The purpose of our Board and corporate governance framework is to safeguard the interests of stakeholders by addressing the principal versus agent issues inherent in a company with public stock ownership. Our guiding principle is to approach these issues from the point of view of an owner with a long-term time perspective. We try to make any required trade-off 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 getting a shareholder return at a rate aligned with the risk profile of the company. We approach Corporate Governance with two perspectives:
a) a principles-based approach – this is the formal side of Corporate Governance; and
b) a spirit-based approach.
Principles-based approach: IDS and the QCA code
In terms of a rule-based approach, as an AIM listed company, IDS is now required to follow the principles of a recognised corporate governance code. In common with many AIM listed companies, IDS has chosen to use the new QCA Corporate Governance Code released in April 2018 as the recognised code to be applied.
Click here to see how IDS has approached each of the ten QCA Code principles, explaining how each of these has been applied, and in the event that IDS has not complied, an explanation is given as to why (‘comply or explain’).
In addition to the compliance with the QCA Code, IDS has implemented the following additional principles to strengthen its corporate governance framework.
Share ownership by Non-executive Directors
The Board believes that investment by the Non-executive Directors (NEDs) in the company they work for leads to a better alignment of interests between NED’s and shareholders.
Through their investment, the NEDs signal that they believe in the long-term success of the Company. 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 company is set out in the Remuneration Report on page 43 of the Annual Report and Accounts 2019. When valued at the year end share price of £1.75, all the NEDs have invested at least one year’s compensation in IDS shares.
The philosophy of share ownership for all directors to have ‘skin in the game’ has also led the Company to implement a Co-investment Plan as the long-term incentive for the Executive Directors and senior management instead of a plain-vanilla options scheme, which lets participants benefit from the upside, but without any downside risk.
When agenda-setting, the Chairman coordinates with the Executive Directors and the other NEDs 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 Research and Development 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.
The board has considered the applicability of the going concern basis in the preparation of the financial statements included in the Annual Report and Accounts 2019. These included the review of internal budgets and financial results. The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operations for the foreseeable future. For this reason, they have adopted the going concern basis in the preparation of the financial statements included int he Annual Report and Accounts 2019.