HUTCHMED (China) Limited ("Company")
The Company strives to attain and maintain high standards of corporate governance best suited to the needs and interests of the Company and its subsidiaries (the "Group") as it believes that effective governance practices are fundamental to safeguarding stakeholder interests and enhancing shareholder value. Accordingly, the Company has adopted corporate governance principles that emphasise a quality board of Directors (the "Board"), effective internal controls, stringent disclosure practices, transparency and accountability. It is, in addition, committed to continuously improving these practices and inculcating an ethical corporate culture.
With effect from the listing of the shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “SEHK”) on 30 June 2021, the Company has adopted the Hong Kong Corporate Governance Code (as set out in Appendix 14 to the Rules Governing the Listing of Securities on the SEHK) (the “HK Code”), in replacement of the UK Corporate Governance Code (published by the UK Financial Reporting Council on 15 July 2018) (the “UK Code”). A full version of the HK Code is available from the SEHK website at: en-rules.hkex.com.hk/rulebook/appendix-14-corporate-governance-code-and-corporate-governance-report.
The Company applied the principles and provisions of the UK Code for the financial year ended 31 December 2020. This statement incorporates by reference the disclosures set out in the Corporate Governance Report of the Company on pages 49 to 68 of the 2020 Annual Report of the Company. This can be accessed here.
The Company's explanation for departure from certain provisions of the UK Code for the year ended 31 December 2020 are set out below:
Division of responsibilities
Mr Simon To, the chair of the Board, was an Executive Director upon appointment as chair. Given Mr To’s knowledge and experience of the Company’s business, his in-depth knowledge, business experience in China and extensive network of relationships, the Board believes that it is in the best interests of the Company that Mr To acts as the chair.
As of 31 December 2020, the Board comprised ten Directors, including the Chairman, CEO, Chief Financial Officer, Chief Scientific Officer, two Non-executive Directors and four Independent Non-executive Directors.
Although the composition of the Board did not follow the recommendation under the UK Code which states that at least half the Board, excluding the Chairman, should comprise Non-executive Directors determined by the Board to be independent, the Nomination Committee has considered the structure, size, diversity profile and skill set matrix of the current Board and confirmed it considers that each Director will continue to possess the character, experience, integrity and the levels of skills, care and diligence required as a Director of the Company in respect of all decisions taken at both Board and, where applicable, Committee level to ensure the long term sustainable success of the Company.
Composition, succession and evaluation
The Nomination Committee, chaired by Professor Tony Mok, an Independent Non-executive Director and with the Chairman Mr To and Independent Non-executive Director Mr Graeme Jack as members, is in compliance with the provisions of the UK Code. Prior to 11 December 2020, the Nomination Committee comprised all Directors as members with a sub-committee comprising members in compliance with the requirements under the UK Code established, on an ad hoc basis, to facilitate the selection and nomination process.
Mr To has served as the Chairman of the Company for more than nine years. Notwithstanding the length of his service, Mr To continues to demonstrate his commitment as Chairman, providing direction on Company strategy, assisting generally on business operations. With his in-depth knowledge, business experience in China and extensive network of relationships in the commercial and political arena, the Board took the view that it is in the best interests of the Company that Mr To continues to act as the Chairman.
The Remuneration Committee comprises three members and is chaired by Mr Paul Carter, an Independent Non-executive Director, with the chair Mr To and Independent Non-executive Director Mr Graeme Jack, as members. The composition is not in compliance with the UK Code which stipulates that the Remuneration Committee should comprise at least three Independent Non-executive Directors. Given Mr To’s knowledge on the remuneration and specialized market conditions of the Company’s business, the Board took the view that it was in the best interests of the Company that Mr To acts as a member of the Remuneration Committee.
In 2020, the Remuneration Committee reviewed the approach to remuneration and reported on executive remuneration in detail, with particular reference to the UK Code and associated guidance. Aimed at attracting and retaining top talent, the Remuneration Committee appointed an independent advisor, Aon Hewitt Consulting (Shanghai) Co., Ltd. (“Aon”) to conduct a compensation benchmarking research on peer group U.S. and China biotech companies. Aon has no other connection with the Company or individual Directors. The Remuneration Committee comprehensively reviewed the Group’s compensation and share-based incentives policies, performed benchmarking research on peer group U.S. and China biotech companies and established an attractive policy to ensure the Group is able to recruit and retain top talent. Vesting of share-based awards under the policy is in line with that peer group. The Committee takes seriously its responsibility to ensure that the executive remuneration practices of the Group drive strong performance, are aligned with the strategy and sustainability of the Group and are appropriate in the context of the external regulatory environment and the expectations of our stakeholders.
The Remuneration Committee has considered the views of and feedback from the Company’s shareholders in reviewing and settling the Company’s remuneration policy. The Committee continually engages with investors and/or investor representative organisations on remuneration topics as appropriate. These lines of communication ensure that emerging best-practice principles are factored into the Committee’s decision-making.
Further detail on the work of the Company’s Remuneration Committee and the Company’s remuneration policy for the Executive Directors and senior executives can be found in the Company's Corporate Governance Report of the Company found on pages 49 to 68 of the 2020 Annual Report of the Company.
The information in this statement was last reviewed on 30 June 2021.