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The Board is committed to the highest standards of corporate governance
throughout the group. The Board is accountable to the company’s
shareholders for good governance and this statement describes how
the Principles of Good Governance and the provisions of the Code
of Best Practice, identified in the London Stock Exchange’s Combined
Code, issued on 25 June 1998, are applied by the company.
Amersham strives to maintain a good dialogue with shareholders
and regular meetings are held with institutional shareholders throughout
the year to discuss the progress of the company, future growth prospects
and strategy. Executive Directors’ remuneration issues are raised
as part of these discussions. Other channels of communication include
company presentations, seminars, press releases and interim and
annual reports. In addition, the company website www.amersham.com
provides information on the company for all shareholders and the
general public.
The remuneration policy and the terms and conditions of service
of the Executive Directors appear in the Remuneration
report. The Executive Directors are employed on rolling contracts
subject to two years’ notice when given by the company or one year’s
notice if given by the Director. With effect from 1 March 2002,
the notice period will be reduced to one year on either side.
The Board
The Board comprises four Executive Directors, seven Non-Executive
Directors and an employee representative Non-Executive Director.
Throughout the financial year the offices of Chairman and Chief
Executive have been held separately. The Chairman, Mr R D Lapthorne,
is an independent Non-Executive Director.
The Deputy Chairman, Mr J Fr Odfjell has been identified as the
senior independent Non-Executive Director.
Biographies of the Board members appear on a
previous page which also shows the membership of the Nomination,
Remuneration and Audit Committees. These indicate the high level
and range of business experience amongst Board members which is
essential to manage effectively a business of the size and complexity
of the Amersham group.
Apart from the employee representative and Professor Sir Keith
Peters, who serves on our Scientific Advisory Board, all of the
Non-Executive Directors were independent of management and free
from any business or other relationship which could materially interfere
with the exercise of independent judgement. All Directors have access
to the Company Secretary.
The Board meets at least seven times a year and more frequently
when business needs require. The Board has a schedule of matters
reserved to it for decision and the requirement for Board approval
on these matters is communicated widely throughout the group. To
enable the Board to function effectively and allow Directors to
discharge their responsibilities, full and timely access is given
to all relevant information.
Newly appointed Directors are given training appropriate to the
level of their previous experience. All are apprised of their roles
and duties as Directors of a public company.
The Board is responsible for the overall direction, strategy, performance
and management of the group. Authority for implementing the Board’s
policies is delegated to the Chief Executive within certain limits
authorised by the Board.
The Nomination Committee
The Nomination Committee meets at least once a year to review the
composition of, and succession to, the Board and make recommendations
to the Board on the appointment of Non-Executive and Executive Directors.
The Committee comprises six of the independent Non-Executive Directors
and is chaired by Mr J Fr Odfjell, the Deputy Chairman of the Board.
Members of the Committee abstain when matters affecting their own
appointments are discussed. The Committee has available to it the
services of external advisers as it deems necessary and at the company’s
expense. The Chief Executive attends the meetings of the Nomination
Committee.
The Remuneration Committee
The Remuneration Committee is responsible for determining the remuneration
policy and the terms and conditions of service of the Executive
Directors. The Remuneration Committee also determines group policy
relating to share option schemes and the level at which share options
are granted to senior executives within the group. The Committee
has available to it the services of independent advisers. The Committee
comprises six of the independent Non-Executive Directors including
the Chairman and Deputy Chairman of the Board and is chaired by
Mr R D Lapthorne, the Chairman of the Board. The principal terms
of reference of the Remuneration Committee appear in the Remuneration
report. The Chief Executive and the Group Human Resources Director
attend the meetings of the Committee to discuss the performance
of the other Executive Directors and to make proposals as necessary
but they are not present when their own remuneration is being considered.
The Audit Committee
The Audit Committee monitors and reviews the internal controls and
accounts of the group. It also considers the group’s compliance
with the Combined Code. The Committee is chaired by Mr D H Brydon
and comprises three further independent Non-Executive Directors:
Mr R D Lapthorne, Mr J Fr Odfjell, and Mr J F Rejeange. On 20 February
2002, Dr J S Patterson was appointed an additional member of the
Audit Committee. The Committee can request the external auditors,
who are normally present, Executive Directors and other officers
of the group to attend its meetings. The Audit Committee receives
regular reports from the Risk and Operational Review department
on all aspects of the group’s system of internal control.
Appointments to the Board
Any Director appointed during the year is required, under the provisions
of the company’s Articles of Association, to retire and seek reappointment
by shareholders at the next Annual General Meeting. The Articles
also require that one-third of the Directors retire by rotation
each year and seek re-appointment at the Annual General Meeting.
The Directors required to retire will be those in office longest
since their previous appointment or re-appointment and this will
usually mean that each Director retires at least every three years.
The Board has resolved that each Director will retire at least every
three years, even if this is not strictly required by the application
of the provisions of the Articles of Association.
Non-Executive Directors are appointed for a term of three years,
renewable annually by mutual agreement thereafter.
Compliance
In addition to the Principles of Good Governance, the Combined Code
also contains a Code of Best Practice detailing some 45 provisions.
The Board has carried out a full internal review of compliance with
its provisions. Except that Executive Directors were employed on
service contracts subject to two years’ notice rather than one year,
the Board confirms that the company has complied with these provisions
throughout the financial year. Agreement has now been reached with
each Executive Director that, with effect from 1 March 2002, they
will be employed on service contracts subject to one year’s notice.
Internal control
The Board is ultimately responsible for the group’s system of internal
control and for reviewing its effectiveness. However, such a system
is designed to manage rather than eliminate the risk of failure
to achieve business objectives, and can provide only reasonable
and not absolute assurance against material misstatement or loss.
The Board confirms that it has applied Principle D.2 of the Combined
Code in that, there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the group, which has
been in place for the year 2001 and up to the date of approval of
the Annual Report and Accounts, also that this process is regularly
reviewed by the Board and is in accord with Internal Control: Guidance
for Directors on the Combined Code published in September 1999.
In accordance with provision D.2.1 the Board, including the appropriate
sub-committees continuously reviews the effectiveness of the group’s
internal control processes. Key elements of the group’s system of
internal controls are set out below:
Control environment
The group is committed to the highest standards of business conduct
and seeks to maintain these standards across all of its operations
throughout the world. The group has in place group finance policies
and employee procedures.
The group has an appropriate organisational structure for planning,
executing, controlling and monitoring business operations in order
to achieve objectives. Lines of responsibility and delegations of
authority are documented.
Risk identification
Group management are responsible for the identification and evaluation
of key risks applicable to their areas of business. The group has
a formal risk identification and review process facilitated by a
dedicated function, which assists senior management in the process.
This function reports to both the Audit Committee and the Board
on a regular basis. Risks are assessed on a continual basis and
may be associated with a variety of internal or external factors
including control breakdowns, disruption in information systems,
competition, natural catastrophe and regulatory requirements.
Information and communication
Group businesses participate in periodic strategic reviews, which
include the consideration of long term financial projections and
the evaluation of business alternatives. Operating units prepare
annual budgets and five-year strategic plans; performance against
plan is actively monitored at the Board and business unit level
supported by regular forecasts. Forecasts and results are consolidated
and presented to the Board on a regular basis.
Control procedures
The group and its operating units have implemented control procedures
designed to ensure complete and accurate accounting for financial
transactions and to limit the potential exposure to loss of assets
or fraud. Measures taken include physical controls, segregation
of duties, reviews by management and internal audit, and external
audit to the extent necessary to arrive at their audit opinion.
A process of control self-assessment and hierarchical reporting
has been established which provides for a documented and auditable
trail of accountability. These procedures are relevant across group
operations and provide for successive assurances to be given at
increasingly higher levels of management and, finally, to the Board.
These documents are reviewed by the Risk and Operational Review
department for completeness and accuracy. Planned corrective actions
are independently monitored for timely completion.
Monitoring and corrective action
There are clear and consistent procedures in place for monitoring
the system of internal controls. The Audit Committee meets at least
three times a year and, within its remit, reviews the effectiveness
of the group’s system of internal controls. The Committee receives
regular reports from the Risk and Operational Review function and
management.
Going concern
After making enquiries the Directors have reasonable expectation
that the company and the group have adequate resources to continue
in operational existence for the foreseeable future, and that it
is therefore appropriate to adopt the going concern basis in preparing
the financial statements. In forming this view the Directors have
reviewed the Annual Profit Plan for the year ending 31 December
2002 and strategic plan projections for subsequent years. The Directors
have satisfied themselves that the group is in a sound financial
position and that sufficient borrowing facilities will be available
to meet the group’s foreseeable cash requirements.
On behalf of the Board
R D Lapthorne, Chairman
25 February 2002
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