Corporate Governance.

Statement of Compliance with the Combined Code

This statement describes how the Main Principles of the Combined Code on Corporate Governance, issued by the Financial Reporting Council dated June 2008 (the Code), have been applied.

During the year ended 31st March 2010, the company has complied with all relevant provisions set out in Section 1 of the Code throughout the year except the following:

  • A.3.2 – At least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent.

    During the period from 22nd June 2009, following the appointment of Mr R J MacLeod as Group Finance Director designate, to 21st July 2009, the board comprised five independent non-executive directors and six executive directors and therefore less than half of the board comprised independent non-executive directors. On 21st July 2009, following the retirement of Dr P N Hawker and Mr D W Morgan from the board and the appointment of Mr W F Sandford as an executive director, the number of executive directors was reduced to five. Since the retirement of Mr J N Sheldrick as Group Finance Director on 7th September 2009, more than half of the board has comprised independent non-executive directors. The board considers the one month period of non-compliance with this provision to be immaterial and was necessary in order to ensure orderly board succession.

  • D.1.1 – The senior independent director should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders.

    During the year the board has taken the view that it is not necessarily practical, efficient or desired by shareholders for the Senior Independent Director to attend meetings with major shareholders in order to learn their issues and concerns unless such discussions are requested by shareholders. The methods by which major shareholders’ views are communicated to the board as a whole are discussed under ‘Relations with Shareholders’.

Directors and the Board

The board is responsible to the company’s shareholders for the group’s system of corporate governance, its strategic objectives and the stewardship of the company’s resources and is ultimately responsible for social, environmental and ethical matters. The board held seven meetings in the year and in addition met separately to review the group’s long term strategy. The board delegates specific responsibilities to board committees, as described below. The board reviews the key activities of the business and receives papers and presentations to enable it to do so effectively. The Company Secretary is responsible to the board, and is available to individual directors, in respect of board procedures.

The board comprises the Chairman, the Chief Executive, three other executive directors and five independent non-executive directors. Mr N A P Carson is the Chief Executive. Sir John Banham is the Chairman. Sir John’s other commitments are disclosed in the Board of Directors section. The roles of Chairman and Chief Executive are separate. The Chairman leads the board, ensuring that each director, particularly each non-executive director, is able to make an effective contribution. He monitors, with assistance from the Company Secretary, the information distributed to the board to ensure that it is sufficient, accurate, timely and clear. The Chief Executive maintains day-to-day management responsibility for the company’s operations, implementing group strategies and policies agreed by the board.

The role of non-executive directors, who are appointed for specified terms subject to re-election and to Companies Acts provisions relating to the removal of a director, is to enhance independence and objectivity of the board’s deliberations and decisions. Mr A M Thomson is the Senior Independent Director. Each non-executive director is considered by the board to be independent in character and judgment and there are no relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgment.

The executive directors have specific responsibilities, which are detailed in the Board of Directors section, and have direct responsibility for all operations and activities.

In accordance with the company’s Articles of Association, all directors submit themselves for re-election at least once every three years. The board composition allows for changes to be made with minimum disruption.

Regular business presentations from senior managers at board meetings assist the non-executive directors in familiarising themselves with the group’s businesses. The board also usually holds at least one board meeting per year at one of the group’s operational sites and takes the opportunity to tour the site and discuss issues with local senior and middle management. During the year ended 31st March 2010 the board visited the new methanol synthesis catalyst manufacturing plant in Clitheroe, UK and the Emission Control Technologies’ manufacturing facilities in Royston, UK. Individual non-executive directors also undertake site visits. Such presentations, meetings and site visits help to give a balanced overview of the company. They enable the non-executive directors to build an understanding of the company’s businesses, the markets in which the company operates and its main relationships and to build a link with the company’s employees. This is important in helping the non-executive directors to continually develop and refresh their knowledge and skills to ensure that their contribution to the board remains informed and relevant. Account is taken of environmental, social and governance matters in the training of directors.

During the year the board undertook a formal evaluation of its performance and the performance of its committees and the individual directors. The Deputy Company Secretary conducted face to face interviews with each individual director based on a standard questionnaire. The interviews focused on the operation of the board and its committees and on individual directors’ contributions. Separately, the Chairman held a series of one to one discussions with each director to provide them with an opportunity to expand on their responses, to raise any broader issues and to review their performance. A report was prepared on the findings of these interviews and it also contained a number of recommendations designed to ensure that the current high standards of governance and processes were maintained. The report has been considered by the board and the board approved its recommendations. The report concluded that the board and its committees continue to work effectively.

Led by the Senior Independent Director, the non-executive directors met without the Chairman present to appraise the Chairman’s performance, taking into account the views of the executive directors.

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