Report of the Directors

Corporate Governance Report

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This section of the annual report describes the company’s corporate governance structures and processes and how they have been applied throughout the year ended 31st March 2013 (the year).

Our board of directors has a responsibility to our shareholders to ensure the sound running of the company. This can only be achieved if supported by appropriate and well managed governance processes. We believe that there are a number of key elements which are essential for an effective board and good governance. These are illustrated below and we discuss them in more detail throughout this section of the report.

The UK Corporate Governance Code

The UK Corporate Governance Code (the Code), issued by the Financial Reporting Council (FRC) in June 2010, contains broad principles and specific provisions which set out standards of good practice in relation to leadership and effectiveness, remuneration, accountability and relations with shareholders. This Corporate Governance Report is structured so as to report against each of these key areas. The Code applied to Johnson Matthey throughout the year.

In September 2012 the FRC published the 2012 edition of the Code (the 2012 Code), together with a revised version of its Guidance on Audit Committees. The changes formally apply to companies whose financial year begins on or after 1st October 2012, and so will apply to Johnson Matthey for our financial year ending 31st March 2014. However, we have chosen to adopt some aspects of the 2012 Code (and follow the relevant aspects of the related guidance) early and report on it in this year’s annual report. We’ve identified in this report where we’ve adopted the 2012 Code.

As a listed company, Johnson Matthey is required to report on how we have applied the main principles of good governance set out in the Code and either confirm that we have complied with the Code’s provisions or provide an explanation where we have not. Our compliance statement is set out in the following section. We have reviewed our explanations of non-compliance against the 2012 Code’s guidance on the characteristics of a meaningful explanation of non-compliance.

This Corporate Governance Report, together with the Nomination Committee Report, the Audit Committee Report and the Remuneration Report, describe how we have complied with the provisions of the Code and applied its main principles during the year.

How have we Complied with the Provisions of the Code?

Except as referred to below, Johnson Matthey has complied with all relevant provisions of the Code throughout the year.

We have not complied throughout the year with part of Code provision E.1.1, which states that 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. The board considers, and has done for a number of years, that there are appropriate mechanisms in place to listen to the views of shareholders and communicate them to the board without it being necessary for the Senior Independent Director to attend meetings with major shareholders. The Senior Independent Director is, however, available to attend any such meetings if requested by shareholders. The board believes that this approach is consistent with the relevant main principle of the Code on dialogue with shareholders, to which Code provision E.1.1 relates, and is consistent with good governance and the promotion of delivery of the company’s objectives. More information on how we engage with shareholders is set out below.

From 25th July 2012 to 4th October 2012 Johnson Matthey did not comply with Code provision B.1.2, which states that at least half the board, excluding the Chairman, should comprise non-executive directors who have been determined by the board to be independent. Sir Thomas Harris retired from the board as a non-executive director on 25th July 2012. Following his retirement and pending the appointment of a new independent non-executive director (the selection process for which had begun in March 2012 prior to Sir Thomas’ retirement and was ongoing as at 25th July 2012), there was a majority of executive directors on the board. Colin Matthews was appointed a non-executive director on 4th October 2012. The board believes that its actual operation during this period of temporary non-compliance did not detract from good governance or the promotion of delivery of the company’s objectives. During this period the board and its committees retained an appropriate balance of skills, experience, independence and knowledge of the company to enable them to carry out their duties and responsibilities effectively. In addition, the board was of sufficient size and retained an appropriate combination of executive and, in particular, independent non-executive directors such that no individual or small group of individuals could dominate the board’s decision making. There was no adverse impact on the business or on the ability to manage any changes to the board’s composition and that of its committees without any undue disruption.

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