Composition of Board of Directors
Our board consists of seven directors, including three directors nominated by Melco International and four independent directors. Nasdaq Stock Market Rule 5605(b)(1) generally requires that a majority of an issuer’s board of directors must consist of independent directors. However, Nasdaq Stock Market Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” in certain corporate governance matters. Walkers (Singapore) Limited Liability Partnership, our Cayman Islands counsel, has provided a letter to Nasdaq certifying that under the Companies Act (as amended) of the Cayman Islands, we are not required to have a majority of independent directors serving on our board. Since September 5, 2018, we have had a majority of independent directors serving on our board. Prior to that, we relied on this “home country practice” exception.
Duties of Directors
Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and in what they consider to be our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time. We, as the Company, have the right to seek damages if a duty owed by our directors is breached and we suffer a loss as a result. In certain circumstances, an individual shareholder may bring such a claim for damages against our directors, on behalf of the Company, by way of a derivative action.
The functions and powers of our board include, among others:
| • | convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; |
| • | declaring dividends and distributions; |
| • | appointing officers and determining the term of office of officers; |
| • | exercising the borrowing powers of our Company and mortgaging the property of our Company; and |
| • | approving the transfer of shares of our Company, including the registering of such shares in our share register. |
Terms of Directors and Executive Officers
Our officers are elected by and serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time as they resign, are removed from office by special resolution or by a majority of the directors, or otherwise vacate their office in accordance with our articles of association. A director will vacate office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) dies or is found by a court to be of unsound mind. In addition, none of the service agreements between us and our directors provide benefits upon termination of their service.
Committees of the Board of Directors
Our board established an audit committee, a compensation committee and a nominating and corporate governance committee in December 2006. Our audit committee was renamed our audit and risk committee on August 3, 2016. Each committee has its defined scope of duties and terms of reference within its own charter, which empowers the committee members to make decisions on certain matters. The charters of these board committees were adopted by our board on November 28, 2006 and have been amended and restated on several occasions, with the latest version of the compensation committee charter amended on December 3, 2021, the audit and risk committee charter amended on December 6, 2023 and the nominating and corporate governance committee charter amended on December 16, 2022. These charters are found on our website. Each of these committees consists entirely of directors whom our board has determined to be independent under the “independence” requirements of the Nasdaq corporate governance rules. The current membership of these three committees and summary of its respective charter are provided below.
Audit and Risk Committee
Our audit and risk committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Crawford. Each of the committee members satisfies the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act. We believe that Mr. Crawford qualifies as an “audit committee financial expert” as defined in Item 16A of Form 20-F. On September 13, 2019, Mr. Crawford was appointed as an independentnon-executive director of Melco International, our parent company and a related party. Since his appointment to the Melco International board, Mr. Crawford has not participated in, or voted on or consented to, any actions or matters being considered by our audit and risk committee which involved any related party transaction with Melco International. The purpose of the committee is to assist our board in overseeing and monitoring:
| • | the audits of the financial statements of our Company; |
| • | the qualifications and independence of our independent auditors; |
| • | the performance of our independent auditors; |
| • | the accounting and financial reporting processes of our Company and the integrity of our systems of internal accounting and financial controls; |
| • | legal and regulatory issues relating to the financial statements of our Company, including oversight of the independent auditor, review of the financial statements and related material, internal audit process and the procedure for receiving complaints regarding accounting, internal accounting controls, auditing or other related matters; |
| • | the disclosure, in accordance with our relevant policies, of any material information regarding the quality or integrity of our financial statements, which is brought to its attention by our disclosure committee; |
| • | the integrity and effectiveness of our internal audit function; and |
| • | the Company’s risk management policies, procedures and practices. |
| • | reviewing and recommending to our board for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor and after considering a tendering process for the appointment of the independent auditor every five years; |
| • | approving the remuneration and terms of engagement of the independent auditor, and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors; |
| • | at least annually, obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; |
| • | discussing with our independent auditor and our management, among other things, the audits of the financial statements, including whether any material information brought to their attention should be disclosed, issues regarding accounting and auditing principles and practices and the management’s internal control report; |
| • | reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports; |
| • | approving all material related party transactions brought to its attention, without further approval of our board; |
| • | establishing and overseeing procedures for the handling of complaints and whistleblowing; |
| • | approving the internal audit charter and annual audit plans, and undertaking an annual performance evaluation of the internal audit function; |
| • | assessing Chief Risk Officer and senior management’s policies and procedures to identify, accept, mitigate, allocate or otherwise manage various types of risks that may materially impact the Company’s business, strategy, operation, financials and reputation, including without limitation, legal, compliance and operational risks and other evolving risks such as cybersecurity threats, and making recommendations with respect to our risk management process for the board’s approval; |
| • | reviewing our financial controls, internal control and risk management systems, and discussing with our management the system of internal control and ensuring that our management has discharged its duty to have an effective internal control system including the adequacy of resources, the qualifications and experience of our accounting and financial staff, and their training programs and budget; |
| • | together with our board, evaluating the performance of the audit and risk committee on an annual basis; |
| • | assessing the adequacy of its charter; and |
| • | co-operating with the other board committees in any areas of overlapping responsibilities. |
Compensation Committee
Our compensation committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Wu. The purpose of the committee is to discharge the responsibilities of the board relating to compensation of our directors and our executives, including, amongst others, to design (in consultation with management), evaluate and approve the compensation plans, policies and programs for the executives and evaluate and recommend to our board for approval of the directors’ compensation.
Members of this committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any compensation committee meeting during the time when his compensation is deliberated.
| • | overseeing the development and implementation of executive compensation programs in consultation with our management; |
| • | at least annually, making recommendations to our board for approval with respect to the compensation arrangements for our directors, and approving compensation arrangements for our chief executive officer and other executives; |
| • | at least annually, reviewing and approving our incentive compensation plans and equity grant, if any, under our share incentive plans, and overseeing the administration of these plans and discharging any responsibilities imposed on the compensation committee by any of these plans; |
| • | reviewing and approving the compensation payable to our executive directors and executives in connection with any loss or termination of their office or appointment; |
| • | reviewing and approving any benefits in kind received by any director or executives where such benefits are not provided for under the relevant employment terms; |
| • | reviewing executive officer and director indemnification and insurance matters; |
| • | overseeing our regulatory compliance with respect to compensation matters, including our policies and restrictions on compensation plans and loans to officers and directors; |
| • | together with the board, evaluating the performance of the compensation committee on an annual basis; |
| • | at such time as it deems appropriate, reviewing and making recommendations to the Board with respect to the adoption of any share incentive plans and/or modifications to the terms thereof and carrying out of the committee’s duties and responsibilities as set forth in such share incentive plans; |
| • | assessing the adequacy of its charter; and |
| • | co-operating with the other board committees in any areas of overlapping responsibilities. |
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Thomas Jefferson Wu, Alec Yiu Wa Tsui, John William Crawford and Ms. Francesca Galante, and is chaired by Mr. Tsui. The purpose of the committee is to assist our board in discharging its responsibilities regarding:
| • | the identification of qualified candidates to become members and chairs of the board and its committees and to fill any such vacancies, and reviewing the appropriateness of the continued service of directors; |
| • | ensuring that our board meets the criteria for independence under the Nasdaq corporate governance rules and nominating directors who meet such independence criteria; |
| • | oversight of our compliance with legal and regulatory requirements, in particular the legal and regulatory requirements of Macau (including the relevant laws related to the gaming industry), the Cayman Islands, the SEC and Nasdaq; |
| • | the development and recommendation to our board of a set of corporate governance principles applicable to our Company; |
| • | the disclosure, in accordance with our relevant policies, of any material information (other than that regarding the quality or integrity of our financial statements), which is brought to its attention by the disclosure committee; and |
| • | oversight of our environmental, social and governance-related risks and opportunities. |
| • | making recommendations to our board for its approval, the appointment or re-appointment of any members of our board and the chairs and members of its committees, including evaluating any succession planning; |
| • | reviewing on an annual basis the appropriate skills, knowledge and characteristics required of board members and of the committees of our board, and making any recommendations to improve the performance of our board and its committees; |
| • | developing and recommending to our board such policies and procedures with respect to nomination or appointment of members of our board and chairs and members of its committees or other corporate governance matters as may be required pursuant to any SEC or Nasdaq rules, or otherwise considered desirable and appropriate; |
| • | developing a set of corporate governance principles and reviewing such principles at least annually; |
| • | deciding whether any material information (other than that regarding the quality or integrity of our financial statements), which is brought to its attention by the disclosure committee, should be disclosed; |
| • | reviewing and monitoring the training and continuous professional development of our directors and senior management; |
| • | developing, reviewing and monitoring the code of conduct and compliance manual applicable to employees and directors; |
| • | together with the board, evaluating the performance of the committee on an annual basis; |
| • | reviewing the environmental, social and governance-related policies and the related regular public disclosures, including our sustainability report following review and approval by our Chairman and Chief Executive Officer; |
| • | assessing the adequacy of its charter; and |
| • | co-operating with the other board committees in any areas of overlapping responsibilities. |
Employment Agreements
We have entered into an employment agreement with each of our executive officers. The terms of the employment agreements are substantially similar for each executive officer, except as noted below. We may terminate an executive officer’s employment for cause, at any time, without advance notice, for certain acts of the officer, including, but not limited to, a serious criminal act, willful misconduct to our detriment or a failure to perform agreed duties. Furthermore, either we or an executive officer may terminate employment at any time without cause upon advance written notice to the other party. Except in the case of Mr. Lawrence Yau Lung Ho, upon notice to terminate employment from either the executive officer or our Company, our Company may limit the executive officer’s services for a period until the termination of employment. Each executive officer (or his estate, as applicable) is entitled to accrued amounts in relation to such executive officer’s employment with us upon termination due to disability or death. We will indemnify an executive officer for his or her losses based on or related to his or her acts and decisions made in the course of his or her performance of duties within the scope of his or her employment.
Each executive officer has agreed to hold, both during and after the termination of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or as compelled by law, any of our or our customers’ confidential information or trade secrets. Each executive officer also agrees to comply with all material applicable laws and regulations related to his or her responsibilities at our Company as well as all material written corporate and business policies and procedures of our Company.
Each executive officer is prohibited from gambling at any of our Company’s facilities during the term of his or her employment and for six months following the termination of such employment agreement.
Each executive officer has agreed to be bound bynon-competition andnon-solicitation restrictions during the term of his or her employment and for certain periods following the termination of such employment agreement. Specifically, each executive officer has agreed not to (i) assume employment with or provide services as a director for any of our competitors who operate in a restricted area for six months following termination of employment; (ii) solicit or seek any business orders from our customers for one year following termination of employment; or (iii) seek directly or indirectly, to solicit the services of any of our employees for one year following termination of employment. The restricted area is defined as, including but not limited to, Hong Kong, Macau, the Philippines, Cyprus and any other country or region in which our Company operates or intends to operate.
