Chairman's Introduction

This extract from the Halma plc 2016 Annual Report & Accounts has not been updated since publication in June 2016.

Paul Walker, Chairman

Good governance is essential for promoting the success of the Company and it sits at the heart of how we manage our Group. Our success is underpinned by the robust and meaningful corporate governance framework that we have in place, supported by our Group-wide culture of openness, transparency, constructive challenge and support.

The Board is committed to maintaining the highest standards of corporate governance and, on their behalf, I am pleased to present Halma’s Corporate Governance Report for 2016.

This report provides an explanation of the framework within which the Group is governed and sets out how we have applied the main principles and relevant provisions of the UK Corporate Governance Code 2014.

Leadership

Developing effective leadership throughout the Group is essential for attracting and retaining talent and aiding succession planning. The additional focus that has been given to improving the quality and performance of Halma’s management talent over the past two years has been invaluable. The Board’s support of executive activity surrounding talent has reinforced this strategic imperative across the entire business.

Equally, at Board level, it is important to have the right balance of skills and experience, while enabling a refresh of non-executive Directors over time. Over the past year, we have had the opportunity to change the composition and responsibilities within the Board. Following Stephen Pettit’s retirement from the Board after last year’s annual general meeting, Tony Rice, non-executive Director, became the Chairman of the Remuneration Committee and Senior Independent Director. Jane Aikman will step down as a non-executive Director and Chairman of the Audit Committee after our Annual General Meeting in July, and Carole Cran, who was appointed a non-executive Director in January 2016, will assume the role of Audit Committee Chairman.

I would like to thank Jane for her valuable contribution to the Company over the last nine years, in particular in her role as Audit Committee Chairman and for her support with Carole Cran’s induction. I am delighted to have Carole as a member of our Board and welcome her further contribution as she prepares for and takes up the role of Audit Committee Chairman.

I believe that we have the right balance of skills, experience and knowledge on our Board to deliver strong leadership, make clear and effective decisions and harness an open and transparent culture which encourages an entrepreneurial approach at a business level.

Biographies for each of the Directors are on this website and for those Directors standing for election or re-election at the Annual General Meeting, are also contained within the Notice of Meeting.

Effectiveness

Building on the externally facilitated Board evaluation that was concluded last year, I have continued to work closely with my fellow Directors to improve the effectiveness of the Board. The competence and culture of open challenge that lies within our Board enables us to deliver effective decision-making within a governance framework which is fit for the future growth of the Company.

People and culture

I reported in last year’s Chairman’s statement that we were upgrading our talent and education programmes to ensure that we have the best people to meet the growing demands of our business and customers. I am pleased to report that we have made considerable progress in this area and have continued to foster a culture which is more diverse and inclusive. You can read more about our talent and leadership initiatives.

Rewarding success

We recognise that recruiting and retaining talent that can deliver the capabilities that we need to match Halma’s growth requires a reward structure that motivates our people to outperform and enables them to share in Halma’s success. The executive share plan adopted at last year’s annual general meeting was designed to incentivise our executives and senior management to achieve superior returns for the Company and align their reward with the interests of shareholders. Further information on the Company’s remuneration policy and approach is set out in the Remuneration Report on pages 73 to 90 of the Annual Report.

Compliance with the UK Corporate Governance Code 2014 (the Code)

Throughout the year ended 2 April 2016, the Company has fully complied with the provisions as set out in the Code (a copy of which is available on the Financial Reporting Council’s website at www.frc.org.uk). The Group’s approach to risk management and internal control is summarised on pages 28 and 29 of the Annual Report.

The Directors confirm that they consider the Annual Report and Accounts, taken as a whole, to be fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance.

The Group’s business model is set out on page 12 and an explanation of the strategy and longer-term objectives of the Company is contained within the Strategic Review on pages 4 to 47 of the Annual Report.

Board priorities

Our priorities for 2017 are to continue to: improve focus on our customers and their needs through innovation and our go-to-market strategies; seek acquisition opportunities in existing and new markets which complement our current portfolio and which can deliver the growth that we expect; and improve the capabilities and diversity of our talent.

Paul Walker
Chairman

14 June 2016