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Board effectiveness

Skills and experience

The Board keeps the skills and experience of its members under constant review. The Directors believe in the necessity for challenge and debate in the boardroom and consider that existing Board dynamics and processes encourage honest and open debate with the Executive Directors. 

Hikma knowledge

Board members frequently visit the business units and meet management teams to fully understand and advise on the important issues facing the Group. During the year, Non-Executive Directors visited facilities in Jordan, Portugal and the US. The Executive Directors and Ali Al-Husry have extensive experience of Hikma from its earliest days to today. The Directors maintain regular contact with senior management and the Company Secretary ensures that Directors are kept up to date with major developments in the Group’s business. 

Board experience

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Diagram as at 1 March 2016. Mr. Breffni Byrne left the Board on 12 May 2016. Ms. Nina Henderson joined the Board on 1 October 2016.

Country of origin

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Diagram as at 1 March 2016. Mr. Breffni Byrne left the Board on 12 May 2016. Ms. Nina Henderson joined the Board on 1 October 2016.

Geographical experience

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Diagram as at 1 March 2016. Mr. Breffni Byrne left the Board on 12 May 2016. Ms. Nina Henderson joined the Board on 1 October 2016.

Training

The Chairman considers the development needs of Directors as part of his ongoing assessment of Board effectiveness and ensures that these requirements are met by the Company Secretary organising appropriate training opportunities. The main Board training and development activities this year were:

  • External advisers provided the Board with training sessions on governance and financial reporting requirements
  • Directors attended several externally provided seminars and discussion forums. Further training is scheduled for 2016
  • Hikma’s brokers and financial advisers presented industry and market updates to the Board on several occasions
  • The Company Secretary made regular updates to the Directors on relevant regulatory and governance matters

Independent advice

The Board Governance Manual provides for any Director to have access to independent professional advice at Hikma’s expense.

External commitments

The Directors’ external commitments are detailed in their profiles in the Leadership Section. The Nomination Committee operates, monitors and reviews the conflicts of interest procedures, which have operated effectively during the year. A register of external commitments is maintained by the Company Secretary and is reviewed at each Nomination Committee and Board meeting. Where new commitments are proposed, these are reviewed in advance by the Nomination Committee and, where appropriate, recommendations on necessary controls are made to the Board. The Board considers that a degree of outside commitments enhances a Director’s ability to perform the role.

 

Time

The Directors commit an appropriate amount of time to their roles and are readily available at short notice. The Non-Executive Directors are required to commit 20 days during each year to the execution of their duties. However, all of the Non-Executive Directors devote at least 30 days per annum to their Hikma responsibilities. In addition, the Committee Chairmen spend a significant amount of time on their respective areas of responsibility and Non-Executive Directors take time to meet with management and visit operations where there are particular areas of interest. Consequently, the Independent Non-Executive Directors dedicate substantially more time to Hikma than their appointment requires. The duties of the Chairman and Chief Executive, Directors and Committee Chairs are set out in the Board Governance Manual. 

Evaluation and performance

The Board and the Committees undertake an externally moderated evaluation each year. The evaluation process and the issues identified are summarised in the table below.

Process

  • The process is co-ordinated by the Senior Independent Director at the request of the Chairman
  • Lintstock, an external moderator which has no other connection with the Company, prepared online questionnaires for both the Directors and senior management, designed to build on previously identified themes
  • Lintstock managed the process and reported independently to the Chairman and the Senior Independent Director
  • Lintstock presented the results and findings to the full Board in the context of Hikma’s business and that of its peers in the FTSE and international markets and provided their independent feedback on the results
  • A similar process was followed for each Committee of the Board
  • The results of the evaluation process formed part of the Chairman’s appraisal of the overall effectiveness of the Board and its members
  • Regularly during the year, the Directors fed back to the Company Secretary improvements and enhancements that they considered should be progressed outside the evaluation timetable

 

Elements assessed

  • Board Composition, Expertise & Dynamics
  • Time Management
  • Board Support & Committees
  • Strategic Oversight
  • Risk Management
  • Succession Planning and Human Resource Management
  • Priorities for Change

Conclusions and action

Key conclusions and observations from the 2015 evaluation:

  • The Board continues to operate effectively and all members actively participate in all discussions with equal contributions, candid discussion and critical thinking
  • The Board is well balanced in terms of skills, experience and independence
  • The flow, timeliness and quality of information were highly rated
  • The Board’s risk appetite is well balanced and considered appropriate
  • The position of Chairman and Chief Executive has been well managed
  • The Board has a positive understanding of the markets of Europe, North America and the MENA region

Progress on previously identified issues

Observations Action taken
Risk management practices could be expanded internally The Board made the Chief Strategy and Corporate Development Officer responsible for risk management at the Executive Committee. The Board oversaw the development of the risk appetite, reviewed the principal risks and considered management’s mitigation strategy for each risk. The Audit Committee developed a process for assessing the viability of the Company and associated risk and viability disclosure.
Additional US political and regulatory experience was required, particularly with the Roxane acquisition The Nomination Committee led a search process for individuals with the requisite specific and business leadership experience which led to the appointment of John J Castellani.
Further assurance of the implementation and suitability of the ABC procedures The CRE Committee requested that the Company Secretary lead a re-assessment of Anti-Bribery and anti-Corruption practices. The assessment was undertaken by Good Corporation, as in 2011. A full report demonstrated that significant progress had been made with development and implementation.
The Audit Committee needed to focus on its extensive financial and risk responsibilities  The Board decided to move the governance and external commitment responsibilities of the Audit Committee to the Nomination Committee, allowing both Committees to focus on the workstreams that more naturally suit their remit and providing a better time and responsibility balance.

Chairman’s appraisal

The Non-Executive Directors regularly meet in private during the course of the year. The performance of the Chairman and the Board is discussed during these meetings. Additionally, the Senior Independent Director met with the Non-Executive Directors to undertake a formal appraisal of the performance of the Chairman. This review addressed:

  • The effectiveness of the Chairman’s leadership
  • The setting of the Board agenda
  • Communication with shareholders
  • Internal communication and Board efficiency

The conclusion of this process was that the Chairman gave clear leadership and direction to the Board, and that the Board is run in an appropriate and effective manner.

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