Corporate Governance

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 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. As a result of amendments in the Israeli Companies Law on corporate governance which came into effect during 2012, as well as comments received during 2012 from corporate governance consultants of UK institutional and pension investors, the Company implemented various improvements in its corporate governance policies, as described in more detail in this Report, and which continue to be effective.

The main thrust of the improvements was designed to:

(a) Guarantee full independence of the various committees of the Board, including the nomination, audit and remuneration committees;

(b) Improve transparency between the Board and senior management of the Company;

(c) Improve the remuneration policy of the Company by refining the parameters and determining pre-defined key performance indicators as a requisite for performance-linked remuneration to its senior executives; and

(d) Improve the Company’s environmental policy and responsibility.

This report also outlines how the Company has applied the Main Principles set out in the UK Corporate Governance Code issued by the UK Financial Reporting Council in September 2014 (the “Governance Code”).
 

Rules about appointment & replacement of directors; Amendment of Articles

Pursuant to the Company’s articles of association and Israeli Companies Law, directors are elected at the Annual General Meeting by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election of directors. Each director (except for the public external appointed directors) shall serve until the next Annual General Meeting following the Annual General Meeting at which such director was appointed, or his earlier removal. The holders of a majority of the voting power represented at a General Meeting and voting thereon shall be entitled to remove any director(s) from office, to elect directors in place of the directors so removed or to fill any vacancy, however created, in the Board of directors by way of ordinary resolution. 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 no more than two further terms of three years each. The appointment of the external directors must be approved by the shareholders in general meeting.

Apart from the authority of the General Meeting to remove a director from office, subject to giving such director a reasonable opportunity to present his position to the General Meeting, under the Company’s articles, the office of a director shall be vacated ipso facto, upon his death, or if he be found to be of unsound mind, or becomes bankrupt or if he becomes prohibited by law from being a director in a public Company, or if the director is a Company upon its winding up.

Of the two executive Directors, the CEO, Zvi Marom will be proposed for re-election at the coming Annual General Meeting (AGM). Mr. Barner resigned his position as director as of 1 January 2016 in order to concentrate all his efforts on growing the Bio-Medical Division under his responsibility and the CFO, Mr. Moti Nagar was nominated by the Board as an interim director to fill Mr. Barner’s place until the coming AGM and he will be proposed for election at the coming AGM.

Under the Israeli Companies Law a Company may amend its articles by a simple majority of the shareholders at a General Meeting. Any proposed amendments to the articles regarding modification of rights attached to shares of the Company and/or dividing the share capital into various classes of shares requires the approval of the holders of 75% of the issued shares in the Company.
 

Compliance with the Governance Code

Throughout the year ended 31 December 2015, 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 set out in the section with that heading 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. Gideon Barak, Mrs. Orna Pollack and Dr. Avigdor Shafferman. Mr. Barak was appointed in July 2013 for a term of three years which expires in July 2016. Dr. Shafferman was appointed in February 2015 for a term of three years and Mrs. Pollack was appointed in September 2015 for a term of three years.
 

The Board – leadership and effectiveness

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.

Board and committee activities in 2015 were as follows:

Meetings Written Consent Attendance
Board of Directors 8 Note 1 Note 1
Audit Committee 3 Note 2 Note 2
Remuneration Committee 3
Nominations Committee 1

1) All Directors attended 100% of the Board meetings during 2015 except for 2 absences of Mr. Gideon Barak from 2 board meetings due to last-minute trips overseas and 2 absences of Mrs. Elka Nir from two board meetings due to illness in one case and the death of her mother in the second case.
(2) All Audit Committee members attended 100% of meetings during 2015, except for 2 absences of Mr. Gideon Barak due to last-minute trips overseas.

There is not a formal schedule of matters specifically reserved to the Board for decision, as set out in A.1.1 of the Governance 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 Dr. Gideon Chitayat. The Chief Executive is Dr. Zvi Marom. 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 19. The interest of the Directors in the Company and their share holdings are set out on page 28. 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 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 comprised 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 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 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 A.1.4 of the Governance Code.

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.
gs.
 

Relations with Shareholders and Significant 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. The Company is committed to having a constructive engagement with its shareholders.

As of 31.12.2015, 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 – 23.91%

Henderson Global Investors - 20.15%

Legal & General Investment Management – 12.00%

Herald Investment Management – 5.06%

All of the above hold ordinary shares of the Company.
 

Committees

The Board has established an Audit Committee, a Remuneration Committee and a Nomination Committee to deal with specific aspects of the Company’s affairs.
 

Audit Committee

Members:
Mr. Gideon Barak, Mrs. Orna Pollack, Mr. Ofer Barner, and Dr. Avigdor Shafferman
Chairman: Gideon Barak (*)

(*)Mrs. Elka Nir was the chairman until 30 June 2015, Mr.Gideon Barak replaced her as Chairperson on 1 July 2015.

The members of the Audit Committee have 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 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. 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.
 

Remuneration Committee

Members:
Mr. Gideon Barak, Mrs. Orna Pollack, Mr. Gideon Chitayat and Dr. Avigdor Shafferman
Chairman: Gideon Barak (*)

(*)Mr. Gideon Barak was the chairman until 31 December 2015, Dr. Avigdor Shafferman replaced him on 1 January 2016.

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 2015 the Committee has been chaired by Gideon Barak, one of the external Directors (as mandatory under the Israeli Companies Law) and its other members are Orna Pollack and Dr. Avigdor Shafferman, 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 day-to-day involvement in running the business.

None of the Directors plays a part in any determination of his own remuneration.

The Remuneration Committee met three times during the financial year. It 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).
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 and responsibilities.

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 page 25–28. The Company’s remuneration policy as recommended by the Remuneration Committee was approved at the Annual General Meeting of the Company in September 2014. The remuneration policy is more fully explained below in the Directors’ Remuneration Report.

Information of the Company’s policy regarding the setting of Directors’ remuneration together with the remuneration of Directors is set out in the Remuneration Report on page 25–28. The Company’s remuneration policy as recommended by the Remuneration Committee was approved at the Annual General Meeting of the Company in September 2014. The remuneration policy is more fully explained below in the Remuneration Report.
No external remuneration advisers were engaged during the year.
 

Nominations Committee

Members: Mr. Gideon Chitayat, Dr. Zvi Marom and Dr. Avigdor Shafferman
Chairman: Dr. Avigdor Shafferman (*)

(*) Dr. Avigdor Shafferman was the chairman until 31 December 2015, Mr. Gideon Chitayat replaced him on 1 January 2016.

In compliance with recent amendments to Israeli law, the chairman of the Nomination Committee is chaired by an independent non-executive director thereby improving the independence of this Committee.

In addition to the Company’s diversity policy for existing employees (as disclosed on page 12),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 company law, the Company has one female non-executive board member. As at 31 December 2015, there was one woman on the Board (representing 16.6% of Board membership), Orna Pollack having been appointed to the Board in September 2015 following Elka Nir having stepped down from the Board in July 2015.

Prior to the date of expiration of office of a director or in cases of early resignation of a director, 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.
 

Conflicts

Throughout 2015 the Company has complied with procedures in place for ensuring that the Board’s powers to authorize conflict situations have been operated effectively and this has also been considered at a committee level where appropriate.

During 2015 no conflicts arose which would require the board to exercise authority or discretion in relation to such conflicts.