Dechra Pharmaceuticals PLC

Dechra Pharmaceuticals PLC

Annual Report and Accounts for the year ended 30 June 2012

Effectiveness

Board Balance and Independence

The Board recognises and understands the importance of balance and refreshment in terms of its composition. The following changes have taken place at Board level over the past 24 months:

  • Retirement of Malcolm Diamond (Non-Executive Director) on 5 November 2010;
  • Appointment of Bryan Morton (Non-Executive Director) on 8 January 2010;
  • Appointment of Dr Chris Richards (Non-Executive Director) on 1 December 2010; and
  • Resignation of Bryan Morton on 9 July 2012.

The following changes are scheduled to take place over the forthcoming 24 months:

  • The appointment of Tony Griffin (Managing Director of DVP EU) as an Executive Director. It is intended that he will be appointed by no later than the end of the 2012 calendar year (once the integration of Eurovet into the Group has been fully achieved);
  • The appointment of two additional Non-Executive Directors (one of whom will fill the vacancy created by Bryan Morton's recent resignation and one will replace Neil Warner in 2013 as Chairman of the Audit Committee); and
  • The proposed retirement of Neil Warner at the 2013 Annual General Meeting at which point recruitment for a further Non-Executive Director will commence.

As previously stated, Mike Redmond's tenure as Chairman will be reviewed prior to the 2014 Annual General Meeting. The Board appreciates that Mike Redmond has held the position of Chairman for over nine years but, given the number of changes to the Board it is considered to be in the best interests of the Company and its stakeholders for him to continue in this position until the recent (and forthcoming) board changes have settled in. This will allow the newer members of the Board to draw upon the Chairman's experience, whilst allowing him to oversee their induction and development.

An external executive search agency has been retained to assist the Board in the recruitment of the two new Non-Executive Directors and it is intended that these recruitments will be completed by the end of the 2012 calendar year.

Overall, the Board considers that all the Non-Executive Directors are independent of management and free of any business or other relationship which could materially interfere with or compromise their ability to exercise independent judgement. This independence of mind provides them with the ability to challenge decisions and think strategically and is integral to the decision making processes of the Board.

Diversity

The Board understands the importance of having a diverse membership and recognises that diversity encompasses not only gender but also diversity in terms of background and experience.

Although there are currently no female board members, 25.0% (2011: 37.0%) of the senior management team, 14.3% (2011: 14.3%) of the subsidiary executive boards and 44.8% (2011: 41.7%) of the overall workforce are females. In terms of the two Non-Executive Director positions currently being recruited female candidates have been specifically requested and if possible that appointment of a female will be made in respect of at least one of the positions.

Conflicts of Interest

Pursuant to the Companies Act 2006 all Directors have a duty to avoid a situation in which they could have, or have, a direct or indirect conflict of interest with the Company. The Articles of Association of the Company enable the Directors to authorise any actual or potential conflict of interest which could arise. There are safeguards which will apply when Directors decide whether to authorise a conflict or potential conflict. Firstly, only independent Directors (i.e. those who have no interest in the matter being considered) will be able to take the relevant decision; secondly, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company's success. The Directors will also be able to impose limits or conditions when giving authorisation if they deem this to be appropriate. During the financial year under review no actual conflicts have arisen.

Information and Professional Development

Detail in respect of the information provided to the Board prior to each meeting is provided earlier in this report.

In order to ensure that the Board maintain their knowledge and familiarity with the Group's operations it is intended that at least one board meeting per year is held at one of the Group's operational sites (other than NVS where the board meetings are usually held). During the year a board meeting was held at Dales, Skipton, in June, where the Board had an opportunity to be shown around the manufacturing facility and meet with employees. Following the acquisition of Eurovet it is proposed to hold a board meeting at the main facility in the Netherlands during 2012/2013.

Any newly appointed Directors are provided with comprehensive documentation aimed at providing information in relation to the remit and obligations of the role, current areas under consideration for the Board and also the latest broker reports. New Directors are also offered the opportunity to visit the various business units in order to allow them to meet with the executive teams and to be shown around the operations.

The Company Secretary and Chairman are aware of the ongoing requirement to review and agree with each Director their training needs. In order to assist with these training requirements the Company Secretary provides briefings for the Directors, where necessary, that cover a number of legal and regulatory changes and developments relevant to the Director's areas of responsibility. During the year these briefings included an update in respect of board diversity and the recent developments in narrative reporting. The Company's lawyers, DLA Piper (UK) LLP, were also invited to present a competition law update to the Board. In addition, the Company Secretary informs the Directors of any external training courses which may be of relevance. It is currently considered that the mixture of internal briefings and external training courses satisfies the Directors' training needs, however, this will be reviewed on an ongoing basis.

Each Director is entitled on request to receive information to enable him to make informed judgements in order to adequately discharge his duties. In addition, all Directors have access to the advice and services of the Company Secretary and senior managers, and may take independent professional advice at the Company's expense in connection with their duties.

Nomination Committee

The Board has an established Nomination Committee to lead the process for board appointments and to make recommendations to the Board. During the period the Nomination Committee comprised Mike Redmond (Chairman), Bryan Morton (resigned 9 July 2012), Dr Chris Richards and Neil Warner. The Chairman would not chair the committee meeting if it was dealing with the appointment of his successor. Details of the work carried out by the Nomination Committee during the financial year have already been detailed in this Report. The Nomination Committee normally meets once a year.

The terms of reference set out the Nomination Committee's role and the authority delegated to it by the Board. The terms of reference have been reviewed during the year, a copy of which is available on the Company website at www.dechra.com. They include the following responsibilities:

  • to oversee the plans for management succession;
  • to recommend appointments to the Board;
  • to evaluate the effectiveness of the Non-Executive Directors; and
  • to consider the structure, size and composition of the Board generally.

Other significant commitments of the Chairman and the Non-Executive Directors were disclosed to the Board before appointment and the Board is notified of any subsequent changes. The letters of appointment of the Non-Executive Directors are available for inspection at the Company's registered office. Both the letters of appointment of the Non-Executive Directors and the service contracts of the Executive Directors will be on display at the forthcoming Annual General Meeting.

Board Evaluation

The Board undertakes an annual evaluation of its performance and that of its Committees.

  • The 2010/2011 board evaluation:
    The evaluation process was reviewed in detail by the Chairman and the Company Secretary during 2010/2011. It was agreed that, given the number of changes to the Board during the review period, an internal (rather than external) evaluation would be most beneficial to the Company. A detailed discussion document was then developed which included the following areas: (i) board composition; (ii) strategy review process; (iii) the format of board meetings and the decision process; (iv) training and development; (v) the performance of the Board and the individual Directors; (vi) Corporate Governance; (vii) leadership and culture; and (viii) risk assessment. One to one meetings were then held by the Chairman with each of the Executive and Non-Executive Directors and Company Secretary. The evaluation of the Chairman was undertaken by the Senior Independent Director. The findings of the internal evaluation were then discussed with the Board in August 2011 and a number of action points agreed, including the following:

ActionProgress
Requirement for additional resource at Executive Director levelTony Griffin (Managing Director of DVP EU) has been identified as an additional Executive Director. It is considered that he will strengthen the current Executive team, providing the relevant experience to assist in the development and implementation of the Group strategy
Requirement for focus on Board and senior management succession plansThe HR Director has presented to the Board in respect of the current succession plans and this has been scheduled as a board agenda item every six months
Requirement for the formulation of a Group IT strategy and for a central IT function to be createdAllen Mellor has been appointed as Group IT Director and has carried out a review of the current IT capabilities and requirements within the Group. He is scheduled to present his findings to the Board in the autumn which will provide the basis for the Group IT strategy
Carry out a review of the current PLC meeting schedule to ensure that it utilises the Board's time effectivelyThe number of PLC meetings has been reviewed in line with the business requirements of the Group. It was agreed to reduce the number of annual meetings from eleven to nine
Carry out a review of the level of information supplied to the Board before each meetingA review in respect of this is ongoing
  • The 2011/2012 board evaluation:
    Following discussion it has been agreed to once again carry out a detailed internal evaluation similar in process to the 2010/2011 evaluation. The results of this evaluation will be reported in next year's Report and Accounts. Given the Company's move in June 2012 to the FTSE 250, consideration will be given to the potential additional benefits which could be derived from an externally facilitated review.

Re-election

At the forthcoming Annual General Meeting, all Directors will retire and offer themselves for re-election. Each of the Directors standing for re-election has been subject to a formal evaluation. Each of the Directors continues to perform effectively and demonstrate commitment, not only in respect of their roles and responsibilities, but also in relation to the Group and its stakeholders. The Board therefore recommends that Shareholders vote in favour of their re-election.

As stated earlier in this report, both Mike Redmond and Neil Warner have served as Chairman and Non-Executive Director respectively for more than nine years. Their performance has been rigorously reviewed and, for the reasons set out previously in this report, it is considered to be in the best interests of the Group and its stakeholders that they continue in office.

We use cookies and track users anonymously, check this box and save to disable. We are inferring consent by continuing.