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 carefully
reviews all new regulations relating to the principles of good corporate governance and practice and endeavours to apply them where applicable. It also carefully reviews 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, Dr. Gideon Chitayat, as well as the experience and expertise of its external directors provides the Company with the relevant leadership to address its position as an Israeli company that is traded on the London Stock Exchange. This report outlines how the Company has applied the Main Principles set out in the UK Corporate Governance Code as amended by the UK Financial Reporting Council in April 2016 (the “Governance Code”).
Throughout the year ended 31 December 2017, and through to the date of approval of the financial statements, the Board considers that the Company has complied with the Main Principles of the Governance Code. The Company has applied the Main Principles by complying with the Governance Code as set forth below and in the Directors’ 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, which may be extended by the Company for no more than two additional terms of three years 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 current independent non-executive Directors which qualify as “external directors” under Israeli law are Mr. Harel Locker, Mrs. Orna Pollack and Dr. Avigdor Shafferman. Mr. Locker was appointed in September 2016 for a term of three years. Dr. Shafferman was appointed in February 2015 for a term of three years and his office was terminated in February 2018 and Mrs. Pollack was appointed in September 2015 for a term of three years, which terminates in September 2018. As will be seen below, the various Committees of the Board are comprised of the external directors, which guarantees full independence while these Committees perform their corporate functions in the Company.
The Board, which currently comprises two executive and four non-executive Directors including the Chairman, is responsible collectively for the long-term success of the Company. 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.
There is not a formal schedule of matters specifically reserved to the Board for its decision, as set out in A.1.1 of the Governance Code, since the Israeli Companies Law which applies to the Company sets out and defines the responsibilities and duties of and areas of decision for the Board. These include 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. In addition, the Audit Committee as well as the directors review and assess on an annual basis, the performance of the external auditors, their independence, reasonableness of their audit fees as compared with peer tier 1 accountancy offices in Israel and make recommendations to be brought forward to the shareholders’ meeting as to the appointment, or reappointment, or replacement of the external auditors of the Group. While the Audit Committee as part of its activity reviews and monitors the external auditor’s independence and objectivity (see page 20) there is no requirement under Israeli law and regulations and it is not common market practice in Israel to have maximum terms for auditors. Rotation of external auditors is not accepted practice in the Israeli market and the Company would like to point out that it is not subject to EU audit regulations that relate to rotation of the external auditors.
The Board comprises six Directors, four of whom are non-executive Directors, under the chairmanship of 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 pages 14 to 15. The interest of the Directors in the Company and their shareholdings are set out on page 24. All the non-executive Directors are independent of management and not involved in any business or other relationship that could materially interfere with the exercise of their independent judgment. The Board is of the opinion that each of its members has the skills, knowledge, aptitude and experience to perform the functions required of a director of a listed company and that the Board is comprised of a good balance of executive and non-executive Directors.
The induction of newly elected Directors into office is the responsibility of the Chairman of the Board. The new Directors receive a memorandum on the responsibilities and liabilities of directors from the Company’s general counsel 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 operating facilities. The Directors receive periodically a detailed operating report on the performance of the Company in the relevant period, including a consolidated statement of financial position. 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.
The Company has an experienced Company Secretary, Mr. Arthur Moher, who is also one of the Company’s legal advisers and all the Directors have access to Mr. Moher’s services. Accordingly, the Company complies with section B.5.2. of the Governance Code.
The Directors may take independent professional advice at the Company’s expense in furtherance of their duties in accordance with section B.5.1. of the Governance Code. Independent outside counsel is also present at every Board meeting and Board committee meetings.
The Board carried out a review of its own effectiveness and that of its various committees during the year. The review was facilitated by the Chairman of the Board who reviewed the performance of each director, his/her knowledge and comprehension of the nature of the Group’s business, how the Board works together and other factors relevant to its effectiveness.
With respect to succession of the Board members, it is the role of the Nomination Committee (see page 21) to identify succession planning. Non-executive directors are replaced regularly in accordance with the requirements of Israeli legislation in respect of the appointment of qualified external directors for a three-year period and the ongoing obligation to replace them regularly as the term of their office expires.
The Board also works to ensure that within the Group there exists a culture that is free from discrimination and harassment in any form. The Board ensures that the Company complies with Israeli legislation known as the Israeli Equal Rights for People with Disabilities Law, 5748-1988 to ensure that appropriate consideration is given to employees with disabilities. The Company is also in full compliance with Israeli legislation known as the Employment (Equal Opportunities) Law, 5758-1998, which requires an employer not to discriminate amongst employees on account of sex, sexual tendencies, personal status and any other forms of discrimination. As of 31 December 2017, of the total workforce of the Group companies, 58% of the employees were women.
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, and are available on the Company’s website to all shareholders. Printed copies of the full Annual Report are 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. The Company is committed to having a constructive engagement with its shareholders.
As of 31 December 2017, to the best of the Company’s knowledge, the following persons or entities had a significant holding of BATM ordinary shares:
Dr. Zvi Marom, the Company’s CEO and founder – 23.98%
Lombard Odier Investment Managers - 16.67%
Legal & General Investment Management – 10.63%
Herald Investment Management – 5.43%
As required by the provisions of the Israeli Companies Law, the Board has appointed an Audit Committee, a Remuneration Committee and a Nomination Committee to deal with specific aspects of the Company’s affairs and ensures that each such Committee is fully constituted and operates as required under the Israeli Companies Law.
Audit Committee: Chairman – Harel Locker, members – Ari Shamiss and Varda Shalev
Nomination Committee: Chairman – Gideon Chitayat, members: Harel Locker and Ari Shamiss
Remuneration Committee: Chairman – Ari Shamiss, members: Harel Locker and Varda Shamiss
Members: Mr. Harel Locker, Mrs. Orna Pollack and Dr. Avigdor Shafferman
Chairman: Mr. Harel Locker
The Chairman of the Audit Committee has significant financial expertise and experience. 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 Conduct 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 (see note 9 to the financial statements).
The Committee has discussed with the external auditors their independence, and has received and reviewed written disclosures from the external auditors regarding independence. 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 scope of which is very limited), thus ensuring the continued objectivity and independence of the external auditors.
The Committee meets at least twice a year, and always prior to the announcement of interim or annual results. The external auditors, internal auditor 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 and the Audit Committee reports back to the Board. The external auditor communicates with the members of the Audit Committee during the year, without executive officers present. The Committee also meets with representatives of the Company’s external auditors at least twice per year and raises on a regular basis any issues it has with the review and/or audit carried out by the external auditors and comments on specific issues it believes the auditors should be focusing on.
The Audit Committee adheres to the functions and requirements prescribed to it by the Israeli Companies Law and Israeli Regulations and takes account of the relevant provisions of the disclosure, guidance and transparency Rules and the UK Corporate Governance Code. The Chairman of the Audit Committee maintains close contact with the Company on a regular basis.
Members: Dr. Avigdor Shafferman, Mrs. Orna Pollack and Mr. Harel Locker
Chairman: Dr. Avigdor Shafferman
The Company’s Remuneration Committee is constituted in accordance with the recommendations of the Governance Code. The Committee consists of three out of the four non-executive Directors and excludes the chairman as is required under Israeli Company Law. Since January 2016 the Committee has been chaired by Dr. Avigdor Shafferman, one of the external Directors (as mandatory under the Israeli Companies Law) and its other members are Orna Pollack and Harel Locker, both of whom are non-executive independent Directors. None of the Committee members has any personal financial interests, conflicts of interests arising from cross-directorships or dayto-
day involvement in running the business.
None of the Directors plays a part in any determination of his own remuneration.
The Committee has responsibility for making recommendations to the Board on the Company’s policy on staff remuneration and for the determination, within agreed terms of reference, of specific remuneration packages for the Chairman of the Company and each of the executive Directors (including pension rights and any compensation payments). During 2017, the Committee was active in the preparation of an updated remuneration policy, which was presented at the AGM in October 2017 and approved by shareholders.
The primary responsibilities of the Committee are to ensure:
1. That individual pay levels for executive Directors should generally be in line with levels of pay for executives in similar companies with similar performance achievement
2. That share option and bonus schemes should be set at a level that provides sufficient incentive to the executive to produce results that will reflect and exceed the Board’s
expectations, and be appropriately balanced alongside fixed-level and more immediate remuneration.
3. That total pay and long-term remuneration will be sufficient to retain executives who perform.
4. That aggregate pay for all executive Directors is reasonable in light of the Company’s size and performance and is compatible with the Company’s risk policies and systems.
5. Information of the Company’s policy regarding the setting of Directors’ remuneration together with the remuneration of Directors is set out in the Directors’ Remuneration Report on pages 22 to 24. The Company’s remuneration policy as recommended by the Remuneration Committee was approved at the Annual General Meeting of the Company in October 2017. The remuneration policy is more fully explained below in the Directors’ Remuneration Report.
6. The Company engaged external remuneration advisers (KPMG in Tel Aviv and London) during the year, to provide the Remuneration Committee with guidance in preparing 2200 an updated remuneration policy for the Company, which was presented to the shareholders at the annual general meeting in October 2017 and approved by shareholders.
Members: Dr. Gideon Chitayat, Dr. Zvi Marom and Dr. Avigdor Shafferman
Chairman: Dr. Gideon Chitayat
In addition to the Company’s diversity policy for existing employees (as disclosed on page 25), the Nomination Committee is specifically tasked with assessing the process utilised by the Company in relation to Board appointments and in monitoring diversity during the recruitment process and in the context of the resulting appointment made. During the process, the Nomination Committee ensures that assessment is made of the skills and experience in identifying a candidate pool and in the recruitment of Board members from such potential candidates, with consideration given to the balance of skills, experience, independence and knowledge of the Board. Board appointments are made on merit set against objective criteria having due regard, amongst other things, to the benefits of diversity on the Board, including gender. In accordance with Israeli Companies Law, the Company has one female non-executive Board member. As at 31 December 2017, there was one woman on the Board (representing 16.6% of Board membership).
Prior to the date of expiration of office of a non-executive director or in cases of early resignation of a director, the Committee considers the necessary skills, experience, expertise and gender required of potential candidates and prepares a list of potential candidates. Since Israel is a relatively small country, it is quite easy for the Nominations Committee to obtain recommendations through objective professional directors in various industries of persons that could fit the requirements needed by the Company. Once this is done, a number of appropriate candidates (who have relevant experience in those lines of business in which the Company is engaged and the personal qualifications that fit the Company) are interviewed by the Chairman of the Board. After the interview, the Nomination Committee presents its recommendations to the Board which, if deemed necessary may expand on the interview and research process in order to find the optimum candidate for the office of director in the Company. Generally, no external search consultancy firm is used or advertisement published by the Company, for the reasons explained above.
Throughout 2017 the Company has complied with procedures in place for ensuring that the Board’s powers to authorise conflict situations have been operated effectively and this has also been considered at a committee level where appropriate. During 2017 no conflicts arose which would require the Board to exercise authority or discretion in relation to such conflicts.
Risk management is currently reviewed on an ongoing basis by the Board as a whole. The Company has an ongoing process for identifying, evaluating and managing the significant risks faced by the Group that has been in place from 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.
The Board has overall responsibility for ensuring that the Company maintains adequate systems of internal control and for determining the nature and extent of principal risks. The Board confirms that they have carried out during 2017 a robust assessment of such risks accordingly, including those that would impact the Company’s business model, future performance, solvency or liquidity, and have considered how they are to be mitigated. To this end, in accordance with the Israeli Companies Law, the Company has appointed and retains the services of an independent qualified internal auditor. Each year, the Audit Committee reviews with the internal auditor potential risks and a proposed plan for their scope of work. Each year the Audit Committee usually selects at least two areas of the Company’s operations on which it requests the internal auditor to focus and prepare an internal audit report with recommendations. Following the completion of each report the internal auditor sends it to all the Directors and presents his findings to the Audit Committee. The Audit Committee then reports to the Board on any major findings together with the internal auditor’s recommendations for improving controls and corporate responsibility and the Board instructs management to implement the recommendations.
The key features of the financial controls of the Company include a comprehensive system of financial reporting, budgeting and forecasting, and clearly laid down accounting policies and procedures. The main elements of internal control currently include:
• Operating Controls: The identification and mitigation of major business risks on a daily basis is the responsibility of the executive Directors and senior management. Each business function within the Group maintains controls and procedures, as directed by senior management, appropriate to its own business environment while conforming to the Company’s standards and guidelines. These include procedures and guidelines to identify, evaluate the likelihood of and mitigate all types of risks on an ongoing basis.
• Information and Communication: The Group operating procedures include a comprehensive system for reporting financial and non-financial information to the Directors. Financial projections, including revenue and profit forecasts, are reported on a monthly basis to senior management compared with corresponding results for previous periods. The central process for evaluating and managing non-financial risk is monthly meetings of business functions, each involving at least one Director, together with periodic meetings of executive Directors and senior management.
• Finance Management: The finance department operates within policies approved by the Directors and the Chief Financial Officer. Expenditures are tightly controlled with stringent approvals required based on amount. Duties such as legal, finance, sales and operations are also strictly segregated to minimise risk.
• Insurance: Insurance coverage is provided externally and depends on the scale of the risk in question and the availability of coverage in the external market.