As a company whose shares are traded on AIM, the Company is subject to the AIM Rules for Companies. Pursuant to (amended) AIM Rule 26, with effect from 28 September 2018, every company whose shares are traded on AIM is required to state on its website which corporate governance code it applies, how it complies with that code, and where it departs from its chosen corporate governance code an explanation of the reasons for doing so (Corporate Governance Statement).
The Board has elected to report against the UK Corporate Governance Code 2018 (published July 2018 and applying to accounting periods beginning on or after 1 January 2019) (the “Code”). Whilst the Group is not required to comply with the Code (which has been drafted with larger, main-market listed companies in mind), we have voluntarily chosen to formally adopt the Code as representing best practice in UK corporate governance. The Board also uses the revised Guidance on Board Effectiveness to help guide best practice when applying the Code. Published by the Financial Reporting Council (‘FRC’), the Code is much shorter than the previous version and focuses on board leadership and company purpose; division of responsibilities; composition, succession and evaluation; audit, risk and internal control; and remuneration. At its heart, the Code emphasises the value of good corporate governance to long-term sustainable success. Although AIM listed companies are not required to comply with the Code (unlike those with a premium listing), the Board’s election underpins its belief that effective corporate governance as best business practice will assist the delivery of the Group’s corporate strategy, the management of risk and the generation of shareholder value, improve Board efficiency, boost investor confidence, reduce cost of capital and help protect our shareholders’ long-term interests. Clinigen values corporate governance highly, not only in the boardroom but across the whole business of the Group.
The Board’s role is to establish the vision and strategy for the Group and the Board is responsible for the long-term success of the Company. The individual members of the Board have equal responsibility for the overall stewardship, management and performance of the Group and for the approval of its long-term objectives and strategic plans.
The Board is responsible to the Company’s shareholders with its main objective to increase the sustainable value of assets and long-term viability of the Company. The Board reviews business opportunities and determines the risks and control framework. It also makes decisions on budgets, Group strategy and major capital expenditure. The day-to-day management of the business is delegated to the Executive Directors.
The Board has a schedule of matters specifically reserved for its approval. These matters are delegated to the Board Committees, Executive Directors, executive management team and senior management where appropriate. The schedule of matters reserved for the Board and terms of reference for each of its Committees can be found below.
|Strategy||The need to ensure the long-term sustainable success of the business|
|Culture||The need for the Board to ensure that the workforce is engaged, is aligned with the Company culture and that the Board is alert to any concerns employees may have|
|Finance||The need to provide transparent and accurate information to the market and the need to ensure that the Company generates and preserves value over the long term|
|Risk||The need for the Board to establish formal and transparent policies and procedures to ensure the effectiveness of its internal controls systems and the integrity of financial statements|
|Workforce||The need to ensure external reporting is accurate and that the Company strives to address any imbalances within pay and conditions. The need to ensure that all employees are treated fairly and have clear guidance on Company policies and procedures|
|Governance||To ensure high standards of governance and adherence to applicable regulations throughout the Group|
There is a clear division of responsibilities between the Chairman and the CEO of the Company.
The role of the Chairman is to lead and manage the Board, ensuring the Board’s effectiveness in all aspects. They should facilitate active engagement by all members, promoting a culture of challenge, openness and scrutiny.
The CEO manages the Group’s business and develops its strategy. The CEO leads the senior management team in delivering the Group’s strategic objectives.
The Non-Executive Directors’ responsibilities are to challenge and contribute towards the Group’s strategy, and to ensure that the financial controls and systems around risk management are suitably robust.
The Company Secretary supports the Board and advises on all governance matters. All Directors have access to the advice of the Company Secretary. The appointment of the Company Secretary is a matter for the Board.
The Board consists of two Executive Directors, an Independent Non-Executive Chairman, three Independent Non-Executive Directors and a Non-Executive Director. Anne Hyland is the Company’s Senior Independent Director, and acts as a sounding board for the Chairman and a trusted intermediary for the other Directors. He was also available as an additional point of contact for shareholders.
The names of the Directors and the Company Secretary, and their biographies are set out here.
The Board continues to assess that its membership has the right qualities required to operate within a robust governance structure which the Board believes fits the requirements of the Group. Priorities for the Board in 2020/21 include continually assessing progress against the strategic priorities and strengthening the Board membership with Independent Non-Executive Directors where it is deemed necessary.
In June 2019, the Board conducted an internal Board evaluation which was led by the Senior Independent Director at the time, John Hartup, and facilitated externally by Prism Cosec. The evaluation concluded that the Board operates efficiently and cohesively. The key recommendations and the actions taken are set out below:
|Schedule an annual review of the attendance and time commitments of each Director by the Nominations Committee to ensure that any concerns are addressed||An annual review has been put in place. The Board is satisfied that none of its Directors are over committed and that each has sufficient time to meet their Board responsibilities at Clinigen|
|Consider options for improving the structure of the agenda and papers within the Board pack||The Company Secretary facilitated the introduction of an online Board portal to manage Board and Committee packs|
|Ensure that the roles and responsibilities of the Chairman, CEO and Senior Independent Director are documented and published in line with the requirements of the 2018 Code||The Board has approved written job descriptions for the Chairman, CEO and Senior Independent Director|
|In light of new reporting requirements, Directors review their duties under Section 172 of the Companies Act 2006||The Company Secretary facilitated a discussion about Section 172 and ensured that the Directors (i) had a clear view on how they discharged their duties under Section 172; (ii) determined who the key stakeholders were and how they should engage with; and (iii) were clear on how they should report on their responsibilities under Section 172 in the Annual Report|
|When preparing the agendas for Board and Committee meetings, the Secretary and Chair should agree proposed timings for each discussion topic and note those timings on the meeting agenda||This has been implemented|
|In light of Code requirements, consider the governance and review of reports arising from the Company’s arrangement for employees to raise concerns in confidence||This takes place using the Peakon employee engagement platform. We also have a Whistleblowing Policy|
|Formalise the annual programme of work for the Nomination Committee||This is in the process of being formalised|
The Group seeks to recruit the best candidates at Board level and considers candidates on merit and against objective criteria. The process for the appointment of Directors is managed by the Nomination Committee.
Appointments are made with due regard for the benefits of diversity on the Board (including gender). The Group supports the Code in respect of diversity.
The Board takes care that appointees have sufficient time available to allocate to the position. Each Non-Executive Director is expected to allow the necessary time to conduct their duties which involves attending all Board and Committee meetings of which they are members.
Effective procedures are in place to deal with conflicts of interest. Other interests and commitments of Directors are known by the Board and any changes to their commitments are reported.
The Articles of Association state that one-third of the Directors must stand for re-election by shareholders annually in rotation and that each Director appointed by the Board is subject to election by the shareholders at the first AGM after their appointment. However, to underline their accountability to shareholders and the Board’s commitment to appropriate corporate governance, each Director will stand for re-election at the upcoming AGM. Following advice from the Nomination Committee, the Board has concluded that each Director is qualified for election or re-election.
The Board meets on a formal basis regularly throughout the year and met eight times in the year ended 30 June 2020. The Committee meetings are scheduled around the Board meetings. Agendas, Committee papers and other appropriate information are distributed prior to each meeting to allow the Board to meet its duties.
The Directors’ attendance during the year ended 30 June 2020 are as follows:
|Board||Audit and Risk Committee||Remuneration Committee||Nomination Committee|
1 By invitation
On joining the Board, new Directors receive a comprehensive formal induction, involving meetings with senior management and external advisers. Individual training and development needs are reviewed regularly and provided as required. All Directors receive regular updates in legal, regulatory and governance matters by the Group General Counsel and Company Secretary, independent external auditors and advisers. The Group General Counsel and Company Secretary attends all Board meetings and has the responsibility of advising the Board on corporate governance matters and assisting with the flow of information to and from the Board.
During the year, the Board received refresher training on the AIM Rules for Companies as part of the transition which took place with the change in NOMAD.
Occasionally Board meetings are held at operational sites outside the UK to enhance the Board’s understanding of the business but travel restrictions due to COVID-19 has meant that this was not possible this year. The face-to-face Board meetings which were possible this year have all taken place in the UK. The Board is also provided with regular updates on strategy from senior management throughout the year including a virtual strategy day held in June 2020.
The Board has established a Nomination Committee, Audit and Risk Committee, and Remuneration Committee, each having separate duties and responsibilities.
The Chairman of the Nomination Committee is Peter Allen, with Ian Nicholson and Sharon Curran being the other members of the committee. Sharon joined the committee on 27th April 2021. The primary role of the Committee is regularly to review the structure, size and composition of the Board, give full consideration to succession planning for Directors and other senior executives and evaluate the balance of skills, knowledge, experience and independence on the Board. The Committee meets at such times as the Chairman of the Committee requires. The Committee met once during the year to discuss succession planning and board composition. Topics for the coming year will include the Company’s approach to diversity and inclusion and how that links to company strategy.
The Chair of the Audit and Risk Committee is Anne Hyland with Ian Nicholson and Sharon Curran being the other member's. As announced in May 2020, the Board recognises that it is best practice for the Chairman of the Group not to be a member of the Audit Committee. With this in mind, Peter Allen relinquished his position as a member of the Audit and Risk Committee with immediate effect. The primary role of the Committee is to monitor, review and challenge the financial statements and regulatory environment, monitor the relationship with the external auditors, monitor the Group’s internal control and risk management, and ensure compliance with laws and regulations. The Committee meets at such times as the Chairman of the Committee requires. The Committee carefully considers the key judgements applied in preparation of the consolidated financial statements including the estimated future discounted cash flows supporting the carrying value of goodwill and intangibles and the going concern assumption. Each of the relevant estimates and judgements have been confirmed as appropriate.
The Board believes that the Chair, who is a Chartered Accountant, has highly relevant experience to contribute to the Committee discussions.
The Chairman of the Remuneration Committee is Ian Nicholson, with Peter Allen, Sharon Curran and Anne Hyland being the other members of the committee. Anne was appointed to the Committee on 23 June 2020. Sharon joined the committee on 27th April 2021. The primary role of the Committee is to determine and agree the remuneration of the Company’s Chairman, CEO, Executive Directors and senior managers, with the objective to ensure there is an appropriate remuneration strategy in place to encourage enhanced performance and reward for individual contributions to the success of the Company. The Committee also reviews the design of all Group share incentive plans and oversees major changes to employee benefit structures across the wider business. The Committee reviews the performance targets regularly to ensure that they are both challenging and closely linked to the Group’s strategic priorities. The level of remuneration of the Directors is set out in the Group’s Remuneration Report below.
The Board has responsibility for establishing and maintaining the Group’s internal control systems. The Board regularly reviews, and evaluates internal controls, ensuring they meet the needs of the Group. The internal controls are designed to manage risk rather than eliminate it and therefore cannot provide absolute assurance against material misstatement or loss. Primary responsibility for reviewing internal controls has been delegated to the Audit and Risk Committee.
The Board realises that effective communication with shareholders on strategy and governance is an important part of its responsibilities. The CEO and CFO have a regular dialogue with institutional shareholders engaging proactively with them and ensuring their views are communicated back to the Board. The Investor Relations department acts as a focal point for contact with investors throughout the year. The Chairman and Non-Executive Directors continue to be available to discuss matters of concern as requested. Interim and final results are communicated via formal meetings with roadshows, participation in conferences and additional dialogue with key investor representatives held in the intervening periods.
Prior to the AGM held in November 2019, the Board contacted the Group’s largest institutional investors and proxy companies and provided an opportunity for them to share their feedback on the resolutions past at the AGM and to cover questions more generally. Peter Allen, John Hartup and Ian Nicholson met with the governance representatives and fund managers from these institutions and communicated the feedback back to the wider Board.
The Board believes that appropriate steps are taken to ensure that the Board, and in particular the Non-Executive Directors, develop an understanding of the views of major shareholders. Prior to each Board meeting, an Investor Relations report is circulated which includes analysts’ and brokers’ briefings and following results roadshows, broker and adviser feedback is also passed to the Board.
The Company has a Group share dealing code which complies with all applicable legislation, and all the Directors of the Group understand the importance of compliance with the Code.
The Company’s AGM is used by the Board to communicate with shareholders, who are all entitled to attend. The presentation of the results will be given by the CEO, followed by the formal business of the meeting. The meeting provides an opportunity to ask questions of each of the Board members as part of the agenda, or more informally after the meeting.
The Notice of AGM and all related papers are sent to each shareholder at least 20 working days before the meeting. The outcomes of the voting on resolutions are announced to the London Stock Exchange via the Regulatory News Service and added to the Clinigen website.
The Group operates a whistleblowing policy which allows all employees to raise concerns to senior management in strict confidence about any unethical business practices, fraud, misconduct or wrongdoing.