As an AIM-listed company, e-therapeutics does not have to comply with the UK Corporate Governance Code published by the Financial Reporting Council in 2012. The Quoted Companies Alliance has published a corporate governance code for small and mid-sized quoted companies, which includes a standard of minimum best practice for AIM companies, and recommendations for reporting corporate governance matters (QCA Code). The Board embraces the principles of good corporate governance and has adopted the QCA Guidelines, and intends to comply with the QCA Code insofar as it is considered appropriate to a company of e-therapeutics’ size, stage of development and resources.
Board of Directors
The Board is responsible to shareholders for the effective stewardship of the Company’s affairs and has a formal schedule of matters specifically reserved for its decision. The Board also seeks to ensure that the necessary financial and human resources are in place for the Company to be able to meet its objectives, to review management performance and to ensure that its obligations to its shareholders are understood and met.
Brief biographical details of each Director are available here.
Board roles and responsibilities:
The Chairman is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda. He facilitates the effective contribution of the Directors and ensures that they receive accurate, timely and clear information and that they communicate effectively with shareholders.
Reporting directly to the Chairman, the Company Secretary is responsible for ensuring that Board procedures are followed, that the Company complies with company law and the AIM Rules and that the Board receives the information it needs to fulfil its duties effectively. The appointment (or termination of appointment) of the Company Secretary is a matter for decision by the whole Board.
Sue Steven is the Company Secretary. She provides information and advice on corporate governance and individual support to Directors on any aspect of their role, particularly supporting the Chairman and those who chair board committees. Sue has extensive experience advising both Main Market and AIM-listed companies on their legal, regulatory and general compliance obligations.
Directors may also take independent professional advice at the Company’s expense where necessary in the performance of their duties.
Independence of Directors
The Company’s independent Non-Executive Directors constructively challenge and help develop proposals on strategy and bring strong, independent judgement, knowledge and experience to the Board’s deliberations. The independent Non-Executive Directors are of sufficient calibre that their views carry significant weight in the Board’s decision making.
The Board considers its Non-Executive Directors to be independent in character and judgement because they:
- have not been employees of the Group within the last five years
- have not, or have not had within the last three years, a material business relationship with the Group
- have no close family ties with any of the Group’s advisers, Directors or senior employees
- do not hold cross-directorships or have significant links with other Directors through involvement in other companies or bodies and
- do not represent a significant shareholder
Non-Executive Directors have been remunerated in part by the issue of fully paid shares. The Board considers that such arrangements align the interests of shareholders and the Non-Executive Directors in an appropriate manner. The majority of the Non-Executive Directors’ remuneration continues to be paid in cash.
The Company Secretary maintains a register of outside interests and any potential conflicts of interest are reported to the Board. The Non-Executive Directors have regular opportunities to meet without Executive Directors being present (including time after Board and committee meetings).
Throughout their period in office the Directors are continually updated on the Group’s business, the competitive and regulatory environments in which it operates, corporate social responsibility matters and other changes affecting the Group and the industry it operates in as a whole by written briefings and meetings with senior executives. Directors are also advised on appointment of their legal and other duties and obligations as a Director of a listed company, both in writing and in face-to-face meetings with the Company Secretary. They are reminded of these duties and they are also updated on changes to the legal and governance requirements of the Group and upon themselves as Directors.
In accordance with the articles of association, each Director must be subject to re-election at least every three years. All newly appointed Directors are also subject to election by the shareholders.
There are two Board committees, details of which are set out below. Given the size of the Board a nominations committee has not been established. New appointments of Directors are considered by the Board as a whole. The appointment of senior executives is considered by the Board upon the recommendation of the Executive Directors.
The audit committee’s primary responsibilities are to review the financial statements, to ensure that there are suitable internal control and risk management systems in place, to consider the appointment of the external auditor and their independence and to review audit effectiveness. The audit committee consists entirely of independent Non-Executive Directors. Christine Soden, a Chartered Accountant and Chief Financial Officer of Acacia Pharma Group Limited, chairs the audit committee. The other members of the committee are Iain Ross and Trevor Jones. With the consent of the committee chairman, meetings are attended by the Finance Director and representatives of the Company’s independent auditor. Time is set aside for discussions between the Non-Executive Directors and the independent auditor in private. The audit committee’s terms of reference are available here.
The remuneration committee makes recommendations to the Board on strategy and policy for executive remuneration. It also sets the remuneration packages for the Executive Directors and is also responsible for the granting of options under the Company’s share option schemes to Executive Directors. No Executive Director takes part in discussions regarding their own remuneration. The remuneration committee considers that inclusion of fluctuating emoluments, which include performance bonuses, is an important element of the Company’s employment of Executive Directors and senior managers. The remuneration of the Non-Executive Directors is set by the Board, led by the Executive Directors. The chairman of the remuneration committee is Trevor Jones and the other members are Iain Ross and Christine Soden. The remuneration committee’s terms of reference are available here.
The remuneration committee does not have retention agreements with any external remuneration consultants. Advice is taken from the Chief Executive Officer, the Finance Director and from external advisors as needed, in relation to specific questions and projects.
Risk Management and Internal Control
The audit committee is responsible for establishing the Company’s system of internal control (covering all aspects of the business) and for reviewing its effectiveness. The committee adopts an on-going process for identifying, evaluating and managing the significant risks faced by the Company. This on-going process is regularly reviewed by the committee and has regard to the Financial Reporting Council’s “Guidance on Risk Management Internal Control and Related Financial and Business Reporting” published in September 2014. The audit committee meets with the Executive Directors and the Company’s independent auditor and satisfies itself as to the adequacy of the Company’s internal control systems.
e-therapeutics is an entrepreneurial company with strong financial and management controls within the business. Examples of control procedures include:
- an annual budget set by the Board, with regular review of progress
- monthly management accounts
- dual bank signatories for all payments with pre-determined authority limits for specific Directors and employees
- monthly meetings of Executive Directors to review management information and follow up on operational issues or investigate any exceptional circumstances
- a regularly updated risk register
- clear levels of authority, delegation and management structure
- extensive use of standard operating procedures throughout the Company
- Board review and approval of significant contracts
- a Quality Management System to support the clinical trial activities the Company conducts, ensuring compliance with clinical trial legislation and guidelines
- regular “GxP” training programmes to maintain and enhance staff knowledge and expertise
- annual audits and other contractor management procedures to ensure good vendor performance
- restriction of user access to IT systems
The Company’s system of internal control is designed to safeguard the Company’s assets and to ensure the reliability of information used within the business. The system of controls manages appropriately, rather than eliminates, the risk of failure to achieve business objectives and provides reasonable, but not absolute, assurance against material misstatement or loss.
The independent auditor does not perform a comprehensive review of internal control procedures but reports to the audit committee on the outcomes of its annual audit process.
The Board reviews performance against business plans and the Company’s strategic goals, implementing corrective action where necessary. The remuneration committee keeps under review remuneration principles and development of the senior management team as well as the Executive Directors.
The Board receives a formal summary of matters discussed and approved by the Board’s committees, so that all Directors are aware of the decisions made. The Board is also responsible for reviewing the work of each committee and considering its effectiveness. The Board keeps the terms of reference of the audit and remuneration committees under review.
The Chairman is responsible for the annual performance assessment of the Chief Executive with any performance-related remuneration being determined by the remuneration committee. The Chief Executive reviews the performance of the Executive Directors with any performance-related remuneration again being determined by the remuneration committee.
The Board is keen to promote greater awareness of the Company. The Board seeks to build on a mutual understanding of objectives between the Company and its shareholders by:
- communicating regularly throughout the year
- providing information to shareholders in a balanced and understandable way
- making annual and interim presentations to institutional investors
- meeting shareholders to discuss long-term issues and to obtain their views
- encouraging private investors, in particular, to attend the annual general meeting, so that they have an opportunity to ask questions of the Board and are equipped to make their own assessment of the Company’s position and prospects
- regular meetings of the Board being used as the forum to ensure that Non-Executive Directors are updated on the views of major shareholders that have been communicated to the Executive Directors