The Directors acknowledge the importance of the principles set out in the Corporate Governance Code. The Directors have adopted the Corporate Governance Code which has become a widely recognised benchmark for corporate governance of small and mid-sized companies, particularly AIM companies.
The Board comprises five Directors, two of whom are executive Directors and three of whom are Non-Executive Directors, reflecting a blend of different experience and backgrounds.
The Board meets at least eight times a year to review, formulate and approve the Company’s strategy, budgets and corporate actions and oversee the Company’s progress towards its goals. It has an established Audit and Risk Committee, Remuneration Committee and Nomination Committee with formally delegated duties and responsibilities and with written terms of reference. In February 2020, the Scientific Advisory Board was established to help the Company support product development for customers developing antivirals, vaccines, and respiratory therapeutics. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises.
Board and committee independence
The Board consists of the Executive Chairman, one Executive Director, and three Non-Executive Directors. The Company regards two of the Non-Executive Directors as “independent Non-Executive Director” within the meaning of the UK Corporate Governance Code. The Board has determined that Mark Warne and Michael Meade are independent in character and judgement and that there are no relationships or circumstances which could materially affect or interfere with the exercise of his independent judgement. The Board believes this combination of Executive and Non-Executive Directors allows it to exercise objectivity in decision making and proper control of the Group’s business and that this composition is appropriate in view of the size and requirements of the Group’s business. However, the Board will monitor the composition and balance of the Board.
Share dealing policy
The Company has adopted a share dealing policy regulating trading and confidentiality of inside information for the Directors and other persons discharging managerial responsibilities (and their persons closely associated) which contains provisions appropriate for a company whose shares are admitted to trading on AIM and Euronext Growth (particularly relating to dealing during closed periods which will be in line with the Market Abuse Regulation). The Company will take all reasonable steps to ensure compliance by the Directors and any relevant employees with the terms of that share dealing policy.
Directors’ Contract Overview
Open Orphan is keen to recruit and retain high calibre Directors who are actively involved with the Group, beyond regular Board Meetings.
- Cathal Friel is Executive Chairman at Open Orphan. As Chair, he also leads the Board and is responsible for ensuring its overall effectiveness. His remuneration consists of a gross annual salary of €160,000. Subject to performance, he is eligible for a bonus of up to 25% of basic salary, at the discretion of the Board. His agreement may be terminated by either party serving a minimum five months’ written notice.
- Leo Toole is Chief Financial Officer at Open Orphan and is responsible for the financial governance of the Group. His remuneration consists of a gross annual salary of €160,000, a 10% employer’s pension contribution and standard insurance benefits (including Health Insurance, Income Protection and Death in Service Protection). His agreement may be terminated by either party serving a minimum four months’ written notice. If his role is made redundant due to change of control of the Group (be that a trade sale, merger, reverse merger, reorganization, relisting, etc), he will receive a payment equivalent to 1 year’s gross salary.
- Michael Meade is Senior Independent Non-Executive Director at Open Orphan and is Chair of the Audit and Risk Committee and the Nomination Committee. As part of Michael’s agreement, he is paid an annual fee of £60,000 for provision of services for 24 business days per annum. The agreement may be terminated by either party serving a minimum three months’ written notice.
- Brendan Buckley is a Non-Executive Director at Open Orphan and is Chair of the Remuneration Committee. As part of Brendan’s agreement, he is paid an annual fee of £45,000 for provision of services for 24 business days per annum. Brendan is also a member of the Audit and Risk Committee and the Scientific Advisory Board. The agreement may be terminated by either party serving a minimum three months’ written notice.
- Mark Warne is an independent Non-Executive Director at Open Orphan. As part of Mark’s agreement, he is paid a gross annual fee of £30,000 for provision of services for 24 business days per annum. Mark is a member of the Audit and Risk Committee, the Nomination Committee and the Remuneration Committee. The agreement may be terminated by either party serving a minimum three months’ written notice.
Salaries are reviewed annually by the Remuneration Committee, unless a change in responsibility requires an interim review.
Compliance with the Corporate Governance code
The Company has published on its website details of how it complies with the Corporate Governance Code and where it departs from the Corporate Governance Code and explanations of the reasons for doing so. This information is also set out below. The Company will review this information annually in accordance with the requirements of Rule 26 of the AIM Rules and Rule 26 of the Euronext Growth Rules.
The following summary sets out how the Company applies the key governance principles defined in the Corporate Governance Code.
The Board recognises the importance of sound corporate governance and applies the Corporate Governance Code, which the Directors believe is the most appropriate recognised governance code for a company with shares admitted to trading on AIM and Euronext Growth. It is believed that the Corporate Governance Code provides the Company with the framework to help ensure that a strong level of governance is maintained, enabling the Company to embed the governance culture that exists within the organisation as part of building a successful and sustainable business for all of its stakeholders.
The Corporate Governance Code has ten principles of corporate governance that the Company has committed to apply within the foundations of the business. These principles are:
- Establish a strategy and business model which promote long-term value for shareholders;
- Seek to understand and meet shareholder needs and expectations;
- Take into account wider stakeholder and social responsibilities and their implications for long term success;
- Embed effective risk management, considering both opportunities and threats, throughout the organisation;
- Maintain the board as a well-functioning, balanced team led by the Chairman;
- Ensure that between them the Directors have the necessary up to date experience, skills and capabilities;
- Evaluate board performance based on clear and relevant objectives, seeking continuous improvement;
- Promote a corporate culture that is based on ethical values and behaviours;
- Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board; and
- Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
The Corporate Governance Code requires the Company to apply the ten principles and publish certain disclosures in its annual report and also on its website. The Company’s disclosures are as follows:
Establish a strategy and business model which promote long-term value for Shareholders
The Company has successfully built a drug development consulting capability in six countries in Europe. While this represents the operating capability of the business, its clients are global corporations. Open Orphan is a knowledge-based business and a key challenge is the attraction, development and retention of high calibre knowledge resources to the business. Currently the Company is succeeding in developing its resource base through offering staff challenging development programs to work on and structuring attractive reward systems. Open Orphan has developed a track record and deep expertise in the rare disease arena and plans to leverage this expertise to deliver further growth and give the business a premium positioning.
Seek to understand and meet shareholder needs and expectations
The Company’s annual report and notice of AGM are sent to all shareholders and can be downloaded from the Company’s website. Copies of these documents and the Interim Report and other investor presentations are also available on the Company’s website.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Directors’ vision for the business is to become the drug development partner of choice for micropharmaceutical and biotechnology clients. The business seeks to grow both through acquisition and organically. Delivery of the Group’s business model is underpinned by its core values of:
- Integrity and being consistently open, honest, ethical and genuine.
- Passion and leadership with a commitment to engage and inspire others.
- Courage to be entrepreneurial enough to reach beyond boundaries.
- Acceptance and delegation of responsibility.
- Determination to deliver a proactive customer service
The Company values the feedback it receives from its stakeholders and it takes every opportunity to ensure that where possible the wishes of stakeholders are considered. The executive team is a small and dedicated team who work hard to ensure that values of the Company are an integral part of the business. The Board works closely with the executive team with clear and open communication both within and outside of the Board room. The Company has an open-door policy from the executive team down, where employees’ opinions and suggestions are valued and listened to.
Embed effective risk management, considering both opportunities and threats, throughout the organization
The Company’s Risk Management Policy is designed to provide the framework to identify, assess, monitor and manage the risks associated with the Company’s business. The principal risks and uncertainties facing the Group are described below and are set out in the Company’s latest annual report. The Board adopts practices designed to identify significant areas of business risk and to effectively manage those risks in accordance with the Company’s risk profile. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board.
The risks involved and the specific uncertainties for the Company continue to be regularly monitored and the full Board of the Company formally reviews such risks at regular Board meetings. All proposals reviewed by the Board include a consideration of the issues and risks of the proposal.
The potential exposures associated with running the Company are managed by the Executive Chairman and executive management who have significant broad-ranging industry experience, work together as a team and regularly share information on current activities.
Where necessary, the Board draws on the expertise of appropriate external consultants to assist in dealing with or mitigating risk.
The Company’s main areas of risk include:
- Market risk – changes in economic conditions, prices and investor sentiment;
- Political risk – changes in the political situation and regulatory environment in countries in which the Company operates; and
- Operational risk – associated with continuous disclosure obligations, internal processes and systems.
Additionally, it is the responsibility of the Board to assess the adequacy of the Company’s internal control systems and that its financial affairs comply with applicable laws and regulations and professional practices. Regular consideration is given to all these matters by the Board.
The Company has in place an internal control framework to assist the Board in identifying, assessing, monitoring and managing risk.
The framework can be described under the following headings:
- Continuous Disclosure/Financial Reporting;
- Operations Review;
- Investment Appraisal.
The Company’s internal control system is monitored by the Board and assessed regularly to ensure the effectiveness and relevance to the Company’s current and future operations. Procedures have been put into place to ensure the Executive Chairman and the Finance Directors state in writing to the Board that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and control and that the Company’s risk management and internal compliance and control system is operating efficiently and effectively.
The Directors believe that the Company is not currently of a size to justify the formation of a separate risk management committee. The full Board has the responsibility for the risk management of the Company however the Board will assess the need to form a committee on a regular basis.
Maintain the Board as a well-functioning, balanced team led by the Chairman
The Board consists of the Executive Chairman, the Chief Financial Officer and three Non-Executive director's whose biographies are on the Company’s website. The Board members have a broad range of experience and calibre to bring independent judgement on issues of strategy and performance which helps the board to carry out its supervisory and stewardship functions effectively and to discharge its responsibilities to shareholders for the proper management of the Group. The Board will monitor the composition and balance of the Board.
The independent Non-Executive Directors are as follows:
- Michael Meade, Independent Non-Executive Director, appointed to the Board in January 2020
- Mark Warne, Independent Non-Executive Director, appointed to the Board in January 2020
The Executive Directors are expected to devote substantially the whole of their time to their duties with the Company.
The Board meets formally eight times a year with ad hoc Board meetings as the business demands. There is a strong flow of communication between the Directors.
The Board has not undertaken any formal training during the year. This will continue to be monitored.
Ensure that between them the Directors have the necessary up to date experience, skills and capabilities
The Board comprises the Executive Chairman, the Chief Executive Officer, the Chief Financial Officer and three Non-Executive Director. The Directors believe that the Board has significant industry, financial, public markets and governance experience, possessing the necessary mix of experience, skills, personal qualities and capabilities to deliver the strategy of the Company for the benefit of shareholders over the medium to long-term.
The Board engaged external advisers including lawyers, accountants, nominated adviser and brokers in accordance with normal legal and financial processes associated with being a company admitted to trading on AIM and Euronext Growth.
The Board is kept abreast of developments of governance and AIM regulations by its nominated adviser and the Company’s lawyers provide updates on relevant legal and governance issues with the Company’s nominated adviser providing the Board with AIM Rules and refresher training as and when required. The Company Secretary also helps keep the Board up to date on areas of new governance and liaises with the nominated adviser on areas of AIM requirements.
The Board is kept abreast of developments of governance and Euronext Growth regulations by its Euronext Growth Advisor and the Company’s lawyers provide updates on relevant legal and governance issues with the Company’s Euronext Growth Advisor providing Board with Euronext Growth Rules refresher training as and when required. The Company Secretary also helps keep the Board up to date on areas of new governance and liaises with the Euronext Growth Advisor on areas of Euronext Growth Rules requirements.
The Company Secretary has frequent communication with the Chairman and is available to other members of the Board if required.
The Directors have access to the Company’s nominated adviser, Euronext Growth Advisor, Company Secretary, lawyers and auditors as and when required and are able to obtain advice from other external bodies when necessary.
The Company is mindful of the issue of gender balance although Board appointments are made with the primary aim of ensuring that the candidate offers the required skills, knowledge and experience.
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Directors consider seriously the effectiveness of the Board, committees and individual performance.
There will be regular assessment of the individual contributions of each of the members of the team to ensure that their contribution is relevant and effective, that they are committed and, where relevant, that they have maintained their independence.
The Board sets clear performance objectives in advance of each financial period and agrees key performance indicators against which progress can be clearly measured and corrective action taken as appropriate.
The Company intends to review the Board performance evaluation process and the Board’s approach to succession planning and will publish the results of such review including the criteria against which Board, committee and individual effectiveness is considered on the Company’s website.
Promote a corporate culture that is based on ethical values and behaviours.
The Directors are committed to ethical values and behaviours across the Board and the Company as a whole. The Directors are mindful of the industries that the business operates in and takes all issues of ethical behaviours seriously. These behaviours are instilled throughout the organisation. The importance of delivering success in a safe environment is not undermined. Issues of bribery and corruption are taken seriously, The Company has a zero-tolerance approach to bribery and corruption and have an anti-bribery and corruption policy in place to protect the Company, its employees and those third parties to which the business engages with. The policy is provided to staff upon joining the business and training is provided to ensure that all employees within the business are aware of the importance of preventing bribery and corruption. Each employee is required to sign an agreement to confirm that they will comply with the policies and all staff are provided with annual refresher courses.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board retains ultimate accountability for good governance and is responsible for monitoring the activities of the executive team. The Board consists of:
Cathal Friel, the Executive Chairman has the responsibility for ensuring that the Board discharges its responsibilities and is also responsible for facilitating full and constructive contributions from each member of the Board in determining the Group’s strategy and overall commercial objectives. Mr Friel is also responsible for business execution within the framework and structures defined by the Board. He engages with shareholders and other stakeholder groups to ensure a strong relationship between them and the Company.
Leo Toole, the Chief Financial Officer is responsible for shaping and executing the financial strategy and operational direction of the Company, as well as the overall financial reporting and compliance requirements of Open Orphan.
Brendan Buckley, the Non-Executive Director chairs the Remuneration Committee and is a member of the Audit and Risk Committee and the Scientific Advisory Board.
Mark Warne, an Independent Non-Executive Director is a member of the Audit and Risk Committee, the Nomination Committee and the Remuneration Committee.
Michael Meade, a Senior Independent Non-Executive Director chairs the Audit and Risk Committee and the Nomination Committee and is a member of the Remuneration Committee.
Audit and Risk Committee
The Audit and Risk Committee comprises Michael Meade as chairman with Brendan Buckley and Mark Warne as the other members of the Audit and Risk Committee and meets at least twice a year. The principal duties of the Audit and Risk Committee are to review the half-yearly and annual financial statements before their submission to the Board and to consider any matters raised by the auditors. The Audit and Risk Committee also reviews the independence and objectivity of the auditors. The terms of reference of the Audit and Risk Committee reflect current best practice, including ity to:
- recommend the appointment, re-appointment and removal of the external auditors;
- ensure the objectivity and independence of the auditors including occasions when non-audit services are provided; and
- ensure appropriate ‘whistle-blowing’ arrangements are in place.
The chairman of the Audit and Risk Committee may seek information from any employee of the Group and obtain external professional advice at the expense of the Company if considered necessary. Due to the relatively low number of personnel employed within the Group, the nature of the business and the current control and review systems in place, the Board has decided not to establish a separate internal audit department.
The Company has established a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director is involved in deciding his own remuneration.
The Remuneration Committee comprises Brendan Buckley as chairman with Michael Meade and Mark Warne as the other members of the Remuneration Committee. The Remuneration Committee considers the employment and performance of individual Executive Directors and determines their terms of service and remuneration. It also has ity to grant options under the Company Executive Share OptionScheme. The Committee intends to meet at least twice a year.
The Nomination Committee comprises Michael Meade as chairman with Mark Warne as the other member of the committee. It identifies and nominates for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Nomination Committee intends to meet at least twice a year.
The Company does not have a separate Health and Safety Committee but health and safety is of the upmost importance to the business and a health and safety report is presented and discussed in detail at every Board meeting.
All Board committees report back to the Board following a committee meeting.
The Board retains full and effective control over the Company and holds regular meetings at which financial, operational and other reports are considered and where appropriate voted upon. The Board is responsible for the Group’s strategy and key financial and compliance issues.
There are certain matters that are reserved for the Board, they include:
- Approval of the Group’s strategic aims and objectives;
- Approval of the Group’s annual operating and capital expenditure budgets and any material changes to them;
- Review of Group performance and ensuring that any necessary corrective action is taken;
- Extension on the Group’s activities into new business or geographical areas;
- Any decision to cease to operate all or any part of the Group’s business;
- Major changes to the Group’s corporate structure and management and control structure;
- Any changes to the Company’s listing;
- Changes to governance and key business policies;
- Ensuring maintenance of a sound system of internal control and risk management;
- Approval of half yearly and annual report and accounts and preliminary announcements of final year results; and
- Reviewing material contracts and contracts not in the ordinary course of business.
Scientific Advisory Board
The Scientific Advisory Board comprises of Professor John Oxford as Chairman and Professor Brendan Buckley as the other member of the committee. The Advisory Board was established in February 2020 to help the Company support product development for customers developing antivirals, vaccines, and respiratory therapeutics, all particularly relevant and topical in the environment of heightened awareness of the Coronavirus in 2020.
Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board views the Company’s annual report and accounts as well as its half year report as key communication channels through which progress in meeting the Group’s objectives and updating its strategic targets can be given to shareholders. In addition, the Board uses the AGM as a primary mechanism to engage with Shareholders and both to give information and receive feedback about the Company and its progress.
The Executive Chairman and the Chief Financial Officer undertake meetings with key shareholders and analysts following publication of full and half year results in order to answer questions and ensure that the key messages are properly understood and effectively communicated onward. The Company typically shares all of its key communications with Shareholders with its advisers in draft form before publication to ensure that they are accurate and effective.
The outcome of all general meeting votes is published.