Explanations under the UK Corporate Governance Code

Executive Chairman position

The Board acknowledges that Said Darwazah’s position as Executive Chairman, having previously served as Chief Executive Officer, and his tenure as a director are departures from the UK Code.


The role was created in February 2018, following the appointment of Siggi Olafsson as CEO. Previously, Said Darwazah was the Chairman and Chief Executive. The change of roles and appointment of a CEO has caused a reduction in Said’s executive responsibilities, whilst still retaining his strategic input. The Board considers the transfer of responsibilities from Said to Siggi has been very successful and that the CEO has been fully empowered by the Executive Chairman. The Board is pleased with the progress made and considers it is important to retain corporate memory and important relationships. Therefore, it is essential to retain Said Darwazah’s services in a strategic capacity.


The Board consulted shareholders prior to Said’s appointment as Chairman and Chief Executive in May 2014 and following the change to the position of Executive Chairman to in February 2018. The Independent Non-Executive Directors met twice during 2018 to review the Board structure and concluded that the Executive Chairman role should continue.


The Board is focused on the commercial success of Hikma and believes that continuing the position of Executive Chairman for a period of time is the best way to achieve success for Hikma, because:
— Continuity of strategy: Said Darwazah has been a driving force behind the strategic success of the business since 2007 and the Board believes that it is important for the continued success of the Group that he remains in a strategic role.
— Executive Chairman’s role: The Executive Chairman position is highly visible inside and outside Hikma, acting as an ambassador with business partners and adviser to the divisions.
—Business partners: A significant number of Hikma’s key political and commercial relationships across the MENA region are built on the long-term trust and respect for the Darwazah family where the role of the Executive Chairman remains key.

Control enhancements
The Board continues to operate the following enhanced controls:
—Governance structure review: The Independent Directors meet at least bi-annually in a private session chaired by the Senior Independent Director. This meeting includes consideration of the appropriateness of the governance structure, the division of responsibilities between the Executive Chairman and the CEO and safeguards for shareholders.
—Committee Chair roles: The Chairs of the Board Committees, all of whom are Independent Non-Executive Directors, undertake a significant amount of work in the oversight of the functions that report to their Committees and have in-depth relationships with the relevant executives.
—Transparency and engagement: Hikma has always had the highest regard for shareholders, with many of the original investors from before listing still investing and supporting Hikma today. Over the circa 14 years since flotation Hikma has maintained the highest standards of shareholder engagement, which is reflective of the
importance placed in maintaining strong investor relations and governance.
—Senior Independent role: The Senior Independent Director has joint responsibility, with the Executive Chairman, for setting the Board agenda, agreeing action points and the minutes of the meetings.

Independence

The Board rigorously reviewed and considered the independence of each Non-Executive Director during the year as part of the annual corporate governance review, which included consideration of progressive refreshment of the Board. The Board considers Robert Pickering, Pat Butler, Dr Pamela Kirby, John Castellani and Nina
Henderson to be independent. The Board considers Cynthia Schwalm, who will join on 1 June 2019, to be independent. These individuals provide extensive experience of international pharmaceutical, financial, corporate governance and regulatory matters and were not associated with Hikma prior to its listing in 2005.


The Board does not view Ali Al-Husry as an Independent Director due to the length of his association with Hikma, holding an executive position with Hikma prior to listing and his involvement with Darhold Limited, Hikma’s largest shareholder. However, he continues to bring to the Board broad corporate financial experience, in depth awareness of the Group’s history, and a detailed knowledge of the MENA region, which is an important and specialist part of the Group’s business.

The Board does not view Jochen Gann as an Independent Director as his appointment is in accordance with the shareholder agreement with Boehringer Ingelheim, a major shareholder and his primary employer. However, Jochen brings significant M&A and corporate finance experience with a particular focus on the pharmaceutical sector.