Corporate Governance
The company is committed to high standards of corporate governance and the Board is accountable to the company’s shareholders for such governance. The Board reviews carefully all new regulations relating to the principles of good corporate governance and practice and endeavours to apply them where applicable. It also reviews carefully any comments received from independent reviewing agencies and shareholders and communicates with them directly. The company believes that the combination of the experience of its Chairman, Peter Sheldon, in the UK markets and its senior independent Director, Gideon Chitayat, in the Israeli market provides the company with the relevant leadership to address its position as an Israeli company that is traded on the UK exchange.
This statement describes how the principles of corporate governance are applied and the company’s compliance with the 2006 FRC Combined Code for Corporate Governance (the “Code”) appended to the Listing Rules of the UK Listing Authority.
This statement describes how the principles of corporate governance are applied and the company’s compliance with the 2006 FRC Combined Code for Corporate Governance (the “Code”) appended to the Listing Rules of the UK Listing Authority.
Compliance with the 2006 FRC Combined Code
Throughout the year ended 31 December 2011, and through to the date of approval of the financial statements, the Board considers that the company has complied with Section 1 of the Code. The company has applied the Principles of Good Governance set out in Section 1 of the Code by complying with the Code of Best Practice as set forth below and in the Remuneration Report below. Further explanation of how the principles and supporting principles have been applied is set out below and in the directors’ remuneration report.In addition, as outlined below, the Company’s responsibilities under Israeli company legislation is such that it is obliged to appoint two independent non-executive directors (defined as “external directors” within Israeli law), who must be appointed for a minimum of one three year term, and who cannot serve for more than two three year terms each. With the exception of the “external” non-executive directors who serve for a period of three years in accordance with Israeli company law, all directors have to be re-elected by the shareholders at an AGM, if proposed for re-election.
The new independent non-executive directors defined as external directors was Mr. Amos Shani and Dr. Amiram Mel Mr. Shani was appointed in July 2010 and Dr. Mel in March 2011. On February 27, 2012, Dr Mel informed the Board that as a result of
an appointment with a key customer of the Company, he no longer considered it appropriate to continue as a Director of the Company. Accordingly, he has resigned with effect from February 2012. The Board is currently seeking a replacement for this
vacancy.
The Company believes that as a result of the Israeli corporate law that limits the term of the external directors, it is essential to maintain a number of long serving directors who may serve for more than the ten year period recommended under the Code, in order to provide continuous experience and knowledge. During the last two years the company retained two senior Executives from large US Corporations to serve on its board of Directors, Roger Lacey and Dr. Amiram Mel. However, as a result of the regulatory environment in the USA it became impossible for them to continue to serve on the company’s board. Therefore, we believe that the leadership of our Chairman at this time and his experience in the UK regulatory environment is extremely valuable to the board.
The Board
In compliance with Israeli company legislation the Board meets at least four times a year in formal session. Prior to each meeting, the Board is furnished with information in a form and quality appropriate for it to discharge its duties concerning the state of the business and performance. Board and committee activities in 2011 were as follows:Board of Directors - Meetings 5 - (Note 1)
Audit Committee - Meetings 5 - (Note 2)
Remuneration Committee - Meetings 2
Nominations Committee - Meetings 1
Note 1) All directors attended 100% of the Board meetings, other than Amos Shani and Amiram Mel who were absent from one meeting during 2011 for personal reasons and Peter Sheldon who was absent from one meeting because of illness.
Note 2) All Audit Committee members attended 100% of meetings other than Amos Shani and Amiram Mel who were absent from one meeting during 2011 for personal reasons.
There is not a formal schedule of matters specifically reserved to the Board for decision, as set out in A.1.1 of the Code, however, provisions in the Israeli company legislation set out the responsibilities and duties of and areas of decision for the Board which includes approval of financial statements, dividends, Board appointments and removals, long term objectives and commercial strategy, changes in capital structure, appointment, removal and compensation of senior management, major investments including mergers and acquisitions, risk management, corporate governance, engagement of professional advisors, political donations and internal control arrangements. The ultimate responsibility for reviewing and approving the annual report and financial statements, and for ensuring that they present a balanced assessment of the company’s position, lies with the Board. These provisions have been fully complied with.
The Board comprises six directors, four of whom are non-executive directors, under the chairmanship of Peter Sheldon. The Chief Executive is Dr. Zvi Marom. The senior non-executive director is Dr. Gideon Chitayat. The Board’s members have a wide breadth of experience in areas relating to the company’s activities and the non-executive directors in particular bring additional expertise to matters affecting the company. All of the directors are of a high calibre and standing. The biographies of all the members of the Board are set out on page 13. The interest of the Directors in the Company and their share holdings are set out on page 26. All the non-executive directors are independent of management and not involved in any business or other relationship, which could materially interfere with the exercise of their independent judgment.
The induction of newly elected directors into office is the responsibility of the senior independent director (presently Dr. Gideon Chitayat). The new directors receive a memorandum on the responsibilities and liabilities of directors as well as presentations of all activities of the company by senior members of management and a guided tour of the company’s premises. All directors are invited to visit the company premises and its manufacturing facilities.
Each month every director receives a detailed operating report on the performance of the Company in the relevant period, including a Balance Sheet. A fuller report on the trading and quarterly results of the company is provided at every board meeting. Once per year a budget is discussed and approved by the Board for the following year. All directors are properly briefed on issues arising at Board meetings and any further information requested by a director is always made available.
Under Israeli law it is not a mandatory requirement for a company to have a secretary and the company does not therefore have a formally appointed secretary. However, Mr. Arthur Moher, who is also one of the company’s legal advisers, provides the company with all the functions of company secretary and all the directors have access to Mr. Moher’s services. The directors are therefore of the opinion that the spirit of A.1.4 of the Code has been complied with.
The directors may take independent professional advice at the Company’s expense in furtherance of their duties. Independent outside counsel is present at every Board meeting and Board committee meetings.
Relations with Shareholders
Communication with shareholders is given high priority. The half-yearly and annual results are intended to give a detailed review of the business and developments. A full Annual Report is made available on the Company’s website to all shareholders and printed copies made available on request. The Company’s website (www.batm.com) contains up to date information on the company’s activities and published financial results. The company solicits regular dialogue with institutional shareholders (other than during closed periods) to understand shareholders views. The Board also uses the Annual General Meeting to communicate with all shareholders and welcomes their participation. Directors are available to meet with shareholders at appropriate times.Committees
The Board has established an Audit Committee, a Remuneration Committee and a Nominations Committee to deal with specific aspects of the company’s affairs.Audit Committee
The members of the audit committee are Dr. Chitayat, Mr. Shani and until 27 February 2012, Dr. Mel, who retired recently. Each of them has significant financial expertise. The committee’s terms of reference include, among other things, monitoring the scope and results of the external audit, the review of interim and annual results, the involvement of the external auditors in those processes, review of whistle blowing procedures, considering compliance with legal requirements, accounting standards and the Listing Rules of the Financial Services Authority, and for advising the Board on the requirement to maintain an effective system of internal controls. The committee also keeps under review the independence and objectivity of the group’s external auditors, value for money of the audit and the nature, extent and cost-effectiveness of the non-audit services provided by the auditors.The committee has discussed with the external auditors their independence, and has received and reviewed written disclosures from the external auditors regarding independence. During 2009 the external auditors replaced the partner in charge of the audit to comply with their internal independence regulations. Non-audit work is generally put out to tender. In cases which are significant, the company engages another independent firm of accountants to consulting work to avoid the possibility that the auditors’ objectivity and independence could be compromised; work is only carried out by the auditors in cases where they are best suited to perform the work, for example, tax compliance. However, from time to time, the company will engage the auditors on matters relating to acquisition accounting and due diligence.
The committee meets at least twice a year, and always prior to the announcement of interim or annual results. The external auditors and Chief Financial Officer are invited to attend all meetings in order to ensure that all the information required by the committee is available for it to operate effectively. The external auditor communicates with the members of the audit committee during the year, without Executive officers present.
The Audit Committee adheres to the functions and requirements prescribed to it by the Israeli Companies Law and Israeli Regulations. The Chairman of the Audit Committee maintains close contact with the company on a regular basis.
Nominations Committee
The Board has a nominations committee which is chaired by Peter Sheldon. The other member of the committee are: Dr. Marom and Dr. Chitayat. Individuals nominated as directors are elected by the shareholders in general meeting. Executive and non-executive directors are elected by the shareholder’s General Meeting for a term of one year. Non-executive public “external” directors, as defined by Israeli Company Law, are appointed and elected for a mandatory term of three years, which is renewable for a further term of three years. The re-appointment of a director must be approved by the shareholders in general meeting.One nomination of a director was made during the year under review which was discussed and recommended by the committee in the year. Notwithstanding this the members of the nominations committee met both independently and together with a number of potential appointees to the Board during 2011 to evaluate potential nominees.
Directors’ Remuneration
The Board has a Remuneration Committee, which is currently chaired by Dr. Gideon Chitayat. The other current member of the committee is Mr. Amos Shani. Information of the Company’s policy regarding the setting of directors’ remuneration together with details of the service contracts of the executive directors and the remuneration of directors is set out in the Remuneration Report on page 23 - 26.Accountability and Audit
Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu, has expressed its willingness to continue in office and a resolution to re-appoint the firm will be proposed at the annual general meeting.Significant Risks and Uncertainty
The Group has recently entered the Medical and Surveillance sectors. These are new markets in which the Group has relativelylittle experience. The success of the Group’s investments in these sectors is thus uncertain with consequent risk to the amounts invested.The Group has made acquisitions which do not attain one hundred per cent ownership of the target Companies. As a result certain companies in the group have minority interests, which are usually the local management of the subsidiaries. Relationships with these minority interests are important and carry certain risks.
The Group has several significant indirect sales channels. The loss, or significant scale down, of any one or more of these channels would have a negative impact on the performance of the Group.
The Company has an ongoing process for identifying, evaluating and managing the significant risks faced by the Company that has been in place for 2011 and up to the date of approval of the annual report and financial statements. Principal controls are managed by the executive directors and key employees, including regular review by management and the Board of the operations and the financial statements of the Company.
Corporate Strategy
BATM strategy is based on building two strong technology divisions - the Telecom division and the Medical division - into leading entities, supplying the highest quality and cost effective innovative products in their respective fields.BATM is growing its networking division to be an important provider of access solutions. In the medium term the division is focused on providing groundbreaking technologies in a cellular centric video rich world. This includes expanding the offering to a full access service oriented solution and technological breakthroughs in delivering large scale streams of secured video and data at speeds of 10Gbps and up.
The division is now working closely with customers to define needs in LTE based applications, as well as applications for cloud based networks. Some of these applications are envisaged to reach the markets during 2012.
The Medical division is focused on becoming an important provider of diagnostics and stirilization laboratory equipment. The division is built on high reliability, fast and easy to operate equipment for small diagnostic laboratories with an emphasis on emerging markets. In addition, the division launched an innovative product to treat medical waste in laboratories and hospitals.
The division’s products are highly sophisticated, environmental friendly and very cost effective. BATM Medical has partnerships with reagent manufacturers and academic institutions to guarantee an innovative, “one stop shop”, flexible offering to its customers. The Medical division plans to announce some unique produce offerings during 2012.