of the subsidiary is significant and has an impact on multiple stakeholders, establishing policies and guidelines for managing risks across the group, or supervising internal controls or risk management of subsidiaries/affiliate companies, may be an additional approach that the Risk Management Committee can undertake. For instance, in the case of NPP5A, controlling risks related to radioactive materials is of utmost importance. Controlling risks of accidents such as leaks, contaminations, and conducting detailed inspections of material usage in daily operations, may be another critical risk issue that the parent company should be aware of to consider whether to examine and truly practice or to increase supervision to prevent similar events from happening again in the future. Normally, the subsidiary's risk reports should be assessed together with the parent company's risk reports periodically to see the overall risk of the group companies. Risk management is, therefore, a fundamental tool that creates confidence that all the risks that have impacts on impeding the group's objectives are evaluated, managed or controlled to a level that is acceptable. This leads to efficient and goal-oriented operations. The Risk Management Committee acts as a representative of the entire board, shareholders, and stakeholders, which play a significant role in governing operations to align with the vision and goals under good risk management.

“Group Audit"

In addition to the Risk Management Committee, the Audit Committee also plays an equally important role in overseeing the internal audit practice. The parent company's audit committee must ensure that the subsidiary companies have an audit plan, beginning with identifying key risk factors and addressing significant internal control deficiencies, in order to be included in the audit plan. To ensure efficiency and a holistic approach, the parent company may also conduct random audits of its subsidiaries/affiliates, particularly where high risks or control deficiencies are identified and could lead to severe impact. Regular review of the audit plan and report of the subsidiary companies should also be considered."

In addition to the above-mentioned issues, in reality, the supervision of subsidiaries/affiliates within the group involves many other areas, such as strategy, investment, policies and best practices, among others. Moreover, in the case of NPP5A, another important issue to be considered is the environmental and social impacts on the neighboring communities. Therefore, it cannot be denied that this is another area that the parent company should monitor and ensure that the group companies have a shared policy and practices related ESG framework, as well as mechanisms to monitor and control the implementation effectively.

The objective of this article is to provide another perspective on corporate governance. It is not intended to provide any biased opinions or analyses of the duties of the board of directors or the company in any way.

Srisunun Anuchornphan
Assistant Vice President
Thai Institute of Directors Association (IOD)