Corporate Governance Statement - September 2018
The Directors of Futura Medical PLC recognise the importance of sound corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the "QCA Code"). The QCA Code takes key elements of good governance and applies them in a manner that is workable for the different needs of growing companies and was developed by the Quoted Companies Alliance as an alternative corporate governance code applicable to AIM companies.
Angela Hildreth in her capacity as Company Secretary, has assumed responsibility for ensuring that the group has appropriate corporate governance standards in place and that these requirements are followed and applied within the group as a whole. The QCA Code corporate governance arrangements that the Board has adopted are designed to ensure that the group delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the group in a manner that encourages open dialogue with the Futura Medical plc Board.
The Board has the overall responsibility to set strategy for the Group, and monitor the performance of the operating subsidiaries. The Subsidiary Boards have the responsibility to oversee, govern and direct the operations of the subsidiary entities in line with relevant rules and regulations and overall Group strategy.
The respective Boards have established various committees, each of which has written terms of reference. The principal committees are the Audit, Remuneration, Risk and Oversight and Nomination Committees.
The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term shareholder value, encompassing an efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust.
The sections below set out the ways in which the Group applies the ten principles of the QCA Code in support of the Group's medium to long term success.
The strategy and business operations of the Group are set out in the Strategic Report on pages 11 to 16 of the Group's 2017 Annual Report.
The Group's overall strategic objective is to develop innovative products with compelling commercial potential in the pharmaceutical and consumer healthcare market, leveraging our core skills in transdermal drug delivery.
This strategy is aligned with the well-publicised demographic changes of ageing populations, increasing prosperity, government initiatives to increase self-medication, pressures on payers and healthcare systems, the rapid growth of OTC opportunities in developing countries, the natural desire for an improved quality of life and the Directors' expectations that consumer healthcare spending will increase as a result. The objective is to develop products such that each on its own has the potential to generate significant annual revenues.
At an appropriate stage of development, the Group may choose to realise monetary value from such products via out-licencing deal with pharmaceutical companies with interests in both prescription ("Rx") and over the counter ("OTC") products. Alternatively, if resources permit, the Group may choose to advance a product through clinical development and approval in order to retain the full value of the product within the Group.
The Group operates in a high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties set out on pages 15 and 16 of the Group's 2017 Annual Report.
The key challenge to the successful development of this strategy is ensuring that there are sufficient financial resources that can be deployed in the short term in advance of the products being able to generate financial rewards for the Group in the longer term.
The Group seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Group's strategy and progress and understand the needs and expectations of shareholders. Institutional shareholders and analysts have the opportunity to discuss general issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting. This is also an opportunity to discuss strategy and progress as well as shareholder views at the AGM after the formal business of the meeting.
The Group is aware of its corporate and social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Group's employees, regulators, partners, suppliers and patients involved in the Group's clinical development activities. The Group's operations and working practices need to balance the needs of all of these stakeholder groups while maintaining focus on the Board's primary responsibility to promote the success of the Group for the benefit of its members as a whole.
The Group endeavours to take feedback received from stakeholders by meeting regularly and responding accordingly. This feedback ensures that the Group can respond to new issues and opportunities that arise to further the Group in the delivery of its long term strategy. Recently the Group has received feedback from Regulators and potential commercial partners, this feedback has been incorporated into the design of MED2005 Phase 3 programme design.
The Audit, and Risk and Oversight Committees are responsible to the Board for risk management and internal controls and for ensuring that procedures are in place, and are being effectively implemented to identify, evaluate and manage the significant risks faced by the Group. The internal controls are designed to manage rather than eliminate risk and provide assurance against material misstatement or loss. The Audit Committee is responsible for reviewing the effectiveness of these internal controls on an annual basis.
Given the current size and transparency of the operations of the Group, the Board has concluded that an internal audit function is not required.
A summary of principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 15 and 16 of the Group's 2017 Annual Report.
Futura's Board currently comprises two Non-Executive Directors and three Executive Directors.
All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and will continue to seek re-election by rotation at least once every three years.
The full Board meets at least 6 times per year and is responsible for formulating and monitoring Group strategy, as well as complying with legal, regulatory and corporate governance matters. The strategy and business model and amendments thereto, are developed by the Chief Executive Officer and his senior management team, and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.
The Board is responsible to the shareholders for proper management of the Group and meets at least six times per year to set the overall direction and strategy of the Group, to review scientific, operational and financial performance and to advise on other strategic matters as they arise. All key operational and investment decisions are subject to Board approval.
A summary of Board and Committee meetings held in the year ended 2017 is set out in the Group's 2017 Annual Report.
The Board considers itself independent. The QCA code suggests that a Board should have at least two independent Non-executive Directors who currently sit on the Board of the Company to be regarded as independent under the QCA's guidance for determining such independence. Jonathan Freeman has served on the Board for a concurrent period longer than nine years but on the basis he had no association with, and was independent from the Group at the time of his appointment and, as such, the Directors consider he satisfies the independence criteria set out in the QCA Code.
Non-Executive Directors receive their fees in the form of a basic cash fee and an equity-based fee which takes the form of nominal price share options under the Company's Non-Executive Share Option Scheme. To avoid any incentive that may influence the Non-Executive Director's independence, the options grants are not deemed significant, either for any individual Non-Executive Director or in aggregate. The current remuneration structure for the Board's Non-Executive Directors is deemed to be proportionate and in line with market rates.
The Directors commit the time required to fulfil their duties.
The Board considers that all of the Non-Executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities and bring significant experience in commercial, operational and financial development of the Group's products.
The Board regularly reviews the composition of the Board to ensure that it has the necessary depth and breadth of skills to support the ongoing delivery of the Group's long-term strategy and the Board is committed to ensuring diversity of skill, experience and gender balance. Board members maintain their skillsets through practice in day-to-day roles, enhanced with attending specific training where required. This is a combination of in-house company arranged briefings and external courses.
The Board uses external advisors where necessary to enhance knowledge or to gain access to particular skills or capabilities. Accountants and lawyers are used for diligence work on specific projects; both nomination and remuneration committees use recruitment and employment consultants and specialist advisors have been used by the Board to ensure compliance in specific areas. A recent example of this is the response to the requirements of GDPR.
The Chairman, in conjunction with the Company Secretary, ensures that the Director's knowledge is kept up to date on key issues and developments pertaining to the Group, its operational activities and to the Director's responsibilities as members of the Board. During the course of the year, Directors received updates from the Company Secretary on a number of corporate governance matters.
Internal evaluation of the Board, the committees and individual directors is undertaken on an annual basis in the form of peer appraisal, questionnaires and discussions to determine the effectiveness and performance as well as the directors' continued independence. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board, to identify any training and development needs and for succession planning.
The Board as a collective is evaluated on diversity, balance, governance and strategy and individual members are evaluated on a range of criteria such as leadership, strategy, governance, interpersonal skills and integrity.
The Nominations Committee continues to monitor the requirement for succession planning.
The Board recognises that their decisions regarding strategy and risk will impact on the culture of the Group as a whole and that this will impact performance of the Group. The Board seeks to maintain the highest standards of integrity in the conduct of the Group's operations. An open culture is encouraged within the Group with regular communications to staff regarding progress and staff feedback regularly sought. The Board assessment of the culture within the Group at the present time is one where there is respect for all individuals, there is open dialogue within the Group and there is a commitment to provide the best service possible to all the Group's customers which include commercial partners and patients and clinicians who are participating in our clinical development programmes.
Regular communications and feedback provide a mechanism for the Board to monitor the application of ethical values and behaviours or any material deviations from its aspirations in this regard.
The Board has overall responsibility for promoting the success of the Group. The Executive Directors have day-to-day responsibility for the operational management of the Group's activities. The Non-Executive Directors are responsible for the overall operational management of the Group's activities. The Non-Executive Directors are responsible for bringing independent and objective judgement to Board decisions.
There is a clear separation of the roles of Chief Executive Officer and the Non-Executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or Group dominates the Board's decision making and ensuring the Non-Executive Directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Nominations Committee. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.
The Audit Committee normally meets twice a year and has responsibility for, amongst other things, reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors. The Committee also approves external auditors' fees and ensures the auditors' independence as well as focussing on compliance with legal requirements and accounting standards. It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for approving the annual financial statements and interim statements remains with the Board.
The Finance Director and Chief Operating Officer and the external auditors attend meetings by invitation only. The Audit Committee meet privately (without any other Board member present) with the external auditors at least once per year.
A summary of the work of the Audit Committee in the Year ended 31 December 2017 is set out in the Audit Committee Report on page 24 of the Group's 2017 Annual Report.
The Remuneration Committee, which meets as required, but at least once per year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the Executive Directors. It also supervises the Group's share incentive schemes and sets performance conditions for share options granted under the schemes.
The independent Non-Executive Director(s) and the Non-Executive Chairman sit on the Committee, and the Chief Executive attends by invitation only.
A summary of the work undertaken in the year ended 31 December 2017 is set out on page 19 of the Group's 2017 Annual Report. The Directors remuneration report can be found on pages 19 to 23 of the Annual Report.
The Nominations Committee, which meets as required, but at least once per year, has responsibility for reviewing the size and composition of the Board, the appointment of replacement of Directors, the monitoring of compliance with applicable laws, regulations and corporate governance guidance and making appropriate recommendations to the Board.
The independent Non-Executive Director(s) and the Non-Executive Chairman sit on the Committee, and the Chief Executive attends by invitation only.
The terms of reference for the above committees can be found here
The Board also oversee the Group's share dealing code and its whistle-blowing policies and procedures.
The Group places a high priority on regular communication with its various stakeholder groups and aims to ensure that all communications concerning the Group's activities are clear, fair and accurate. The website is regularly updated and users can register to be alerted when announcements or details of presentations and events are posted onto the website. Further information included in Principles 2 and 3 demonstrate the commitment of The Board to promote healthy dialogue with all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.
The Group's financial reports can be found here
Notice of General Meetings of the Company can be found here
The results of voting on all resolutions in future general meetings will be posted to the Group's website.
Click here for Annual Report 2017
Page last updated: 28 September 2018