Annual Report and Accounts 2006 - Optos

Corporate Governance
The Combined Code
The principal duty of the board of directors (the “Board”) and management of
the Company is to ensure that the Company is well-managed in the interests
of its shareholders. Following the admission of the Company to the Official List
of the Financial Services Authority (the “Official List”) and to trading on the
London Stock Exchange plc’s market for listed securities in February 2006,
the Company raised its compliance levels in accordance with the Combined
Code on Corporate Governance published in July 2003 (the “Combined Code”).
The Board is committed to ensuring that high standards of corporate governance
are maintained and that the Company manages its business and affairs to the
extent they are deemed appropriate, the principles and provisions set out in
the Combined Code. The Board is also committed to improve and strengthen
its corporate governance practices to assure shareholders that the Company
operates in their best interests.
The statement below describes how the directors of the Company (“the Directors”)
have applied the principles of corporate governance and the extent to which the
principles and provisions of the Combined Code have been complied with since
the Company’s admission to the Official List in February 2006.
Statement of Compliance
The Company, since its admission to the Official List, has complied with the
provisions set out in the Combined Code except to the extent set out below,
for which an explanation for non-compliance is provided.
The Board
The Combined Code provides that the board of directors of a UK public company
should include a balance of executive and non-executive directors, with
independent non-executive directors, excluding the Chairman, comprising at
least one half of the board. The Company does not have sufficient independent
non-executive directors within the meaning of the Combined Code, but the
Combined Code does provide that smaller companies (which would include
the Company) should have at least two independent non-executive directors,
excluding the Chairman. Accordingly, the Company is compliant within the
meaning and spirit of this part of the Combined Code. The Board is committed
to reviewing its membership on a regular basis.
The Board currently comprises the Chairman (who is non-executive), four executive
Directors, two ‘independent’ non-executive Directors (within the meaning of the
Combined Code) and two other non-executive Directors. The Board considers all
non-executive Directors to be independent in character and judgement. Under the
provisions of the Combined Code, relative to non-executive director independence,
Barry Rose and Dr David Guyer are deemed independent. Patrick Paul and
Anne Glover are presumed not independent because they have both served
on the Board for more than nine years since first elected and have, or have had,
within the last three years, a material business relationship with the Company either
directly, or as a partner, shareholder, Director or senior employee of a body that has
such a relationship with the Company.
The Board considers all Directors bring independent judgement to bear
on matters of strategy, resources, performance and standards of conduct.
The Chairman ensures that Board discussions are conducted taking all views
into account so that no one individual Director or small group of Directors
dominates the proceedings of the Board.
The Board meets on a regular basis to discuss and agree matters which are
specifically reserved to it for review and decision. Frequent contact between
designated Board meeting dates is carried out by the Directors as and when
required to discuss and agree matters arising relative to furthering the business
of the Company.
Functions of the Board
The principal functions of the Board are:
• review and approval of the financial objectives, major business strategies and
plans, and major corporate actions;
• review of the adequacy of the Company’s systems for compliance with all
applicable laws and regulations, for safeguarding the Company’s assets and for
managing the major risks it faces;
• approval and monitoring progress of the annual plan and budget, including
proposed capital expenditure;
• raising new capital and confirming major financing;
• approval of annual and interim accounts;
• establishment and operation of share option and long-term incentive schemes;
• selection and evaluation of the Chairman and Chief Executive Officer;
• determining compensation for the senior management team;
• periodic review of management succession plans; and,
• selection and recommendation to shareholders for election of appropriate
candidates for service on the Board.
The Board delegates to the senior management team decisions; including:
• implementation of the strategies and policies of the Company and the
subsidiaries (the “Group”) as determined by the Board;
• monitoring the operating and financial results against budgets; and,
• managing and controlling the allocation of capital, human and technical resources.
The Board regularly receives detailed financial and operational information in
order for it to monitor the performance of key areas of the business.
Committees of the Board
The Combined Code requires that all the members of the audit committee and
remuneration committee and a majority of the members of the nomination
committee should be independent non-executive directors. Due to its relative
small size, the Company is not compliant with these requirements, as it does not
have sufficient independent non-executive Directors within the meaning of the
Combined Code.
No-one other than the chairman of the relevant committee and the members of
the relevant committee are entitled to be present at meetings of either the audit,
remuneration or nomination committee meetings unless specifically invited to attend.
Since the admission to the Official List, the Directors have adopted updated terms
of reference for each of the audit, remuneration and nomination committees.
The written terms of reference for the committees can be accessed and
downloaded from the Company’s website and are also available on request.
Audit Committee
The audit committee is appointed by the Board and has responsibility to assist
the Board in its oversight responsibilities for the planning and review of the
Group’s annual report and accounts and half-yearly reports, and the involvement
of the Group’s auditors in that process. The audit committee is chaired by
Barry Rose and its other members are Anne Glover, Dr John Padfield and
Patrick Paul. It will normally meet not less than three times a year. The audit
committee is comprised exclusively of non-executive Directors.
The audit committee focuses, in particular, on compliance with legal requirements,
accounting standards and the Listing Rules, and on ensuring that an effective system
of internal financial control is maintained. The audit committee also maintains
the responsibility for recommending the appointment, terms of reference and
remuneration of the Company’s external auditors, reviewing the independence and
effectiveness of the external auditors and establishing the policy on the use of the
external auditors on non-audit services. The ultimate responsibility for reviewing
and approving the annual report and accounts and the half-yearly reports remains
with the Board after receiving a recommendation from the audit committee.
The Chairman of the audit committee reports the outcome of meetings to the
Board and the Board receives minutes of all audit committee meetings.
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Optos plc Annual Report & Accounts 2006