Corporate Governance

Statement of compliance with the UK Corporate Governance Code

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 governance practices are fundamental to safeguarding stakeholder 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 15 July 2018 (the "Code") for the financial year ended 31 December 2019 which is applicable to companies listed on the London Stock Exchange with a premium listing, despite the Company’s shares being traded on AIM and hence not required to comply with the Code. A full version of the Code is available from the Financial Reporting Council website at www.frc.org.uk.

This statement incorporates by reference the disclosures set out in the Company's Corporate Governance Report found on pages 41 to 59 of the Company's Annual Report for the financial year ended 31 December 2019. This can be accessed here.

The Company's explanations for departures from certain provisions of the Code for the year ended 31 December 2019 are set out below:

 

Division of responsibilities

  • Provision 9
    Mr Simon To, the chair of the Board, was an executive director upon appointment as chair. Given Mr To’s knowledge and experience of the Company’s business, his in-depth knowledge, business experience in China and extensive network of relationships, the Board believes that it is in the best interests of the Company that Mr To acts as the chair.
  • Provision 11
    The Board comprises ten directors, being four executive directors, two non-executive directors and four independent non-executive directors (one of whom is the senior independent non-executive director).
    The Code states that at least half the board, excluding the chair, should comprise non-executive directors determined by the board to be independent. The nomination committee considered the structure, size, diversity profile and skill set matrix of the current Board and confirmed that each director continued to possess the character, experience, integrity and the levels of skills, care and diligence required as a director of the Company in respect of all decisions taken at both Board and, where applicable, committee level to ensure the long term sustainable success of the Company. The nomination committee further confirmed that the overall composition of the board is appropriately diverse and optimal for the Company at the present time.

 

Composition, succession and evaluation

  • Provision 17
    The Company established the nomination committee on April 15, 2019 which comprises all directors and is chaired by the chair of the Board. The Code requires the nomination committee to comprise a majority of independent non-executive directors. The Board is of the view that the ultimate responsibility for the selection, nomination and appointment of directors rests with the Board as a whole and 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 succession plan for directors, as and when appropriate. A Board sub-committee, chaired by the chair and comprising members in compliance with the requirement under the Code for a nomination committee, will be established as and when needed to facilitate the nomination committee in the conduct of the selection and nomination process, and will be dissolved after the purpose for which it is established is achieved or discontinued. 
  • Provision 19
    Mr To has served as the chair of the Board for more than nine years. Notwithstanding the length of his service, Mr To continues to demonstrate his commitment as chair, providing direction on Company strategy, assisting generally on business operations. With his in-depth knowledge, business experience in China and extensive network of relationships, the board believes that it is in the best interests of the Company that Mr To acts as the chair.

 

Remuneration

  • Provision 32
    The remuneration committee comprises three members and is chaired by Mr Paul Carter, an independent non-executive director, with the chair Mr To and independent non-executive director Mr Graeme Jack, as members. The Code stipulates that the remuneration committee should comprise at least three independent non-executive directors. Given Mr To’s knowledge on the remuneration and specialized market conditions of the Company’s business, the board believes that it is in the best interests of the Company that Mr To acts as a member of the remuneration committee.
  • Provision 36
    Since the 2019 annual general meeting, the remuneration committee has reviewed the Company’s approach to remuneration and reporting on executive remuneration in detail, with particular reference to the Code and associated guidance. Aimed at attracting and retaining top talent, the remuneration committee concluded benchmarking research on peer group U.S. and China biotech companies. In late 2019, the remuneration committee comprehensively reviewed the Group's compensation and share-based incentives policies, performed benchmarking research on peer group U.S. and China biotech companies and established a new attractive policy to ensure the Group is able to recruit and retain top talent. Vesting of share-based awards under the policy is in line with that peer group. The committee takes seriously its responsibility to ensure that the executive remuneration practices of the Group drive strong performance, are aligned with the strategy and sustainability of the Group and are appropriate in the context of the external regulatory environment and the expectations of the Company’s stakeholders.
  • Provisions 40 and 41
    The remuneration committee has considered the views of and feedback from the Company’s shareholders in reviewing and settling the Company’s remuneration policy. The committee continually engages with investors and/or investor representative organisations on remuneration topics as appropriate. These lines of communication ensure that emerging best-practice principles are factored into the committee’s decision-making. As noted above, in late 2019, the remuneration committee comprehensively reviewed the Group's compensation and share-based incentives policies, performed benchmarking research on peer group U.S. and China biotech companies and established a new attractive policy to ensure the Group is able to recruit and retain top talent.
    Further detail on the work of the Company’s remuneration committee and the Company’s remuneration policy for the executive directors and senior executives can be found in the Company's Corporate Governance Report found on pages 41 to 59 of the Company's Annual Report for the financial year ended 31 December 2019.

 

The information in this statement was last reviewed on 18 September 2020.