Corporate Governance

1) Establish a strategy and business model which promote long-term value for shareholders

Explanation

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

Compliance

The Group’s vision is to be the first choice semiconductor partner to technology innovators, together transforming how the world communicates.

The focus is on our customers’ success by delivering advantages through the improved functionality and performance of class leading IC solutions. R&D activity is targeted at developing the product portfolio to support emerging and evolving customer requirements for size, cost and performance whilst striving to remain our customer’s first choice supplier within their advanced communication platforms.

Continued investment in growth development across all markets with a clear pipeline of future products and business opportunities to drive organic growth.

2) Seek to understand and meet shareholders needs and expectations

Explanation

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.
The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

Compliance

The Group Managing Director is the principal spokesperson for engagement with shareholders. The Executive Chairman is present at interim and full-year briefings and is otherwise available to discuss any matters of concern with shareholders and stakeholders alike. Communication is with all shareholders, including investors, fund managers, the media and other interested parties. Briefings are held with investors and analysts following the announcement of half-year and preliminary results along with other ad-hoc meetings throughout the year.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

Explanation

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interest and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

Compliance

By understanding our stakeholders, the Board can discuss the potential impact of our decisions on each group, ensuring that we consider their needs and concerns.

The Company’s key stakeholder groups are:

• Shareholders
• Employees
• Customers
• Suppliers
• Local government and communities

Shareholders

We engage with shareholders through our reports, regular news releases, website, Annual General Meeting, investor presentations and one-on-one meetings.

Employees

We have an open, collaborative and inclusive structure and engage regularly with our employees. We try to foster a suitable environment to allow them to realise their full potential.

Customers

We work closely with our customers to develop a deep understanding of their business, giving us the ability to anticipate and respond to their needs and foster long-term relationships.

Suppliers
We engage with our suppliers regularly to ensure our quality and commercial objectives are met. We strive to maintain continuity of supply through varying global economic and market conditions.

Local government and communities

We attend a variety of regional business meetings throughout the year and attend council events linked to the local community and work with local educational establishments and offer funding for research projects.

Social responsibility

As a Board, our intention is to behave responsibly and to ensure that management operate the business in a responsible manner, operating with high standards of business conduct and good governance that reflects our responsible behaviour, and our shareholders will benefit from the delivery of the long-term plan.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

Explanation

The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

Compliance

The Board has established Audit and Remuneration Committees, as part of its leadership and control of the Company, the Board has specific items reserved for its consideration which include business strategy, financial performance, acquisitions, divestments and major capital investment.

The Audit Committee is responsible for ensuring the financial performance of the Group is properly measured and reported and for reviewing reports from auditors relating to the Group accounts and the Group’s internal control systems.

5. Maintain the board as a well-functioning, balanced team lead by the chair

Explanation

The board members have a collective responsibility and legal obligation to promote the interests of the company and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.

The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a board judgement.

The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.

Compliance

The Group is led and controlled by an effective and entrepreneurial Board that comprises two Executive Directors and four Non‑Executive Directors. The Non-Executive Chairman is primarily responsible for the running of the Board and the Group Managing Director is the Chief Operating Decision Maker with responsibility for the day‑to‑day running of the Group and for implementing Group strategy.

The Board’s activities are supported by Nomination, Audit and Remuneration Committees.

The Board and its committees receive high quality, accurate and timely information on a regular basis. The Board meets formally a minimum of six times per year.

All the Directors have appropriate skills and experience for the roles they perform at the Company, including as members of Board Committees. All Directors are subject to re‑appointment at the first AGM after their appointment and, thereafter, apart from the Group Managing Director, one‑third of the remaining Directors shall retire by rotation at the AGM.

The Company is satisfied that the current Board is sufficiently resourced to discharge its governance obligations on behalf of all stakeholders and will consider the requirement for additional Executive and Non-Executive Directors as the Company fulfils its growth objectives.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

Explanation

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

Compliance

The evaluation of the Board, collective skills and its performance along with that of the individual members is considered on an ongoing basis considering the needs of the Company and its stakeholders. New appointments are led by the Group Managing Director and considered by the whole Board acting as the Nominations Committee.

7. Evaluate the board performance based on clear and relevant objectives, seeking continuous improvement

Explanation

The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The board performance review many be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boars. No member of the board become indispensable.

Compliance

The Board evaluates its own performance regularly. Annually the Remuneration Committee evaluates performance as part of the review of remuneration and discretionary bonus awards.

The Board and the remuneration Committee evaluate the Board performance, including but not limited to collective skills. Its performance along with that of the individual members is considered on an ongoing basis considering the needs of the Company.

8. Promote a corporate culture that is based on ethical values and behaviours

Explanation

The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

Compliance

The Board along with the Senior Management define the core, Vision, Values and Guiding Principles of CML Microsystems Plc which supports the objectives of the company.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Explanation

The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

• Size and complexity; and
• Capacity, appetite and tolerance for risk.

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

Compliance

The Company’s Corporate Governance Statement as set out in its 2022 Annual Report and Accounts explains the structures which are in place at Board and Committee level and how these interact, including the roles individual Directors fulfil on the Board.

The organisational structure is kept under continual review and evolves as the needs of the business changes to fulfil its growth objectives.

10. Communicate how the company is governed and is performed by maintaining a dialogue with shareholders and other relevant stakeholders

Explanation

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested partied to come to informed decisions about the company.

In particular, appropriate communication and reporting structures should exist between the board and all constituent parts of its shareholder base. This will assist:

• The communication of shareholders’ views to the board; and
• The shareholders’ understanding of the unique circumstances and constraints faced by the company.

It should be clear where these communication practices are described (annual report or website).

Compliance

CML Microsystems Plc encourages communication with its shareholders as disclosed in principle 2.

The results of all Annual General Meetings resolutions are announced promptly after the meeting has taken place. The results of all Annual General Meeting resolutions issued in the last five years are available on the Company’s website at: www.cmlmicroplc.com/news.

Historical Annual Reports and the unaudited half-year results for the past five years are available at: www.cmlmciro.com/financial-reports.

Constitution of the Board and of Board Committees.

The Board considers that its constitution it’s both independent and has appropriate balance of experience in judging matters of strategy, performance, resources, investor relations, internal control and corporate governance.

The Board consist of two Executive Directors and two Non-Executive Directors. The Board meets formally a minimum of six Board meetings during the year at which reports on the Group’s operations, together with the Group’s finance reports are considered. The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and acquisitions. In accordance with the Articles of Association, one‑third of the Board excluding the Group Managing Director, is subject to re‑election by rotation annually.

The Board has a Nomination Committee, a Remuneration Committee and an Audit Committee. The Nomination Committee comprises of the whole Board, Remuneration Committee comprises of Executive Chairman (Committee Chairman), Senior Independent Non-Executive Director and the Group Managing Director and Audit Committees comprises of the Senior Independent Non-Executive Director, the Chair of the Audit Committee and the other Independent Non‑Executive Director.

This was last updated on 28/06/24.