Corporate Governance

Pharmaxis is a dual-listed Australian company. Our primary listing is on the Australian Securities Exchange (ASX) and our secondary listing is on the U.S. Nasdaq Global Market (Nasdaq).

Pharmaxis has developed a Corporate Governance Framework with supporting policies and practices to comply with both the Corporate Governance Principles and Recommendations issued by the Australian Securities Exchange Corporate Governance Council (“ASX Governance Principles”) in August 2007, and relevant US requirements arising from our Nasdaq listing.

The Pharmaxis Corporate Governance Framework complies with the ASX Governance Principles.

The Board reviews and updates the Corporate Governance Framework as required and at least annually.

The business and management systems that support the Corporate Governance Framework are regularly reviewed and updated in line with the growth of the business:

Overview of the Pharmaxis Corporate Governance Framework

This framework and supporting policies and procedures are described and discussed in this section. For ease of reference, this section is structured consistently with the ASX Governance Principles.

  1. Lay Solid Foundations for Management and Oversight
  2. Structure the Board to Add Value
  3. Promote Ethical and Responsible Decision Making
  4. Safeguard Integrity in Financial Reporting
  5. Make Timely and Balanced Disclosure
  6. Respect the Rights of Shareholders
  7. Recognise and Manage Risk
  8. Remunerate Fairly and Responsibly

1. Lay Solid Foundations for Management and Oversight

Companies should establish and disclose the respective roles and responsibilities of board and management

Recommendation 1.1

Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

The Board is responsible for:


The CEO and other Senior Executives are responsible for:


Recommendation 1.2 & 1.3

Companies should disclose the process for evaluating the performance of senior executives and provide the information required in the guide to Principle 1.

The performance of our Senior Executive Officers was evaluated in the current year in accordance with the process described below.

The Remuneration and Nomination Committee is specifically responsible for reviewing the ongoing performance of the Chief Executive Officer (“CEO”) and ensuring there is an appropriate process to review the performance of Senior Executive Officers and for setting and approving performance objectives of Senior Executive Officers in relation to bonus payments and options. In June of each year the Remuneration and Nomination Committee:

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2. Structure the Board to Add Value

Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties

Board composition and independence:

Recommendation 2.1

A majority of the board should be independent directors

Our Board of Directors currently consists of six directors, including five non-executive directors, one of which is the non-executive chairman. Details of the skills, experience and expertise of each of our directors are set out in the Statutory Annual Report.

We regard our five non-executive Directors, Messrs. McComas, Farrell, Villiger, Delaat and Hanley as independent for the purposes of the ASX Governance Principles. The Board regularly assesses director independence having regard to the criteria outlined in the ASX Governance Principles. The threshold for materiality is set at $250,000 in any one year in relation to financial/contractual dealings with the Company, and ten years in relation to years of service. In relation to Directors serving on the Audit Committee, the Director and/or their associates may not receive any fees from the Company other than those related to Director or Committee fees.

We do not regard Dr. Robertson as an independent Director as he is an executive officer.

The Board has an agreed procedure for Directors and Board Committees to obtain independent professional advice at the Company’s expense.

Recommendation 2.2

The chair should be an independent director.

The Chairman of our Board is an independent director. Our Corporate Governance Framework requires the Chairman to be independent.

Recommendation 2.3

The roles of the chair and the chief executive officer should not be exercised by the same individual.

The role of Chairman and Chief Executive Officer are exercised by different individuals. Our Corporate Governance Framework requires the Chairman to be a different individual to the Chief Executive Officer.

Recommendation 2.4

The board should establish a nomination committee.

We have a Remuneration and Nomination Committee. The combined role is considered appropriate for a company of our size. A copy of the Remuneration and Nomination Committee Charter is available here. The purpose of our Remuneration and Nomination Committee is:


The appointment of new directors and the re-appointment of existing directors will be based on the Committee’s recommendations.

The Remuneration and Nomination Committee consisted entirely of independent directors. The chairman of the Remuneration and Nomination Committee is an independent Director.

The Remuneration & Nomination Committee consists of:


Recommendation 2.5

Companies should disclose the process for evaluating the performance of the board, its committees and individual directors

Our Remuneration and Nomination Committee is responsible for overseeing the process for evaluating the performance of the Board, Board Committees and individual Directors. Evaluations were conducted in the current year in accordance with the process described below.

Our Remuneration and Nomination Committee conducts an annual survey of Directors.

A Board performance survey is used to:


The Board performance surveys are collated by the Company Secretary and discussed at a subsequent Board meeting where the implementation of recommendations is agreed.

Board committee performance is assessed using the Board performance survey, separately completed by committee members in relation to their respective committee. Individual committees are then asked to:


An individual director performance survey is used to assess the performance of individual directors. Each Director completes a survey in relation to every member of the Board including themselves and the Chief Financial Officer/Company Secretary. The results of the surveys are collated by the Company Secretary and provided to the Director concerned and the Chairman as a basis for separate discussions as considered necessary by either.

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3. Promote Ethical and Responsible Decision Making

Companies should actively promote ethical and responsible decision-making

Recommendation 3.1

Companies should establish a code of conduct and disclose the code or a summary of the code as to:


A copy of our Code of Conduct is available here.

Recommendation 3.2

Companies should establish a policy concerning trading company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.

A copy of our Share Trading Policy is available here.

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Principle 4: Safeguard Integrity in Financial Reporting

Companies should have a structure to independently verify and safeguard the integrity of their financial reporting

Recommendation 4.1

The board should establish an audit committee

We have an Audit Committee

Recommendation 4.2

The audit committee should be structured so that it:


The structure of our Audit Committee complies with the above recommendation. Our Audit Committee is responsible for:


The structure of the Pharmaxis Audit Committee complies with the above recommendation. The Audit Committee consists of:


Recommendation 4.3

The audit committee should have a formal charter

Our Audit Committee Charter is available here. The Audit Committee Charter provides information on procedures for the selection and appointment of our external auditor. The charter discusses the rotation of the external audit engagement partner.

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Principle 5: Make Timely and Balanced Disclosure

Companies should promote timely and balanced disclosure of all material matters concerning the company

Recommendation 5.1

Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies

We have a Continuous Disclosure and Shareholder Communications Policy, which is available here.

We have a Disclosure Committee to oversee the implementation of the policies and procedures in relation to communications with the market.

The Disclosure Committee consists of the:

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Principle 6: Respect the Rights of Shareholders

Companies should respect the rights of shareholders and facilitate the effective exercise of those rights

Recommendation 6.1

Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy

Our Continuous Disclosure and Shareholder Communication Policy is available here. In addition to our continuous disclosure and statutory reporting requirements, we provide shareholders with quarterly updates of our progress across all areas of the business and utilize our website to disclose useful and relevant information about us.

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Principle 7: Recognise and Manage Risk

Companies should establish a sound system of risk oversight and management and internal control

Recommendation 7.1

Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies

The Audit Committee is responsible to the Board for oversight of material business risks and internal controls. Our Risk Management Statement is available here and provides an overview of our risk profile, management strategies and internal controls. Our Statutory Annual Report also contains details of the material business risks relevant to us.

Recommendation 7.2

The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks

The Audit Committee, as part of its oversight in this area, requires management to establish appropriate systems and procedures to manage our material business risks and to report on the effective management of those risks.

Recommendation 7.3

The board should disclose whether it has received assurance from the chief executive officer and the chief financial officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks

This recommendation is a requirement of our Corporate Governance Framework as well as U.S. securities legislation.

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Principle 8: Remunerate Fairly and Responsibly

Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear

Recommendation 8.1

The board should establish a remuneration committee

We have a Remuneration and Nomination Committee. A copy of our Remuneration and Nomination Committee Charter is available here.

As noted above, our Remuneration and Nomination Committee consists of independent directors. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Board of Directors or Remuneration and Nomination Committee.

Recommendation 8.2

Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives

As non-executive Directors assess individual and Company performance, their remuneration does not have any variable incentive component. Only the Executive Director and Senior Executive Officer remuneration includes a variable component such as the vesting of options or bonus payments linked to the achievement of performance targets.

Note that Directors, Senior Executive Officers and other pe2008 Statutory Annual Reportrsons designated by the Board are not permitted to trade in our derivatives of our securities without the written consent of the Board. For further details in relation to our remuneration framework, refer to the Remuneration Report set out in Section 1.5 of our Statutory Annual Report.

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Note that Corporate Governance Requirements Arising from Our U.S. Listing are described in section 1.3.3 of our Statutory Annual Report

Documents Available:


 
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