Corporate Governance

The purpose of our Board and corporate governance framework is to safeguard the interests of stakeholders by addressing the principal: agent issues inherent in a company with public stock ownership. Our guiding principle is to approach these issues with the perspective of an owner with a long-term time perspective. We try to make any required trade-offs between:

a) the interests of owners, agents and employees; and

b) the short and the long-term.

With this perspective in mind, a long-term owner will want a company built on the principles of sustainability, quality and highest ethical grounds – with the ultimate goal of seeing their invested capital appreciate at a rate aligned with the risk profile of the company. We approach Corporate Governance with two perspectives:

– a rule-based approach – this is the formal side of Corporate Governance;

– a spirit-based approach.

On 19 June 2018, the Company adopted the QCA Corporate Governance Code (2018 edition) (the Code). The Board views this as an appropriate corporate governance framework for IDS PLC, and consideration has been given to each of the ten principles set out in the Code. Click here to view the application of each principle.

 

Policy and strategy

The full Board is responsible for determining the strategy of the Group. As such it has reserved the right, amongst others, to approve budgets and long-term plans as well as any major decisions of capital allocation (see Matters Reserved for the Board). The roles and responsibilities of the Chairman and Chief Executive Officer are clearly defined. The Chief Executive Officer is responsible for implementing the strategy determined by the full Board. The Chairman is responsible for fostering a process which leads the selection of a Board team that has the skills to move the business forward, following the principles of a long-term owner.

 

Board Committees

Remuneration Committee

The Remuneration Committee assists the Board in the discharging of its responsibilities related to remuneration of the Company’s executive officers.

Chairman: Mr PJ Williamson

Members: Dr K P Kaspar, Mr PJ Williamson

Terms of Reference

Audit Committee

The Audit & Risk Committee assists the Board’s oversight of accounting and financial reporting processes and the audits of the Company’s financial statements.

Chairman: Mr PJ Williamson

Members: Dr B Wittek, Mr PJ Williamson, Dr KP Kaspar

Terms of Reference

Nominations Committee

The Nominations Committee is responsible for reviewing the size, structure and composition of the Board, establishing appropriate succession plans for the Executive Directors and other senior executives in the Group and for the nomination of candidates to fill Board vacancies, where required.

Chairman: Dr B Wittek

Members: Mr PJ Williamson, Dr B Wittek, Dr K P Kaspar

Terms of Reference

 

Spirit-based approach

In addition to the compliance with the QCA Code, IDS has implemented the following additional principles to strengthen the spirit of its corporate governance.

Share ownership by NED’s
The Board believes that investment by the NED’s in the Group they work for leads to a better alignment of interests between NED’s and shareholders.

Through their investment, the NED signals that they believe in the long-term success of the Group. Moreover, it is an additional incentive to look after long-term value creation for shareholders. Thus new Board members are encouraged to invest at least one years’ compensation into IDS shares. The share ownership of the NED’s in the Group is set out in the Remuneration Report on page 45.

This philosophy has also led the Group to implement a Co-investment Plan as the long-term incentive for the Executives and senior management instead of a plain-vanilla options scheme, which lets participants benefit from the upside, but without any downside risk.

‘5+5 Days’ involvement
We have chosen Non-executive Directors based on their ability to add a specific perspective to the Group. NED’s are expected to spend ‘5+5 Days’ with the Group:

a) Five (or six) days attending Board meetings including the required preparation; and

b) Additional four to five days with operating management or other employees in order to get a first hand, ground-level impression
in their area of expertise.

As an example, Dr Peter Kaspar covers the science and management of science aspects of our business. In this role he has been involved in several projects with the R&D team looking at issues of pipeline management, design process and regulatory approval processes. He has summarised his impressions in reports to the Board and the full Board has discussed them and drawn appropriate conclusions. As a result several process improvements have been implemented.

Similarly, Peter Williamson has been involved with the Group Finance Director in several rounds of discussions on efficiency programmes, sharing his extensive knowledge in this area.

In arranging their interactions with operating management, the NED’s follow the principles of clean leadership, mainly:

a) The CEO and Group Finance Director are informed before;

b) In the meetings the NED is primarily listening, he does not take any decisions or give orders; and

c) Any results are shared with the full Board; there is no separate report to the NED’s.

We believe with these side-rules, the 5+5 principle leads to a culture of full transparency and also full trust within all members
of the Board. It also cuts out the potential for politicking.

Long-term themes
When agenda-setting, the Chairman coordinates with the Executive Directors and the other NED’s to agree a meaningful rotation of long-term topics. Themes covered include People/Talent and Culture, Corporate Development, our progress in key areas where we can generate significant growth and updates on the R&D portfolio. The purpose of such agenda-setting is to ensure the Board focuses on long term topics, and not solely on the shorter-term issues which often monopolise the workload of the management team.