Gobernación corporativa
Extracts from the Halma p.l.c. 2008 Annual Report & Accounts have not been updated since publication in July 2008.
Introduction by Geoff Unwin, Chairman
This section of the report deals with how the Board and its committees discharge their duties and how we apply the principles of good governance in the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority and for which the Board is accountable to shareholders. The Board is committed to the maintenance of high standards of corporate governance. The policy of the Board is to manage the affairs of the Company in accordance with the principles of corporate governance contained in the Combined Code. I am pleased with the progress Halma has made to ensure best practice is maintained and we continually seek to improve our practices for the benefit of our shareholders.
Geoff Unwin
Chairman
Succession planning
I have always maintained that a key part of my role involves ensuring that the right people are doing the right jobs within the Group and that there is a sufficient cadre of individuals being nurtured throughout the Group to enable effective succession planning. Reviews of management capabilities and potential are performed on a routine basis and I am satisfied that sufficient resource within the Group exists and continues to be developed through programmes such as the Halma Executive Development Programme which itself evolves to meet the changing needs of the Group. Where a need for improvement to management resources is identified, the necessary attention is provided to ensure full strength is attained as soon as practicable.Board appointments
Following the annual general meeting in August 2007, Jane Aikman joined the Board as a non-executive Director. As a finance director of both listed and private companies, Jane's corporate and international experience complements the Board’s current mix of knowledge and skills. In April 2008 we made another appointment to the Board, Adam Meyers, in contemplation of Keith Roy's notification of intention to retire at the end of July 2008. Adam provides another international dimension to the Board since he is based in the US and we are already benefiting from having him around the Board table. Our Board composition is discussed further on page 40, but I wanted to add my own confirmation that I am entirely satisfied that our preferred composition of the Board, which is a deviation from the Combined Code, is appropriate to Halma and is one which all of the non-executive Directors support. No shareholder has ever raised this matter with me and, indeed, when I sought shareholders' support at the 2005 AGM, it was unanimous.Board committees
Our committees are a valuable part of the Company's corporate governance structure. The workload of the committees is far more than the table of scheduled meetings on page 40 would indicate as ad hoc meetings and communications between meetings frequently require considerable amounts of time. As with the Board's composition, I am equally comfortable that the composition of all of our committees remains appropriate.Board performance
The Board evaluates its performance and that of the Remuneration, Audit and Nomination Committees at least annually. Each year, we consult the Board to determine whether an external facilitator would enhance our process. To date, we have concluded that the current, open climate that the Board enjoys ensures a full and frank discussion of all matters, so an external facilitator is unnecessary. For 2007/08 the evaluation commenced with a self-assessment questionnaire, the results of which were compiled by the Company Secretary and discussed by the Board at the January 2008 Board meeting. The Board also met in January 2008, separate from any scheduled meeting, for a general discussion on Board effectiveness followed by a meeting of the executive Directors with the Chairman, a meeting of the Chairman and non-executive Directors, and then a meeting of the non-executive Directors without the Chairman present. The outcomes of these meetings were then fed back to individuals by the Chairman, Senior Independent Director or Chief Executive, as appropriate.Shareholder communication
I would like to encourage all shareholders to find the time to attend our AGM on 31 July 2008. It is an excellent opportunity to meet the Board, the Executive Board and the CEOs of our operating companies, all of whom will be in attendance, and hold them accountable for the Group's results and their stewardship of your company.Geoff Unwin
Chairman
Compliance with the Code of best practice
Throughout the financial year, the Company complied with the Code provisions set out in Section 1 of the July 2003 FRC Combined Code on Corporate Governance, as amended in June 2006, except in respect of provisions A3.2 and C3.1 which involve the composition of the Board and the Audit Committee and the number of members who are independent non-executive Directors.The Board reaffirmed its decision to maintain the composition of the Board as a Chairman, three independent non-executive Directors and four executive Directors and recognises that this composition was not achieved prior to Jane Aikman's appointment on 1 August 2007. From 3 April 2008, the preferred composition is not possible due to Keith Roy's and Adam Meyers' directorships overlapping for reasons of succession planning. Prior to permitting this imbalance to occur, the Chairman and non-executive Directors sought assurance from the Chief Executive that he was unaware of any significant matters to be brought to the Board's attention prior to Keith Roy's retirement on 31 July 2008. After Keith Roy's retirement, the Board will be restored to its preferred composition. The Board adjudged this composition as the most appropriate structure for the Company providing valuable direct knowledge of operations and a robust debate surrounding the issues facing the Group in the present and future as well as ensuring a good mix of skills and experience.
In respect of the Audit Committee composition, the non-compliance related to the period to 1 August 2007 when Jane Aikman was appointed to the Board and the Audit Committee. Jane Aikman succeeded Andrew Walker who retired in March 2007.
Application of the principles of good governance
The Group is controlled and directed by a Board consisting of a Chairman, four Directors (five from 3 April 2008 to 31 July 2008) and three other non-executive Directors. Click here for their biographies. The Nomination Committee returned to full membership in August 2007 following Jane Aikman's appointment. The Board considers the Chairman and each of the non-executive Directors to be independent. In assessing independence, the Board considers that the Chairman and non-executive Directors are independent of management and free from business and other relationships which could interfere with the exercise of independent judgment now and in the future. The Board believes that any shareholdings of the Chairman and non-executive Directors serve to align their interests with those of all shareholders. Richard Stone is acknowledged as the Senior Independent Director. Upon appointment and at regular intervals, all Directors are offered appropriate training. Each Director is subject to re-election at least every three years. The Chairman confirms that non-executive Directors standing for re-election continue to be effective and demonstrate commitment to their roles.The Directors retain responsibility for the formulation of corporate strategy, investment decisions, and treasury and risk management policies. There is a formal schedule of matters reserved for the Board's decision and the Board meets at least six times each year with further ad hoc meetings as required. Directors are issued an agenda and comprehensive board papers in the week preceding each Board meeting. All Directors have access to the advice and services of the Company Secretary as well as there being an agreed procedure for obtaining independent professional advice.
Board and Committee meeting attendance
During the year attendance by Directors at Board and Committee meetings was as follows:| Board | Remuneration Committee | Audit Committee | Nomination Committee | |
|---|---|---|---|---|
| Total scheduled meetings | 6 | 3 | 3 | 1 |
| Geoff Unwin | 6 | 3 | N/A | 1 |
| Andrew Williams | 6 | N/A | N/A | 1 |
| Kevin Thompson* | 5 | N/A | N/A | N/A |
| Neil Quinn | 6 | N/A | N/A | N/A |
| Richard Stone | 6 | 3 | 3 | 1 |
| Keith Roy | 6 | N/A | N/A | N/A |
| Stephen Pettit | 6 | 3 | 3 | 1 |
| Jane Aikman** | 2 | 2 | 2 | N/A |
* Kevin Thompson was attending Harvard Business School's Advanced Management Program at the time he missed one Board meeting.
** Since her appointment on 1 August 2007, Jane Aikman has missed only one scheduled meeting due to a prior commitment identified at the time of her appointment.
Committees of the Board
Halma has six committees of the Board: the Remuneration Committee, the Audit Committee, the Nomination Committee, the Share Plans Committee, the Bank Guarantees and Facilities Committee and the Acquisitions and Disposals Committee.Each of these committees has terms of reference approved by the Board, copies of which are available below or on request from the Company Secretary.
View the Remuneration Committee's Terms of Reference in PDF format (33kb, opens in a new window)
View the Audit Committee's Terms of Reference in PDF format (46kb, opens in a new window)
View the Nomination Committee's Terms of Reference in PDF format (39kb, opens in a new window)
View the Share Plans Committee's Terms of Reference in PDF format (16kb, opens in a new window)
View the Bank Guarantees and Facilities Committee's Terms of Reference in PDF format (16kb, opens in a new window)
View the Acquisitions and Disposals Committee's Terms of Reference in PDF format (18kb, opens in a new window)
Internal control
The Board of Directors has overall responsibility to the shareholders for the Group's system of internal control and responsibility for reviewing its effectiveness has been delegated to the Audit Committee. Any system of internal control can provide only reasonable but not absolute assurance against material misstatement or loss.Following publication by the Turnbull Committee of the guidance for directors on internal control ('Internal Control: Guidance for Directors on the Combined Code'), the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, that this has been in place for the year under review and up to the date of approval of the Annual report and accounts. This process has been reviewed by the Board, and the Group accords with the Turnbull guidance.
The Group's external auditors, Deloitte & Touche LLP, have audited the financial statements and have reviewed the internal financial control systems to the extent they consider necessary to support their audit report.
The Board meets regularly throughout the year and has adopted a schedule of matters which are required to be brought to it for decision. This procedure is intended to ensure that the Directors maintain full and effective control over all significant strategic, financial and organisational issues.
Group risk is mitigated by means of an operating structure which spreads the Group's activities across a number of autonomous subsidiary companies. Each of these companies operates with a high quality board of directors including a finance executive.
Group companies operate under a system of controls which includes but is not limited to:
- defined organisational structure with an appropriate delegation of authority to operational management which ensures appropriate segregation of key duties;
- the identification and appraisal of risks both formally, through the annual process of preparing business plans and budgets, through an annual detailed risk assessment carried out at local level and informally through close monitoring of operations;
- a comprehensive financial reporting system within which actual and forecast results are compared with approved budgets and the previous year's figures on a monthly basis and reviewed at both local and Group level;
- an investment evaluation procedure to ensure an appropriate level of approval for all capital expenditure;
- self-certification by operating company management of compliance and control issues;
- a prescribed robust structure under which it is appropriate to adopt means of electronic communication and to conduct e-commerce.
- Operating companies carry out a detailed risk assessment each year and identify mitigating actions in place or proposed for each significant risk. A risk register is compiled from this information, against which action is monitored through to resolution. Group management also compile a summary of significant Group risks, documenting existing or planned actions to mitigate, manage or avoid the risk.
- Each month the board of each operating company meets, discusses and reports on its operating performance, its opportunities, the risks facing it and the resultant actions. The relevant Divisional Chief Executive chairs this meeting. Divisional Chief Executives meet regularly with the Chief Executive and Finance Director and report progress to the Executive Board.
- A set of 'warning signs' is reported to Group and divisional management. This report is designed to provide an early warning of potential risks and to direct appropriate action where necessary.
- The Chief Executive submits a report to each Halma p.l.c. Board meeting which includes financial information, the main features of Group operations and an analysis of the significant risks facing the Group at that time.
- Cyclical internal control visits are carried out by senior finance staff resulting in actions fed back to each company and followed up by Divisional Finance Directors and Divisional Chief Executives. Visit reports are coded in terms of risk and a summary of all such visits reported to the Audit Committee regularly with any significant control failings being reported directly to the Audit Committee; senior finance staff also carry out financial reviews at each operating company prior to publication of half year and year end figures.
- The Finance Director and Chief Executive report to the Audit Committee on all aspects of internal control for its review. The Board receives the papers and minutes of the Audit Committee meetings and uses these as a basis for its annual review of internal control.
As noted above, a programme of internal control visits is conducted. Following its review of internal control activities in 2004, the Audit Committee established an internal audit function for independent reporting of the outcome of these visits to the Audit Committee.
During the year we implemented further improvements to our Internal Audit activities as the result of several benchmarking activities previously conducted. As a result further improvements have been targeted for the coming year to enhance our processes including the appointing of a dedicated Internal Audit manager.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.Investor relations
In regular meetings with shareholders and analysts the Chief Executive and Finance Director communicate the Group's strategy and results, disclosing such information as is permitted within the guidelines of the Listing Rules. Such meetings ensure that institutional shareholders representing over 50% of the Company's issued share capital meet with the Company on a regular basis. Major shareholders are also offered the opportunity to meet with the Chairman and/or Senior Independent Director.All shareholders are encouraged to attend the annual general meeting, and major shareholders are also invited to briefings following the interim and annual results. The content of presentations to shareholders and analysts at results announcements and all announcements are available on this website.
The Halma website also contains electronic versions of the latest Annual report and accounts, Interim reports, biographical information on key Directors and Officers, share price information, and full subsidiary company contact details as well as hotlinks to their own websites. The website also features the facility to request e-mail alerts relating to announcements made by the Group and contains information in Chinese, French, German and Spanish as well as English.
Click here for the Financial calendar.