The Board has adopted the Quoted Companies Alliance (‘QCA’) Corporate Governance Code in line with the London Stock Exchange’s recent changes to the AIM rules requiring all AIM listed Companies to comply with a recognised corporate governance code. Set out below is how we currently comply with the key principles set out in the QCA code. Further updates will be published at least annually in line with our full year reporting calendar.
1. Principle: Establish a strategy and business model which promotes long-term value for shareholders
Elektron is a global technology group that conceives, designs and markets products and services that connect, monitor and control.
The Group innovates for growth by continually investing in new products capable of substantial growth by using operational cash flow from Bulgin.
The strategy and business model is more fully explained in the Annual Report.
2. Principle: Seek to understand and meet shareholder needs and expectations
The Company is committed to engaging with its shareholders, and maintaining constructive communication to ensure its strategy, business model and performance are clearly understood. We actively seek dialogue with the market by seeking to convey to analysts and investors our plans for the business and understanding what they think about us. We do so via investor roadshows, hosting capital market days and through regular reporting.
The AGM is the main forum for dialogue with private shareholders and the Board. The Notice of the meeting is sent to shareholders at least 21 days prior to the meeting. The Board is available for discussion and to answer questions at the AGM.
Results of the AGM are always announced promptly after the conclusion of the AGM. For future AGMs, for each vote, the number of proxy votes received for, against and withheld will be announced at the meeting and will be subsequently published on the Company’s website.
The Board seeks to build relationships with institutional shareholders. The CEO and CFO make presentations to shareholders and analysts immediately following the publication of its half year and full year results. In addition in July 2018 the Company hosted a capital markets day inviting both existing and potential new shareholders.
The Board as a whole reviews and approves the material to be used in the half year and full year presentations to shareholders and it is also briefed on the feedback from shareholders by the CEO and CFO.
Both the Chairman and Non-Executive Directors are available to meet major shareholders if required.
3. Principle: Take into account wider stakeholder and social responsibilities and their implications for long-term success
Aside from its shareholders, customers and suppliers, the Company believes its most important stakeholder group is its employees.
Recognition is given to individual employees’ needs and requirements and employees are encouraged to apply their skills, knowledge and energy. The Group recognises the importance of its employees and their training. The Group recognises that the needs of the business will continue to change. As such, training is and will be offered to enable employees to enhance their skill base to assist the business in meeting future opportunities and challenges.
The Group continues to keep its staff informed on matters affecting them as employees and the various factors affecting the performance of the Group. This is achieved through formal and informal meetings. At each of the main sites, an employee forum has been established.
During the last 12 months the Executive have hosted a series of informal meetings with groups of employees as part of maintaining and encouraging an open dialogue on any matter impacting the workplace.
The Group is committed to equality for all, regardless of gender, race, age, disability, religion or sexual orientation, where it is reasonable and practicable within existing legislation
4. Principle: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Company sets out in its Annual Report, the steps taken to ensure that effective risk management is embedded within the Company culture. The Board has identified the principal business and financial risks and has implemented control procedures.
Internal controls and audit
The Company has an established framework of internal financial controls which is subject to both review by the Directors and the Audit committee in light of the ongoing risks faced by the Company.
The Board acknowledges its responsibility for reviewing the effectiveness of the systems that are in place to manage risk. However any such system cannot provide absolute assurance against misstatement or loss. The Board considers that the internal controls that are in place are appropriate for the size and complexity of the Group. The key elements of the Group’s internal control environment include:
- Close involvement of the Executive Directors in the day to day running of the Group
- Clear lines of authority and reporting established
- Centralised control and decision making over key areas such as capital expenditure and financing
- A suite of daily and monthly reports focussing on the key performance and risk areas. Such reports include detailed annual budget setting with monthly monitoring. Daily reporting including reports on sales, orders and cash balances compared with budget.
Given the current size of the Group and the close involvement of the Executive directors in the day to day operations the Board believes that an internal audit function is not justified, although this is kept under regular review.
The Group undertakes regular updates and reviews of its business processes, co-ordinated by the Group quality function to ensure that not only addresses basic financial controls addressed but also non-financial controls are also in place too over areas such as health and safety, environmental issues and adherence to law and regulations.
The Group maintains a risk register which not only highlights risks relevant to its businesses but also details the actions being taken to mitigate these risks. These registers are reviewed regularly at operating board level and are subject scrutiny by the Board at least twice a year.
5. Principle: Maintain the board as a well-functioning, balanced team led by the chair
The Board currently comprises the Executive Chairman, Chief Executive Officer, Chief Financial Officer and two Non-Executive Directors. Biographical details can be found here. These illustrate the level and range of business experience which the Board believes enables it to provide clear and effective leadership of the Group.
The Chairman has the responsibility for making sure that the Board agenda concentrates on the key strategic issues together with both operational and financial issues.
After careful review the Board considers that the Non-Executive Directors bring independent judgement and robust challenge to the Board’s discussion, although Giovanni Ciuccio is nominated by and currently employed within the group of the Company’s largest shareholder, D&A Income Limited.
As the Group revenue and operations grow the Board may consider adding an additional independent Non-Executive Director. However, for now, the Board considers its composition appropriate given the size of its businesses, its revenues and profitability.
The Board meets at least four times a year, and in 2017/18 met six times, with all directors attending.
The Executive directors are required to devote substantially all of their working time to the Company. Non- Executive Directives are required to commit at least 10 days a year or more should the need arise.
The Company has procedures in place to monitor and manage any conflicts of interest. The Board is aware of the backgrounds and other interests of the Directors and changes to these are reported and where appropriate agreed with the rest of the Board.
The Board is supported by an Audit Committee and Remuneration Committee of which both the non-executive directors are members. Peter Welch’s financial and business experience alongside Giovanni Ciuccio’s accounting, financial and investment expertise provide the necessary level and combination of skills and knowledge to each of those committees.
6. Principle: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Company’s Annual Report includes biographies of all the Directors, including the Non-Executive Directors, alongside the relevant experience and skills that they bring to the Company. The Company provides training or access to training for all Directors to ensure their skills are kept up to date.
The Board is satisfied that, between all of the Directors, it has an effective and appropriate mix of skills and experience for the size and nature of the Group’s businesses.
All Directors are put forward for re-election at each AGM.
All Directors, the Audit Committee and Remuneration Committee are able to take independent professional advice in the furtherance of their duties, if necessary and in addition have access to advice and the services of the Chief Financial officer and Company Secretary.
In the past year the Audit Committee members received external training on the latest developments on being an effective committee. In addition the remuneration committee sought advice from remuneration consultants in respect of Executive directors remuneration packages.
Currently the office of Company Secretary is held by the Chief Financial Officer who, assisted by the Company’s corporate paralegal team is able to co-ordinating meetings, distribute information to the Board, provide access to advisers for the Board should the need arise and manage shareholder enquires.
7. Principle: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Evaluation of the Board has been historically been carried out in an informal manner. From 2018 the Board will formally review and consider the performance of each director at or around the time of the publication of the Company’s Annual Report.
8. Principle: Promote a corporate culture that is based on ethical values and behaviours
The Board believes that the promotion of a corporate culture based on sound ethical values and behaviours is essential to creating a workplace environment that allows people to flourish and this will contribute to enhancing shareholder value.
The company maintains, and reviews annually, an employee handbook that includes clear guidance as to what is expected of every employee.
9. Principle: Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Board meets at least quarterly. Prior to the start of the financial year a schedule of meeting dates is agreed to ensure an appropriate spread of meetings throughout the year. This may be supplemented with additional meetings should the need arise.
There is a clear division of responsibility at the head of the Company. The Chairman is responsible for running the business of the Board and for ensuring appropriate strategic focus and direction and also in his capacity as an Executive the development of the strategies of Checkit and Elektron Eye Technology.
The Chief Executive Officer is specifically responsible for proposing the strategic focus of Bulgin to the Board, implementing it once it has been approved and overseeing it through the Executive Team.
He also acts as CEO of Checkit and Elektron Eye Technology and working with the Chairman manages the implementation of the strategy for these businesses through the Executive team.
The Board and its Committees receive appropriate and timely information, with a formal agenda and associated papers always circulated a few days in advance of the meeting.
The Board is responsible for the long term success of the Company and has a schedule of matters reserved for it, including:
- Allocation of resources
- Structure and sources of capital and funding,
- Financial reporting,
- Internal controls and compliance including monitoring of risk,
- Corporate transactions and expenditure proposals beyond any delegated authority to the Executive Directors,
- Board membership,
- Corporate Governance,
- Litigation, and
- Directors’ indemnification and insurance.
The Board receives reports from the Executive Directors, committee chairs and function heads ensuring matters are considered fully and enabling Directors to discharge their duties properly. In addition senior managers are invited to attend meetings to update on business performance as appropriate.
The Board has two sub-committees as follows:
- Audit Committee: The Audit Committee overseas the integrity of the financial results of the company. It engages and works with external auditors and Group management. It reviews and reports to the Board on significant issues includingestimates and judgements made in connection with preparation of the Group financial statements. The Audit Committee also has a key role in the oversight of the effectiveness of risk management. Full details of the report of the Audit Committee are set out in the Annual Report. The Committee met three times during 2017/18.
- Remuneration Committee: This Committee ensures that the Group’s Executive remuneration policy is aligned to the implementation of the Company strategy and shareholder interests, after taking into account the views of shareholders. The Committee seeks to establish a policy that is designed to motivate retain and attract Executives of the high calibre necessary for a business of Elektron’s complexity, international scope and ambitions. Full details of the Report of the Remuneration Committee can be found in the Annual Report
Given the current size and complexity of the Group the Board does not currently consider that a nominations committee is required and that the Board as a whole leads the process for Board appointments and succession planning for key senior executives, whilst reserving its right to establish a committee for any specific appointment process.
10. Principle: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Company principally communicates with stakeholders through the Annual Report, half and full year announcements and the AGM. For future AGMs, for each vote, the number of proxy votes received for, against and withheld will be announced at the meeting and will be subsequently published on the Company’s website.
One to one meetings are held with large existing or potential new shareholders. The Company engages its broker and investor relations advisers to assist in shareholder interaction and feedback and the Board receives regular updates on the views of shareholders from these advisers.
The Company generally holds briefing meetings for employees post the half and full year result announcements.