Corporate Governance Practices

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

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. The Group's internal controls are summarised on the Managing risk page.

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 here and an explanation of the strategy and longer-term objectives of the Company is contained within the Strategic Review.

Board meetings

The Board has six regular meetings scheduled each year but will meet, as required, to consider urgent matters. During the year an ad hoc meeting was held to consider and approve the US Private Placement.

Directors are issued with an agenda and comprehensive electronic meeting papers in the week preceding each Board meeting. The Board and each Director has access to the advice and services of the Company Secretary, as well as the option of obtaining independent professional advice at the Company's expense.

Board meeting attendance

During the year attendance by Directors at Board and Committee meetings was as follows:

Committees
Board attendance Board Audit Remuneration Nomination Overall
attendance
%
Paul Walker 6/6 - 4/4 3/3 100
Andrew Williams 6/6 - - 3/3 100
Kevin Thompson 6/6 - - - 100
Stephen Pettit1 3/3 1/1 2/2 1/1 100
Neil Quinn2 1/1 - - - 100
Jane Aikman3 6/6 3/3 4/4 2/3 94
Adam Meyers 6/6 - - - 100
Daniela Barone Soares 6/6 3/3 4/4 2/3 94
Roy Twite 6/6 3/3 4/4 3/3 100
Tony Rice 6/6 3/3 4/4 3/3 100
Carole Cran4 1/1 1/1 1/1 1-1 100
  1. Stephen Pettit retired following the conclusion of the AGM on 23 July 2015.
  2. Neil Quinn retired from the Board on 14 May 2015.
  3. Jane Aikman and Daniela Barone Soares were unable to attend the Nomination Committee meeting on 3 June 2015 due to illness.
  4. Carole Cran was appointed as non-executive Director on 1 January 2016.
Composition of the Board

The Board is comprised of the Chairman, five independent non-executive Directors and three executive Directors. The Board views this structure as a suitable balance of direct knowledge of the Group's operations with independent challenge and experience from outside the Company.

Board Diversity

The Board recognises the benefits to an International group of greater diversity on the Board and in management positions throughout the Group. At the year end, and at the date of this Report, the Board comprised nine Directors, including three women (33%). The spread of nationalities are seven British, one American and one Brazilian.

Halma has the ambition to increase the number of executives based outside Europe and the USA to better reflect the revenue generated outside those markets and to embrace diversity and inclusion across the Group. To support this ambition, the Board has adopted a Diversity and Inclusion policy and a programme of training to support the policy has been rolled out to senior executives and head office personnel. Operating subsidiary company boards are encouraged to invite local personnel with diverse skill sets to attend board meetings to provide a fresh perspective and bring a diverse and inclusive approach to the decision-making body.

Independence

The Board has reviewed the independence of the Chairman and each non-executive Director and considers the Chairman and all of the non-executive Directors to be independent of management and free from business or other relationships that could interfere with the exercise of independent judgement. The Board believes that any shares in the Company held by the Chairman and non-executive Directors serve to align their interests with those of the shareholders.

Tony Rice was appointed as the Senior Independent Director in July 2015, following the retirement of Stephen Pettit from the Board.

Time allocation

The Board benefits from the wide variety of skills, experience and knowledge that each Director has. However, being available and committing sufficient time to the Company is essential and therefore the number of external directorships that a non-executive Director holds is an important consideration when recruiting and when performing the annual evaluation of non-executive Directors effectiveness.

Executive Directors are permitted to accept one external appointment, subject to the prior approval of the Chairman. Approval will only be given where the appointment does not present a conflict of interest with the Group's activities and where the role is considered to be beneficial to the development of the individual, which will also benefit the Company.

In addition to the scheduled Board meetings (six per year), non-executive Directors are expected to attend the AGM, the annual strategy meeting and certain other Company events and site visits throughout the year. A time commitment of around 20 days per annum is the anticipated requirement for each non-executive Director. Confirmation is obtained on appointment from each non-executive Director that they can allocate sufficient time to the role. Details of Board attendance during the year is set out above and biographical details of each Director are here.

Induction of new Directors

Newly appointed non-executive Directors follow a tailored induction programme, which includes dedicated time with Group executives and visits to companies within each of the four sectors.

Carole Cran met with the Company Secretary to review the tailored induction materials, which provide a comprehensive overview of: the Group and the legal and organisational structure; the governance framework; the role of non-executive Director; key business contacts at Group, sector and operating company level; and details of the external advisers. In addition to the latest Annual Report and Company announcements, further materials such as recent broker coverage, the last Board evaluation and CEO conference presentations were also provided. Carole met the Chairman, Chief Executive and Finance Director on a one-to-one basis on her appointment and has subsequently met the other members of the Board and Executive Board along with senior managers from Head Office functions and the sectors. A varied programme of site visits to operating companies across the sectors is being arranged, which will include the opportunity for Carole to meet investors at the forthcoming investor event.

The Chairman reviews training and development needs of the Board, and each individual Director, at least annually. Briefings and presentations from subject specialists form part of the ongoing training needs for the Directors.

Performance evaluation

The Board undertakes a formal evaluation of its performance, and of each Director, on an annual basis. The principal Committees of the Board undertake an annual evaluation of their effectiveness, in accordance with their terms of reference.

As in prior years, the Board met in January 2016 before its scheduled meeting to provide a forum for discussion of the Board evaluation outside the formal meeting. This forum has proven useful for a number of years. The Chairman and non-executive Directors also meet after each Board meeting without executive Directors present to ensure there is an opportunity to discuss potentially sensitive matters. The Chief Executive will join for part of these meetings at least once per annum. The Senior Independent Director meets with the non-executive Directors without the Chairman present, at least annually, to evaluate the Chairman's performance.

The Executives are also given the opportunity to meet with the Chairman and/or the Senior Independent Director separately. The outcome of these meetings is fed back to individuals by the Chairman, Senior Independent Director or Chief Executive, as appropriate.

The Board and Committee evaluations conducted in 2015 were externally facilitated by EquityCommunications. Accordingly, the Board and Committee evaluation for 2016 was an internal evaluation, conducted by the Chairman having a structured one-to-one session with each member of the Board/ Committees and the Company Secretary. The results were anonymised and provided to the whole Board in January 2016.

The main areas of focus arising from the evaluation process, and subsequently discussed by the Board, were: the size and balance of the Board; the continued development of the Group's strategic priorities and future direction; executive succession planning; and the allocation of resources.

Liability insurance

Each Director is covered by appropriate directors' and officers' liability insurance, at the Company's expense. In addition, there are Deeds of Indemnity in place, which provide an indemnity from the Company to the Director in respect of any proceedings brought by third parties against Directors personally in their capacity as Directors of the Company. The indemnity does not extend to certain areas, including: any liability to pay a fine levied in criminal proceedings; defending criminal proceedings where the Director is convicted and such conviction is final; defending any civil proceedings brought by the Company or an associated company; or in any proceedings for disqualification of the Director.