The Directors acknowledge the importance of good corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’). The QCA Code was developed in consultation with several significant institutional small company investors, as an alternative corporate governance code applicable to AIM companies. The QCA Code identifies ten principles to be followed to enable companies to deliver growth in long term shareholder value, encompassing an efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust.
Further information on compliance with the QCA Code will be provided in our next annual report.
Eva-Lotta Allan, Non-Executive Chairman
This disclosure was last reviewed and updated on 18 September 2018
The sections below set out the ways in which the Group applies the ten principles of the QCA Code in support of the Group’s medium to long-term success.
1. Establish a strategy and business model which promote long-term value for shareholders
The strategy of C4X Discovery (“C4XD” or the “Company”) is explained fully within the Strategic Report section on pages 3 to 7 of the Group’s 2017 Annual Report.
C4XD is committed to becoming the world’s most productive Drug Discovery Engine, supplying the pharmaceutical industry with a sustainable source of commercially attractive drug assets. We pursue programmes in areas of high unmet medical need that are commercially attractive, committing our resources to the discovery of novel therapeutic targets and the generation new drug molecules which act against these targets. Our sustainability will be driven by reinvesting the revenue generated through early stage licensing deals back into our Drug Discovery Engine, maximising value for our shareholders.
We continue to invest in our proprietary suite of drug discovery technologies and our highly experienced and uniquely trained scientific team. Where beneficial, we will continue to build alliances with organisations that have capabilities complementary to our own. Combined, we believe this makes us uniquely positioned to achieve our goal.
The key challenges to the business and how these are mitigated are detailed on page 8 and 14 of the Group’s 2017 Annual Report.
2. Seek to understand and meet shareholder needs and expectations
The Company recognizes the AGM as an important opportunity to meet private shareholders, where the shareholders are given the opportunity to ask questions and raise issues to the Board; this can be done formally during the meeting or informally with the Directors afterwards. At the AGM, separate resolutions are proposed on each substantially different issue. For each resolution, proxy appointment forms are issued which provide voting shareholders with the option to vote in advance of the AGM if they are unable to attend in person. The outcome of the voting on AGM resolutions is disclosed by means of an announcement on the London Stock Exchange, and the results are posted on the Investors section on the Company website.
All resolutions were duly passed in the latest AGM, however, should voting decisions not be in line with the Company’s expectations the Board will engage with those shareholders to understand and address any issues. The Company Secretary is the main point of contact for such matters. However, all of our Directors or Non-Executive Directors are willing to engage with shareholders should they have a concern that is not resolved through the normal channels.
Copies of our annual report and the interim report are sent to all shareholders and copies can be downloaded from the Investors section of the website. Other information for shareholders (and other interested parties) is also provided on our website, including the preliminary and half-year results.
3.Take into account wider stakeholder and social responsibilities and their implications for long-term success
C4XD is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups, including shareholders, employees, partners, suppliers, regulatory authorities and industry bodies. C4XD endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate consistent with the Company’s longer-term strategy.
The Company recognises that having an effective workforce is fundamental to organisational success. For this reason, it is Company policy to recruit the best person for each vacancy. Selection is purely merit based against pre-determined job requirements and in full compliance with the objectives of the Company’s Equality and Dignity at Work policies. C4XD is committed to ensuring the health and safety of its employees in the workplace. This includes the provision of subsidised private health insurance for employees who elect to take it. The Company requires employees to act ethically and responsibly in accordance with the policies and procedures within our employment handbook.
The Board is committed to keeping employees as informed as possible regarding the Company’s performance and wherever possible, seeks their views on matters which affect them as employees. Feedback is gathered via All Staff meetings and employee surveys. This recently led to a new transparent grading structure being introduced with increased opportunities for training, career development and promotion. Additionally, share options are awarded to employees as a mechanism for attracting and retaining members of staff.
The Company is engaged in several longer-term risk-sharing strategic alliances in relation to the development of certain assets. Each alliance is managed through a Joint Steering Committee, with regular meetings to ensure strategies align, objectives are clear, and issues are quickly resolved. C4XD invests in both Outsourcing and Alliance Management, ensuring we identify the right partners and build strong relationships as we continue to seek further, value-adding collaborations.
The Company has policies and procedures in place to ensure compliance with health, safety and environmental legislation. Additionally, C4XD has a Health and Safety Committee who actively liaise with our laboratory and building managers to ensure learnings are shared and standards are optimised. The Company takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board has overall responsibility for the Group’s system of internal controls, including reviewing the effectiveness of these controls and the processes in place for risk management. These processes and procedures are designed to manage rather than eliminate risk and can therefore only provide a reasonable and not an absolute assurance against material misstatements or losses. Through the activities of the Audit Committee, chaired by Alex Stevenson, the effectiveness of these internal controls is reviewed annually. The Audit Committee also ensures that the financial performance of the Group is properly measured and reported on having due regard to the interests of Shareholders. Annual budgets and rolling forecasts are reviewed and approved by the Board, and the Directors receive monthly management accounts and regular management reports which enable them to scrutinise Group and management performance against agreed objectives.
The Executive Directors have a close involvement with all day-to-day operations and meet with staff on a regular basis to identify and review business risks, the controls needed to minimise those risks and the effectiveness of controls in place. Business risks are monitored and updated on a regular basis.
The Group maintains appropriate insurance cover; the insured values and type of cover are comprehensively reviewed on a periodic basis. Additionally, the Company has written operational, accounting and employment policies in place.
A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 8 and 14 of the Group’s 2017 Annual Report.
5. Maintain the Board as a well-functioning, balanced team led by the Chair
C4XD’s Board comprises three Executive Directors, three Non-Executive Directors and the Non-Executive Chairman, reflecting a blend of different experience and backgrounds. The Board considers that two Non-Executive Directors bring an independent judgement to bear, notwithstanding the varying lengths of service.
The Board does not consider Alex Stevenson to be independent: he is a director of Aquarius, and holds shares (8%) in Aquarius Equity Holdings Ltd. The Aquarius IV Fund LLP remain a major shareholder with C4XD. However, the Board believe that the contribution of Alex is in the best interests of the Company and all of its shareholders.
Non-Executive Directors receive their fees in the form of a basic cash fee and do not receive any pension payments or other benefits. However, they do participate in the share option scheme at the discretion of the Remuneration Committee. These share options vest over three years and are not subject to performance conditions. The option grants concerned are not deemed to be significant, either for any individual Non-Executive Director or in aggregate. The current remuneration structure for the Board’s Non-Executive Directors is deemed to be proportionate and was subject to a shareholder consultation process prior to its implementation.
All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and will continue to seek re-election at least once every three years.
The Board is responsible to the shareholders for the proper management of the Group and meets regularly to: set the overall direction and strategy; review scientific, operational and financial performance; consider risk management and the framework of internal controls; and advise on management appointments. The Board has a formal schedule of matters reserved to it and is supported by the Audit, Remuneration and Nomination Committee.
To enable the Board to discharge its duties, all Directors receive appropriate and timely information; briefing papers are distributed to all Directors in advance of Board meetings, supplemented by any information specifically requested by the Directors. Minutes of Board and Committee meetings are circulated to all Board members. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that the Board procedures are followed, with full compliance with applicable rules and regulations.
A summary of Board meetings held in the previous year, and Directors’ attendance records, is set out on page 12 in the Group’s 2017 Annual report.
6. Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities
The Board considers that all the Directors have suitable competence and calibre to add strength and objectivity to the Company’s activities, and bring considerable experience in scientific, operational and financial management within the Pharmaceutical and Biotechnology sector.
Directors’ biographies are available on the Board section of the Company website and are set out on pages 10-11 of the Group’s 2017 Annual Report, though changes to the Board have been made since the report was published.
The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group. A new Non-Executive Chairman and Non-Executive Director have been recently appointed to ensure the Board has the right composition to maintain positive momentum in driving the Company vision.
The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational environment and to the Directors’ responsibilities as members of the Board. In addition, procedures are in place to enable the Directors to obtain independent professional advice in the furtherance of their duties, if necessary, at the Company's expense.
The Nomination Committee, chaired by Alex Stevenson, oversees the process and will identify and nominate candidates, for the approval of the Board, to fill Board vacancies as and when they arise. Where new Board appointments are considered, the search for candidates is conducted and appointments are made on merit against objective criteria and with due regard for the benefits of diversity on the Board, including gender. The Nomination Committee also considers succession planning. The Nomination Committee meets at least twice a year.
On appointment, each Director takes part in an induction programme in which they receive comprehensive information about the Group, the role of the Board and the matters reserved for its decision, the terms of reference and membership of the Board and Committees and the powers delegated to those Committees, the Group’s corporate governance practices and procedures including the powers reserved to the Group’s most senior executives, and the latest financial information about the Group. Throughout their period in office the Directors are updated on the Group’s business, the competitive environment in which it operates, corporate social responsibility matters and other changes affecting the Group and the industry it operates in as a whole.
The Remuneration Committee, chaired by Natalie Walter, reviews the performance of the Executive Directors and determines their terms and conditions of service, including their remuneration and the grant of options, having due regard to the interests of Shareholders. The Remuneration Committee meets at least twice a year.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board has a process for evaluation of its own performance, that of its committees and individual Directors, including the Chairman. In previous years, this evaluation has been based on a performance evaluation questionnaire completed by each Director. Additionally, annual appraisals of the Executive Directors have taken place, most recently in February 2018. The appraisal of the Chief Executive Officer is performed by the Chairman and the appraisal of the other Executive Directors is performed by the Chief Executive Officer.
The performance appraisals assess how effectively the Executive Directors are leading the organisation to deliver results in the short- and longer-term, considering their strategic planning, people management and relationships, financial management, and conduct of business. The appraisal will conclude by summarising the goals for the coming year, job-related strengths and plans to strengthen performance.
All Directors are subject to election by the shareholders at the next general meeting following appointment to the Board and to re-election at intervals of not more than three years. They undergo a performance evaluation before being proposed for re-election to ensure that their performance is and continues to be effective, that where appropriate they maintain their independence and that they are demonstrating continued commitment to the role.
Following the recent appointment of a new Chairman and Non-Executive Director, the evaluation process of the Board performance as a whole has been reviewed and will be more structured and rigorous going forward. The Board review will still involve the completion of a questionnaire, aiming to review the following criteria:
- The Board’s ability to evaluate the operating environment, think strategically and adapt as necessary
- The skills and capabilities of the Board needed to meet current and future business need
- How well the Board performs its key roles and how successful it has been
- The Chairman’s leadership style and tone and their relationship with the Chief Executive
- The entrepreneurial leadership of the Executive Directors and effectiveness of the senior management teams
- Non-Executives’ contribution to strategy development
- Succession planning for key Board and senior management team members
- Address whether the Board provides effective support, scrutiny and challenge to the senior management teams, identifying any learning and development needs
- The extent to which the Board’s Committees are properly constituted, perform their delegated roles and report back clearly and fully to the Board
- The effectiveness of Board processes, including its accountability and decision making
- The frequency and length of meetings, and the level and quality of information the Board receives
- The processes surrounding risk management
- Compliance of the key governance documents with legal requirements and good practice
The Company Secretary will collate and consolidate the responses so that the Chairman can report back to the Board, highlighting significant improvements or deteriorations in any area. This will enable an open follow-up discussion resulting in actions being agreed for any areas requiring improvement.
The Non-Executive Directors will appraise the Chairman’s performance after consultation with the other Directors. The expectations of the Chairman are detailed in the Corporate Governance Section of the Annual report, and summarised in Section 9 below.
Succession planning is regarded by the Board as vitally important for the future success of the business. The Nomination Committee considers the balance of skills, knowledge and experience on the Board and makes recommendations for change where appropriate. The whole Board review the objective criteria against which potential candidates will be measured to ensure the Board composition remains diverse, appropriate and balanced.
Other senior appointments to the Executive and R&D Executive committees are made by the Chief Executive in discussion with the Chairman. Through regular reviews, the Company’s future business leaders can be identified, and personal development plans are put in place to harness their potential, and plan for job growth and career progression.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board seeks to maintain the highest standards of integrity in the conduct of the C4XD’s operations. An open culture is encouraged, with regular communication being delivered to staff regarding progress, and staff feedback being regularly sought. The Executive Committee regularly monitors the cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary.
Throughout the induction process, our employees learn about the history of the Company, the people, journey and our vision for the future. It is vital that everyone begins with a clear understanding of what makes C4XD, its culture and the key role everyone plays in driving its success and reputation. All employees are supported through their employment, with regular meetings with Managers, access to training, mentoring and development, and with regular feedback through our appraisal system. Both performance and behaviours contribute to their remuneration and reward package.
There is a clear expectation that the Board and senior management teams lead by example: they communicate regularly with staff through meetings and messages, and actively engage in team building and social events.
These values are captured in the Company handbook, and the policies and working practices adopted by all employees in the Company. The Board is committed to providing a safe working environment and has a clear and robust Health and Safety Policy. The Company also has a Whistleblowing Policy to allow staff to raise any concerns in confidence. Additionally, the Company has policies in Bioethics, Data Processing, Anti-corruption and Bribery, Dignity at Work, Equal Opportunities and Social Networking, which highlight the expected behaviours of staff.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
C4XD’s Corporate Governance Statement is set out on pages 12-14 of the Group’s 2017 Annual Report. The Group is controlled through its Board of Directors. The Board’s main roles are to provide overall strategy and direction for the Group and to ensure that the necessary resources are made available to enable those objectives to be met.
The Board has a schedule of matters reserved for its approval, including decisions on strategy and risk management, approval of budgets, acquisitions and disposals, major capital expenditure, legal and insurance issues, Board structure and the appointment of advisers. In some areas responsibility is delegated to Committees of the Board within clearly defined terms of reference. Once the strategic and financial objectives of the Group have been set by the Board, it is the role of the Chief Executive Officer to ensure that they are achieved through the day-to-day management of the Group’s business. The Non-executive Directors are responsible for bringing independent and objective judgment to Board decisions.
The division of responsibilities between the Chairman of the Board and the Chief Executive Officer is clearly defined. The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. They are responsible for organising the business of the Board, setting its agenda and ensuring its effectiveness through ensuring that no individual or group dominates the Board’s decision-making. The Chairman encourages all Board members to engage in Board meetings by drawing on their skills, experience, knowledge and, where appropriate, independence. The Chairman facilitates the effective contribution of Non-Executive Directors and constructive relations between Executive and Non-Executive Directors, ensures Directors receive accurate, timely and clear information, and facilitates effective communication with shareholders. The Chairman has overall responsibility for corporate governance matters in the Group and must set the highest standards of integrity.
The Chairman is a Non-Executive Director and has no involvement in the day-to-day business of the Group. The Chief Executive Officer has direct charge of the Group on a day-to-day basis and is accountable to the Board for the financial and operational performance of the Group.
The Company Secretary is responsible for ensuring that Board procedures are followed, with full compliance with applicable rules and regulations.
The Board has established an Audit Committee, Remuneration Committee and Nominations Committee with formally delegated duties and responsibilities:
Audit Committee – chaired by Alex Stevenson
The Audit Committee (Alex Stevenson and Natalie Walter) normally meets twice a year and has responsibility for planning and reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors. The Committee approves the external auditor’s fees and ensures the auditor’s independence as well as focusing on compliance with legal requirements and accounting standards. The ultimate responsibility for reviewing and approving the annual financial statements and interim statements remains with the Board.
The Committee is also responsible for monitoring the quality of internal controls and ensuring that effective risk management systems are in place.
A summary of the work undertaken by the Audit Committee is set out on page 13 of the Group’s 2017 Annual Report.
Remuneration Committee – chaired by Natalie Walter
The Remuneration Committee (Natalie Walter and Harry Finch) meets twice a year and has responsibility for making recommendations to the Board on the remuneration packages of the Executive Directors.
A summary of the work undertaken by the Remuneration Committee is set out on page 14 of the Group’s 2017 Annual Report and the Directors’ Remuneration Report is detailed on pages 15 to 17.
Nominations Committee – chaired by Alex Stevenson
The Nominations Committee (Alex Stevenson and Eva-Lotta Allan), which meets as required but typically twice a year, has responsibility for reviewing the size and composition of the Board, and for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise.
A summary of the work undertaken by the Nominations Committee is set out on page 14 of the Group’s 2017 Annual Report.
Recent changes have been made to the Board at C4XD to ensure the governance framework is in line with the Company’s plans for growth in the longer term. No additional plans have been made to further evolve the framework at this time.
10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Company aims to communicate regularly with its various stakeholder groups, ensuring that content is clear, fair and accurate. The Company encourages two-way communication with both its institutional and private investors and responds quickly to all queries received. The Chairman talks regularly with the Group’s major shareholders and ensures that their views are communicated fully to the Board.
The Company website is regularly updated with announcements or details of presentations and upcoming events.
The Group’s Annual Report, financial reports and Notices of General Meetings of the Company can all be found on the Investors section of the website. The results of voting on all resolutions in future general meetings will be posted to the Company website, including any actions to be taken where a significant proportion of votes were cast against a resolution.