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 (‘Compliance Statement’).
The Board believes 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.
After careful consideration of the Company’s circumstances and stage in development, and what is in the best interests of its shareholders, while having regard to employees, customers, suppliers and the Group’s operational impact on the community, the Board has agreed to report against the Code published by the Financial Reporting Council (‘FRC’) on 17 June 2016.
The Company’s Compliance Statement which sets out how it complies with the Code is available for download here: Statement of Compliance with the UK Corporate Governance Code
The following section outlines in broad terms how the Board has managed and applied standards of corporate governance that are appropriate for the Group’s size.
The Board’s role is to establish the vision and strategy for the Group and 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 on the website www.clinigengroup.com.
Matters considered by the Board in 2019 include:
- Approval of the financial statements
- Annual budget
- Strategic review
- Gender pay gap reporting
- Build out of a US compliance structure following the acquisition of the US rights to Proleukin
- Management of inside information by adoption of a formal disclosure policy
- Acquisition strategy
- Board evaluation
- The requirements of the 2018 Corporate Governance Code
In 2019, the Senior Independent Director led a thorough internal evaluation process of the Board and Committees, to ensure that in all aspects they are efficient and effective with an appropriate mix of skills and experience. The review assessed the composition, experience, dynamics, the Chairman’s leadership, and the Board’s role and responsibilities in connection with the Group’s strategy, oversight of risk and succession planning.
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 Board consists of two Executive Directors, an Independent Non-Executive Chairman, three Independent Non-Executive Directors and a Non-Executive Director. John Hartup is the Company’s Senior Independent Director. John’s role as the Senior Independent Director is to act as a sounding board for the Chairman and a trusted intermediary for the other Directors. He is 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
In accordance with the provisions of the Code, at least half the Board is comprised of Independent Non-Executive Directors.
Alan Boyd joined the Board on 16 November 2018 as a Non- Executive Director and Nick Keher joined the Board on 19 March 2019 as Chief Financial Officer (following Martin Abell’s departure). Martin stepped down from the Board on 31 March 2019.
The Code sets out criteria designed to assist the Board in determining whether there are circumstances that might affect, or could appear to affect, a Director’s judgement and therefore their independence. In accordance with recommendations of the Code, the Board have concluded that the majority of Board members are independent Non-Executive Directors.
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 2019/20 include continually assessing progress against the strategic priorities and strengthening the Board membership with Independent Non-Executive Directors where it is deemed necessary.
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.
Our 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 nine times in the year ended 30 June 2019. 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 2019 are as follows:
|Board||Audit and Risk Committee||Remuneration Committee||Nomination Committee|
|N Keher (appointed to the board March 2019)||3||1*||1*||-|
|A Boyd (appointed to the Board November 2018)**||6||2*||1*||-|
|M Abell (left the Board March 2019)||6||2*||1*||1*|
* By invitation
** Invited as a guest to the Board meeting on 8 November 2018.
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.
Occasionally Board meetings are held at operational sites outside the UK to enhance the Board’s understanding of the business. This year one Board meeting was held in Belgium with the remainder held in the UK. The Board are also provided with regular updates on strategy from senior management throughout the year and attend a day dedicated to the Group’s strategy.
The Board has established a Nomination Committee, Audit and Risk Committee, and Remuneration Committee, each with having separate duties and responsibilities.
The Chairman of the Nomination Committee is Peter Allen, with John Hartup and Ian Nicholson the other members of the Committee. 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 Chair of the Audit and Risk Committee is Anne Hyland, with Peter Allen, John Hartup and Ian Nicholson being the other members of the Committee. 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 and John Hartup being the other members of the Committee. 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 on pages 62 to 71 of the Annual Report.
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.
Following the AGM held in November 2018, 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 established 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.