Annual Report and Accounts 2006 - Optos

Corporate Governance
continued
During the year, the audit committee developed a formal ‘policy on the use of
external auditors for non-audit services’ which aims to monitor the non-audit
services provided to the Group by its external auditors. This policy should ensure
that non-audit work is only undertaken by the external auditors when they are
most suited to undertake it. Any non-audit work involving expenditure of more
than $50,000 must be assigned to tender. The amounts paid to the external
auditors during the year for audit and other services are set out in Note 4 to the
Financial Statements on page 48. The Board has considered the amount of
non-audit work carried out by Ernst & Young LLP and is satisfied that this work does
not compromise the independence of Ernst & Young LLP as auditors of the Group.
In fulfilling its role, the audit committee met on two occasions since admission to
the Official List and to trading on the main market of the London Stock Exchange.
Other Directors and certain individuals were invited to attend when required and
when relevant to the audit committee’s proceedings. At appropriate times,
Ernst & Young LLP, the Company’s external auditors, attended the audit committee
meetings, notably to present and discuss the results of the 2005 year-end audit and
the review of the Company’s interim results for the period ended 31 March 2006.
During the financial year ended 30 September 2006, the business discussed and
considered by the audit committee included:
• monitoring the Company’s adoption of International Financial Reporting
Standards (“IFRS”);
• review of the interim review process and findings;
• scope of interim financials reporting;
• review of financials and Notes to the accounts;
• review of audit committee terms of reference;
• review of external and internal audit requirements and process;
• asset management;
• transfer pricing;
• research and development;
• materiality;
• fees for audit and non-audit purposes;
• risk management.
Remuneration Committee
The remuneration committee is chaired by Dr John Padfield who, as Chairman of
the Board, fulfilled the independence criteria as set out in the Combined Code at
the time of his appointment. Given the Company’s size and recent public listing,
the Board considers it essential that the Chairman of the Board is instrumental in
setting remuneration policy. The Board, excluding the Chairman, determines the
remuneration of the Chairman and the terms of reference of his appointment.
The other members of the remuneration committee are Anne Glover, Patrick Paul
and Barry Rose. It will normally meet not less than twice a year. The remuneration
committee is composed, exclusively, of non-executive Directors.
The remuneration committee has responsibility for: making recommendations to
the Board on the Company’s policy on the remuneration of executive Directors
and certain members of the senior management team; the implementation
and operation of share incentive schemes, and, for the determination, within
agreed terms of reference, of specific remuneration packages for each of the
executive Directors, including pension rights, contracts of employment and any
compensation payments.
In fulfilling its role, the remuneration committee met on three occasions since
admission to the Official List and to trading on the main market of the
London Stock Exchange. In accordance with the remuneration committee’s
terms of reference, the Chief Executive Officer was invited to and participated
in some of its discussions. No Director has any part in any discussion about
his or her remuneration.
Nomination Committee
The nomination committee is chaired by Dr John Padfield and its other members
are Anne Glover, Dr David Guyer, Patrick Paul and Barry Rose. All members of the
nomination committee are non-executive Directors.
The nomination committee considers the composition of the Board,
retirements and appointments of additional and replacement Directors,
and makes appropriate recommendations having regard to the overall balance
and structure of the Board. The nomination committee regularly reviews the
balance and structure of the Board and where appropriate recommends changes
to the Board. It is responsible for nominating candidates for appointment to
the Board having regard to the overall skills and composition of the Board.
This procedure was carried out in relation to the appointments referred to under
the heading ‘Board Appointments and Resignations’ below. The nomination
committee has used external search consultants to identify suitably qualified
candidates for the non-executive positions appointed during the year.
In fulfilling its role, the nomination committee met on one occasion since admission
to the Official List and to trading on the main market of the London Stock Exchange.
Senior Independent Director
The Combined Code recommends that the Board should appoint one of its
independent non-executive Directors to be the Senior Independent Director
(“SID”). The SID is available to shareholders if they have concerns that have not
been resolved through the normal channels, or for which contact through the
normal channels is inappropriate. In addition, the SID must develop a balanced
understanding of the concerns of shareholders by attending sufficient of the
regular meetings between management and the major shareholders.
Barry Rose is the SID for the Company. A meeting in the 2006 financial year of
the Company’s non-executive Directors under the leadership of the SID without
the presence of the Chairman or executive Directors did not take place. The
SID determined that changes to strengthen the balance and structure of the
Board leading up to and following the Company’s initial public offering did not
provide sufficient time or constitute sufficient basis to conduct a fair and accurate
performance evaluation of the Chairman. Such a meeting will take place in the
2007 financial year.
Chairman and Chief Executive Officer
No one individual has unfettered powers of decision. The offices of Chairman
and Chief Executive Officer are held separately. The Chairman is responsible for
the leadership of the Board and the Chief Executive Officer has the executive
responsibility for the running of the business. There is clear division of
responsibility between the Chairman and the Chief Executive Officer which
has been agreed and is regularly reviewed by the Board.
Board Appointments and Resignations
Dr John Padfield joined the Company as non-executive Director on 17 November
2005 and was appointed Chairman of the Board on 1 January 2006. The Board is
satisfied that Dr Padfield remains free from any relationship with the executive
management of the Company which could materially interfere with the exercise
of his independent judgement. Dr Padfield fulfilled the criteria for independence
as set out in the Combined Code at the time of his appointment as Chairman.
The Chairman is highly respected for his wealth of experience working in the
healthcare sector and for his impartial and professional approach to his role.
Dr Padfield has been an executive Director and non-executive Director of a
number of public and private companies in Europe, the United States and Japan,
and is currently Chairman of NextPharma Technologies Holdings Ltd, Cambridge
Laboratories Ltd and The WellChild Trust.
Optos plc Annual Report & Accounts 2006 21