Hutchison China MediTech Limited ("Company")
The Company strives to attain and maintain high standards of corporate governance best suited to the needs and interests of the Company and its subsidiaries (the "Group") as it believes that effective corporate governance practices are fundamental to safeguarding shareholder interests and enhancing shareholder value. Accordingly, the Company has adopted corporate governance principles that emphasise a quality board of Directors (the "Board"), effective internal controls, stringent disclosure practices, transparency and accountability. It is, in addition, committed to continuously improving these practices and inculcating an ethical corporate culture.
The Company has applied the principles and provisions of the UK Corporate Governance Code published by the Financial Reporting Council on 17 June 2016 (the "Code") for the financial year ended 31 December 2018. A full version of the Code is available from the Financial Reporting Council website at www.frc.org.uk.
It is noted that a revised UK Corporate Governance Code was published on 15 July 2018 which applies to accounting periods beginning on or after 1 January 2019. The Company expects to report against this revised code in 2019.
The Company's explanations for departures from certain provisiowww.frc.org.ukns of the Code for the year ended 31 December 2017 are set out below:
- B.1.2 (Composition of the Board) - During the year ended 31 December 2018, the Board comprised three executive directors, the executive Chairman, two non-executive directors not regarded as independent and four independent non-executive directors. Accordingly, during the year ended 31 December 2018, the composition of the Board did not, at any time, comply with provision B.1.2 of the Code which states that, except for smaller companies, at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent. The Board considers that, despite this non-compliance, the Board has an appropriate balance of skills, knowledge and experience to enable it to discharge its duties and responsibilities effectively.
- B.2.1 (Nomination Committee) - The Company has considered the merits of establishing a Nomination Committee for the purposes of complying with the recommendation of the Code but is of the view that with a relatively small Board, it is in the best interests of the Company that the Board collectively reviews, determines and approves the structure, size and composition of the Board as well as the appointment of any new Director, as and when appropriate. The Board is tasked with ensuring that it has a balanced composition of skills and experience appropriate for the requirements of the business of the Group and that appropriate individuals with relevant expertise and leadership qualities are appointed to the Board to complement the capabilities of existing Directors. In addition, the Board as a whole is also responsible for reviewing the succession plan for Directors, including the Chairman of the Board. An example of this nomination process working well in practice was the selection and appointment of new Directors which took place in 2017 which involved the entire Board including the outgoing Directors. The Board, being of a small enough size, was able to select, interview and determine Independent Non-Executive Directors to be replaced with full participation of the Board. The process let the Board not only have good interaction and knowledge of each of the four new Independent Non-Executive Directors but also enabled the incumbent Directors to have a better understanding of the Board dynamics amongst themselves. The process was well conducted and received, and a good learning experience for the entire Board. On 15 April 2019, the Company established a Nomination Committee which comprises all the Directors and is chaired by the Chairman of the Board. The Company expects to report the extent to which these arrangements relating to its Nomination Committee complies with the recommendations of the revised UK Corporate Governance Code (July 2018), which will include an explanation for any departure from the revised code, within the corporate governance section of its annual report for the year ending 31 December 2019.
- B.6.2 (Evaluation) - The Board considers that its internally-led evaluation has resulted in a number of recommendations that have improved the way the Board and the Committees function. For this reason, an externally led evaluation was not considered necessary but the Board will consider the engagement of an external service provider at an appropriate juncture.
- B.2.1 (Remuneration Committee) - The Remuneration Committee comprises three members and is chaired by Mr Paul Carter, an Independent Non-executive Director, with the executive Chairman Mr Simon To and Independent Non-executive Director Mr Graeme Jack, as members. Accordingly, the composition is not in compliance with provision D.2.1 which stipulates that the board should establish a remuneration committee of at least three independent non-executive directors. Given Mr. To’s knowledge of the remuneration and specialised market conditions of the Company's business, the Board took the view that it is in the best interests of the Company that Mr. To, as an Executive Chairman, acts as the member of the Remuneration Committee.
The information in this statement was last reviewed on 11 September 2019. This statement incorporates by reference the disclosures set out in the Company's Corporate Governance Report found on pages 44 to 53 of the Company's Annual Report for the financial year ended 31 December 2018. This can be accessed here.