Corporate Governance

We are committed to maintaining a high standard of corporate governance. Further details can be found in this section

The Company has applied the new Quoted Companies Alliance (‘QCA’) Corporate Governance Code as from 28 September 2018. Click here for an analysis of how Summit applies the ten principles of the QCA Corporate Governance Code.

As Chairman I am responsible for implementing and maintaining sound corporate governance practices and procedures.

It is the Board’s belief that good corporate governance is integral to a successful business. In compliance with AIM Rule 26, this section discloses our philosophy on corporate governance and outlines the principles to which Summit adheres.

Summit looks to apply the highest standards of corporate governance appropriate to its size and stage of development as a pre-commercialisation company. Summit is poised to undertake global clinical trials for its Phase 3 ready antibiotic candidate ridinilazole, and is advancing a pipeline of preclinical programmes to develop new mechanism antibiotics. To support the Company’s research activities, Summit has physical operations in the UK and US. Summit shares are also listed in two distinct markets: the AIM market in London and the Nasdaq Global Market in New York. As Summit is pre-commercial stage, a priority is to invest its cash resources into our core drug development programmes which, if successful, have the potential to substantially increase the value of the business and deliver a return to our shareholders.

Our approach to corporate governance seeks to balance the varying needs of the business. As our Ordinary Shares trade on AIM, Summit is not required to follow the UK Corporate Governance Code. Summit does apply the QCA Corporate Governance Code (“QCA Code”) and below are set out how we apply the ten principles in the QCA Code and further details about this follow.

It is important that Summit attracts and retains high calibre individuals who possess experience within the life sciences industry and with expertise in running dual listed companies. It is also important that Summit optimises its cash resources to ensure that it is best placed to maintain investment into our core research, development and commercialisation activities that will act as potential catalysts to generate future value for shareholders. These requirements are reflected in our corporate governance and remuneration policies. These policies evolved during the financial year ended 31 January 2018, as highlighted by the adoption of a restricted stock unit programme for Non-Executive Directors to replace the historical practice of making share option awards. This change was to ensure all Directors are considered independent under both the UK and US governance guidelines.

There may however in the future be aspects of our policies that run against what is considered to be general best practice in the UK. When this is the case, we will seek to provide a clear explanation as to why the Board believes the specific policies are in the best interests of shareholders.

Frank Armstrong
Non-executive Chairman

Principle 1: Established a strategy and business model that promotes long-term value for shareholders

The focus of Summit is on the discovery, development and commercialisation of novel medicines for indications for which there are no existing or only inadequate therapies. Our strategy is the development of new mechanism antibiotics for the treatment of specific infectious diseases with unmet needs. Our antibiotics are being designed to have clear advantages over existing standard of care treatments and seek to provide value for patients, payors and healthcare providers. Our focus is to rapidly advance our Phase 3 ready antibiotic called ridinilazole for the treatment of C. difficile infection. Summit will look to maximise the commercial potential of ridinilazole for CDI where we currently hold exclusive commercialisation rights in the United States and Europe. We are also applying our existing knowledge and experience to position ourselves as a leader in antibiotic research and development. Summit has obtained development funding and other assistance from government entities, philanthropic, non-government and not for profit organisations for our product candidates. Summit aims to continue to seek additional funding from these types of organisations to support its development programmes.

 

Principle 2: Seek to understand and meet shareholder needs and expectations

Communication with our shareholders is important in ensuring that the Company’s strategy and performance is understood and that it remains accountable to shareholders. The Company regularly engages with its institutional and other major shareholders, particularly around key scientific, operational and financial events. The Company has a dedicated email address which investors can use to contact the company, and this is displayed on the company’s website. Fully audited annual reports will be distributed to shareholders and quarterly results statements notified via Regulatory Information Service announcements. All financial reports, press releases and filings to the Securities and Exchange Commission (‘SEC’) are made available on the Company’s website. Summit regularly participates at investor conferences and where applicable, makes webcast recordings of these events available from the investors section of this website. The Company engages with its shareholders on any resolutions that it will propose at a general meeting of the company, and the notice of meeting and proxy voting results are made available from the website.  Shareholders are welcome to attend the annual general meeting where they can meet the Board.

The Board as a whole is responsible for ensuring that a satisfactory dialogue with shareholders takes place, while the Non-Executive Chairman and Chief Executive Officer ensure that the views of the shareholders are communicated to the Board as a whole. The Board ensures that the Company’s strategic plans have been carefully reviewed in terms of their ability to deliver long-term shareholder value.

 

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

The Board recognises the growing awareness of social, environmental and ethical matters and it endeavours to take into account the interest of the Company’s stakeholders, including its investors, employees, suppliers and business partners, when operating the business. Summit’s mission is developing new mechanism antibiotics that have the potential to improve the quality of life of patients who suffer from serious infectious diseases and support good antibiotic stewardship. Summit’s relationship with its employees is vital to its success. The Company aims to appoint employees with appropriate skills, knowledge and experience for the roles they undertake and thereafter to develop and incentivise staff. Summit also works with external organisations and collaborators. For example, Summit uses contract research organisations to support the running of clinical trials and manufacture drug products. Summit also works from time to time with other advisers in a range of business areas including financial, regulatory, legal, information technology and human resources. Summit seeks frequent and open dialogue with all of its various collaborators as it looks to maintain good work relationships.

 

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

The Board assesses the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The principal risks and uncertainties are summarised in the UK Annual Report and disclosed in detail in the Annual Report on Form 20-F in the United States.

The Board, through the Audit Committee, is responsible for the systems of internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. The Board reviews the effectiveness of these systems annually by considering the risks potentially affecting the Group.

In addition to consideration of financial risk as part of the review of broader internal control, the Company is required to assess and report on the effectiveness of the internal controls over financial reporting under Section 404(a) of the Sarbanes-Oxley Act. The Company does not consider it necessary to have an internal audit function due to the current size of the administrative and finance function. This need is evaluated on an annual basis by the Audit Committee. There is a detailed monthly review of financial results and all large transactions are authorised by the Chief Financial Officer, another senior member of the finance function or the Chief Executive Officer.

 

Principle 5: Maintain the board as a well-functioning, balanced team led by the chair.

At 28 September 2018, the Board comprised four Non-Executive Directors, and one Executive Director. The Board typically has six scheduled meetings per financial year (approximately every two months), with additional Board meetings and Board sub-committee meetings convened as circumstances and business needs dictate. All of the Non-Executive Directors commit sufficient time to undertake their board responsibilities and support the future growth and development of the business. The attendance record of each of the directors is disclosed in the Corporate Governance Report in the 2018 Annual Report and Accounts. The Board reviews the independence of all the Non-Executive Directors. At the time of the 2018 Annual Report and Accounts, the Board determined that all the Non-Executive Directors qualified as independent Directors under Rule 5605(a)(2) of the Nasdaq Listing Standards and believed them to be independent under UK corporate governance standards.

The Board is responsible to the shareholders for the proper management of the Group and sets the overall direction and strategy of the Group, reviews scientific, operational and financial performance, and advises on management appointments. All key operational and investment decisions are subject to Board approval. There is a clear separation of the roles of Chief Executive Officer and Non-Executive Chairman. The Board has Audit, Remuneration, and Nominating and Corporate Governance Committees, each with written terms of reference stating their authorities and duties. The full terms of reference of all the committees are available from this website.

 

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

The Board considers each Non-Executive Director is of sufficient competence and calibre to add strength and objectivity to the Board. Each Non-Executive Director brings considerable experience in scientific, operational or financial development of biopharmaceutical products and companies. The Board contains the necessary skills to support the Company in the development of its drug candidate and discovery programmes, and to support the financial and regulatory obligations as a dual-listed Company in the United Kingdom and United States. The Directors’ biographies can be found on the company website. All of the Directors are subject to election by shareholders at the first annual general meeting after their appointment to the Board and to re-election by shareholders at least once every three years. The Board considers that this practise of retiring by rotation every three years is appropriate given as a biopharmaceutical company, the nature of the business is to carry out long-term research and development. The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with. The work of the Board and committees is also assisted by other people including the Company’s Senior Director of Corporate Affairs and Director of Human Resources.

 

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

The Remuneration Committee oversees the annual evaluation of the performance of the Chief Executive Officer, and it is part of the role of the Nominating and Corporate Governance Committee to oversee the review and evaluation of the Board as a whole, the committees and the individual Directors. The Board evaluations are conducted annually through use of a confidential questionnaire completed by each Director. The questionnaire covers topics including the composition of the Board and committees, oversight of management, understanding the business, and the conduct and effectiveness of board meetings. The results are collated and analysed by external counsel and anonymised results are shared with and discussed by the Board with areas for improvement identified where appropriate.  The formality and complexity of the process is considered appropriate for a company of Summit’s size and stage of development and the Board will continue to review the process and make any changes as appropriate should this position change. The Nominating and Corporate Governance Committee is responsible for managing succession planning for Directors and Executive Officers.

 

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

The Board believes that the promotion of corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value. The Company maintains a Code of Business Conduct and Ethics to which it expects all employees and directors of Summit to adhere. This code is intended to promote the conduct of all Company business in accordance with high standards of integrity and in compliance with all applicable laws and regulations. Employees also have developed five core values that underpins the mission of the business. These five values promote integrity, openness, collaboration and a focus on making a difference to patients.

 

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

The Board is responsible to the shareholders for the proper management of the Group and sets the overall direction and strategy of the Group, reviews scientific, operational and financial performance, and advises on management appointments. The Non-Executive Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly briefed on matters. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day to day business activities of the Group. The Chief Executive Officer is supported by the Chief Financial Officer and Chief Operating Officer who have oversight of financial, regulatory and operational matters.

All key operational and investment decisions are subject to Board approval. The Board has Audit, Remuneration and Nominating and Corporate Governance Committees and their terms of reference are available within the corporate governance section of this website.

The Audit Committee meets at least once every quarter. The responsibilities of the Audit Committee include the following:

• monitoring the integrity of the financial statements of the Group;
• reviewing accounting policies, accounting treatment and disclosures in the financial reports;
• reviewing internal financial controls and risk management systems; and
• overseeing the relationship with external auditors, including making recommendations to the Board as to the appointment or re-appointment of the external auditors, reviewing their terms of engagement, and monitoring the external auditors’ independence, objectivity and effectiveness.

The Remuneration Committee meets regularly during a 12-month period. The responsibilities of the Remuneration Committee include the following:

• determining and agreeing with the Board the Remuneration Policy for all Directors;
• within the terms of the agreed policy, determining the total individual remuneration package for Executive Directors;
• overseeing the evaluation of executive officers;
• determining bonuses payable under the Company’s cash bonus scheme; and
• determining the vesting conditions of awards under the Company’s long-term incentive plans and the issue of share options.

The Nominating and Corporate Governance Committee meets at least once every 12 months. The responsibilities of this committee include the following:

• identifying individuals qualified to become members of the Board of Directors;
• recommending directors to be appointed to the committees;
• overseeing the annual evaluation of the Board and its committees;
• reviewing and making recommendations to the Board on Board leadership structure and
management succession planning; and
• developing and recommending to the Board appropriate corporate governance principles.

 

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board recognises that meaningful engagement with its shareholders is central to the success of the business. The Board seeks to engage with shareholders, while the Non-Executive Chairman and Chief Executive Officer ensure that the views of the shareholders are communicated to the Board as a whole. The Board seeks to make itself available to shareholders including at the Company’s annual general meeting at which the Directors are available to discuss aspects of the Group’s performance and shareholders have the opportunity to question management in more detail. The Board are welcome to attend investor events that Summit hold from time to time.

The work of the Audit, Remuneration, and Nominating and Corporate Governance committees is described in Principle 9 of this disclosure. A Report from the Remuneration Committee is presented in the UK Annual Report and Accounts. Fully audited Annual Reports are distributed to shareholders and quarterly financial results and operational reviews are notified via Regulatory Information Service announcements. All press releases, filings with the SEC and financial reports are made available through the dedicated investors section on the Company’s website. Notices of general meetings and proxy voting results are posted to the Company’s website.

The Company has three board committees and details are as follows:

Audit Committee

The members of the Audit Committee are Mr David Wurzer, Ms Valerie Andrews and Mr Leopoldo Zambeletti.  Mr Wurzer is the chair of the Audit Committee.  The Audit Committee is responsible for the oversight of the accounting and financial reporting processes of the Company, including its internal control principles and the audits and interim reviews of the financial statements of the Company.  The Audit Committee meets at least three times a year.

Remuneration Committee

The members of the Remuneration Committee are Ms Valerie Andrews and Dr Frank Armstrong.  Ms Valerie Andrews is the chair of the Remuneration Committee.  The Remuneration Committee oversees the evaluation of the executive management and reviews the compensation of the directors and executive officers.  It also oversees and administers from time to time the employee share option scheme.

Nominations and Corporate Governance Committee

The members of the Nominating and Corporate Governance Committee are Dr Frank Armstrong, Mr Leopoldo Zambeletti, Ms Valerie Andrews and Mr David Wurzer.  Dr Armstrong is the chair of the committee.  Its responsibilities include recommending the persons to be nominated to the board for election as directors, recommending the directors to be appointed to each committee of the Board, developing corporate governance guidelines and overseeing evaluation of the board.