Statement of Compliance
Reproduced from the Financial Statements 2015
Pursuant to the Listing Rules issued by the Listing Authority, Malta International Airport p.l.c. (the “Company”) should endeavour to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Listing Rules (the “Code”). In terms of Listing Rule 5.94, the Company hereby reports on the extent of its adoption of the principles of the Code for the financial year being reported upon.
The Company acknowledges that the Code does not dictate or prescribe mandatory rules, but recommends principles of good practice. However, the directors strongly believe that such practices are generally in the best interests of the Company and its shareholders and that compliance with the principles of good corporate governance is not only expected by investors but also evidences the directors’ and the Company’s commitment to a high standard of governance.
The Board of Directors (the “Board”) has carried out a review of the Company’s compliance with the Code for the financial year being reported upon, namely the year ended 31 December 2015.
The directors believe that good corporate governance is a function of a mix of checks and balances that best suit the Company and its business. Accordingly, whilst there are best practices that can be of general application the structures that may be required within the context of larger companies are not necessarily and objectively the best structures for companies whose size and/or business dictate otherwise. It is in this context that the directors have adopted a corporate governance framework within the Company that is designed to better suit the Company, its business and its size whilst still ensuring proper checks and balances.
The Company has a corporate decision-making and supervisory structure that is tailored to suit the Company’s requirements and designed to ensure the existence of adequate checks and balances within the Company, whilst retaining an element of flexibility.
In general the directors believe that the Company has adopted appropriate structures to achieve an adequate level of good corporate governance, together with an adequate system of checks and balances in line with the Company’s requirements.
This corporate governance statement (the “Statement”) will now set out the structures and processes in place within the Company and how these effectively achieve the goals set out in the Code. For this purpose, this Statement will make reference to the pertinent principles of the Code and then set out the manners in which the directors believe that these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement will give an explanation for non-compliance.
For the avoidance of doubt, reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles, and the Code Provisions.
3. Compliance with the code
Principles One to Five
These principles deal fundamentally with the role of the Board and of the directors.
The directors believe that for the period under review the Company has generally complied with the requirements of this principle and the relative code provisions.
The Board has throughout the period under review provided the necessary leadership in the overall direction of the Company and has adopted systems whereby it obtains timely information from the Chief Executive Officer (the “CEO”) as the head of the Executive Committee to ensure an open dialogue between the CEO and directors at regular intervals and not only at meetings of the Board. The Company has a structure that ensures a mix of executive and Non-Executive Directors that enables the Board, and particularly the Non-Executive Directors to have direct information about the Company’s performance from the head of executive management that is also a director on the Board.
In line with the requirements of Principle Two, the Company has segregated the functions of the CEO and the Chairman. Whilst the CEO heads the Executive Committee, the Chairman’s main function is to lead the Board, a function which the Board believes has been conducted in compliance with the dictates of Code Provision 2.2.
The CEO is accountable to the Board of the Company for all business operations. He has the power and authority to appoint the persons to fill in the post of each member of the Executive Committee. He also has the discretion to ask any one or more of such members, from time to time, to address the Board on matters relating to the operations of the Company and its Subsidiaries. The Board, of course, is entitled to call in, at its discretion, any one or more of the executives of the Company.
The full complement of the Board, in line with Principle Three is of five (5) Non-Executive Directors and three (3) Executive Directors, a balance that is entrenched in the Company’s Memorandum and Articles, which requires that the CEO is an ex ufficio director together with a maximum of two other senior executives of the Company. The presence of top executives on the Board is designed to ensure that all the members of the Board, including Non-Executive Directors, have direct access at meetings of directors to the individuals having the prime responsibility for day to day operations and executive management of the Company and to the implementation of policies that allow effective discussion and the availability of all the information necessary to carry out their functions in the best possible manner.
The members of the Board for the year under review were:
|Mr Nikolaus Gretzmacher||Chairman & Non-Executive Director||2012|
|Mr Youssef Sabeh||Non-Executive Director||2010|
|Ms. Rita Heiss||Non-Executive Director||2015|
|Mr. Alfred Quintano||Non-Executive Director||2013|
|Dr. Cory Greenland||Non-Executive Director||2015|
|Mr Alan Borg||CEO and Executive Director||2012|
|Mr Markus Klaushofer||CEO and Executive Director||2012|
|Mr Karl Dandler||CFO and Executive Director||2014|
|Mr Austin Calleja||CFO and Executive Director||2002|
Pursuant to generally accepted practices, as well as the Company’s Articles of Association, the appointment of directors to the Board is reserved exclusively to the Company’s shareholders, except in so far as an appointment is made to fill a vacancy on the Board.
The Board normally meets every eight (8) weeks and as a matter of Board policy, a guideline was established whereby at its first meeting, meetings are scheduled for the full year. Board meetings concentrate mainly on strategy, operational performance and financial performance. The Board also delegates specific responsibilities to the CEO and the Committees, notably the Executive Committee and the Audit Committee which operate under their respective formal terms of reference. Directors may, in the furtherance of their duties, take independent professional advice on any matter at the Company’s expense.
For the purposes of Code Provision 3.2, requiring the Board to report on whether it considers each Non-Executive Director as independent in line with the requirements of that Code Provision, the Board considers each of the Non-Executive Directors as independent within the meaning of the Code.
Save for what is stated hereunder, none of the Non-Executive Directors:
(a) are or have been employed in any capacity by the Company;
(b) have or have had a significant direct or indirect relationship with the Company
(c) receive significant additional remuneration from the Company;
(d) have close family ties with any of the executive members of the Board;
(e) have served on the Board for more than twelve consecutive years;
(f) have been within the last three years an engagement partner or a member of the audit team of the present or past external auditor of the Company or any Company forming part of the same group; and
(g) have a significant business relationship with the Company.
Mr Nikolaus Gretzmacher, Ms Rita Heiss and Mr Youssef Sabeh (Non-Executive Directors) are currently members of the Board of Directors of Malta Mediterranean Link Consortium Limited, a Company holding more than 40 per cent of the issued and voting capital of the Company. Notwithstanding the above relationship the Board still considers Mr Gretzmacher, Ms. Heiss and Mr Sabeh, as having the required skills, experience and integrity to retain their independence and impartiality in acting as directors of the Company.
In terms of Principle Four it is the Board’s responsibility to ensure a system of accountability, monitoring, strategy formulation and policy development.
Whilst these are matters which are reserved for the Board to determine within the Group, the Board believes that this responsibility includes the appropriate delegation of powers to management and the organization of the executive team in a manner that is designed to provide high levels of comfort to the directors that there is proper monitoring and accountability apart from appropriate implementation of policy. The Board’s link to the Executive Committee is principally the CEO, together with the other two Executive Directors on the Board, both of whom are member of the Executive Committee.
The Executive Committee comprises the Executive Directors and the heads of each business unit of the Group. The role of the Executive Committee is that of policy execution, business development, finance, security, administrative and personnel matters. It also makes recommendations to the Board on matters which are beyond its remit. The Chief Executive Officer chairs the Executive Committee.
The members of the Committee for the period under review were:
Mr Alan Borg – Chief Executive Officer
Mr Markus Klaushofer – Chief Executive Officer (ceased to be a member of this committee on 21 January 2015)
Mr Karl Dandler – Chief Finance Officer
Mr Austin Calleja – Chief Financial Officer (ceased to be a member of this committee on 1 September 2015)
Mr Patrick Cuschieri – Security (ceased to be a member of this committee on 4 January 2015)
Mr Patrick Murgo – Security
Major Martin Dalmas – Airport Operations
Mr George Mallia – Retail and Property
Mr Ian Maggi – Innovation, ICT and Procurement
Ms Vicki Brown – Projects
Ms Christine Camilleri – Human Resources (ceased to be a member of this committee on 21 July 2015)
Mr Michael Lombardi – Technical Facilities
Ms Tiziana Ellul – Human Resources
Ms Tina Lombardi – Strategy and Business Development
Ms Fleur Farrugia – Human Resources
Company Executives participate in periodic strategic reviews, which include consideration of long-term projections and the evaluation of business alternatives. Regular budgets and strategic plans are prepared, which are incorporated into a Company strategic plan. Performance against these plans is actively monitored and reported to the Board.
In view of the number of members of the Board, the directors believe that its size is manageable to be able to address most issues as a Board rather than create sub-committees of the Board that may be more suitable in the case of companies having larger Boards. Indeed the Board feels that its size and membership allows directors the opportunity to discuss matters directly and that this is a more effective and efficient manner to conduct its business.
The directors however are aware that there may be situations that require the delegation to certain committees of certain tasks or assignments and the Board has on occasion composed ad hoc committees for this purpose.
In ensuring compliance with other statutory requirements and with continuing listing obligations, the Board is advised directly, as appropriate, by its appointed broker, legal advisor and external auditors.
Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at the Company’s expense.
During the financial year under review, the Board held six meetings:
|Director||Attendance Board Meetings 2015|
|Mr Nikolaus Gretzmacher||6 / 6|
|Mr Youssef Sabeh||5 / 6|
|Ms. Rita Heiss||1 / 1|
|Mr. Alfred Quintano||1 / 1|
|Dr. Cory Greenland||4 / 5|
|Mr. Alan Borg||6 / 6|
|Mr. Markus Klaushofer||1 / 1|
|Mr. Karl Dandler||6 / 6|
The Board believes that it complies fully with the requirements of this principle and the relative Code Provisions, in that it has systems in place to ensure the reasonable notice of meetings of the Board and the circulation of discussion papers in advance of meetings so as to provide adequate time for directors to prepare themselves for such meetings.
Principle Six of the Code deals with information and professional development
The CEO is appointed by the directors and enjoys the full confidence of the Board. The CEO, although responsible for the selection of the Executive Committee and the recruitment of senior executives, consults with the directors on the appointment of senior executives. The Board is satisfied that the current schemes for executive compensation are designed to render the Company an attractive proposition for the retention of top executives within the Company and to motivate the Executive Committee.
The Board intends to organise professional development sessions for directors and executives designed specifically to enable them to discharge their functions more efficiently and in line with the high standards expected of them. Directors have access to the advice and services of the Company Secretary who is also the legal counsel to the Board and the Company.
Principle Seven of the Code deals with an evaluation of the Board’s performance
The Board has not appointed a committee for the purpose of undertaking an evaluation of the Board’s performance in accordance with the requirements of Code Provision 7.1.
Principle Eight A of the Code deals with the establishment of a remuneration committee for the Company aimed at developing policies on executive remuneration
The Company has no performance related remuneration payable to its Non-Executive Directors and accordingly, as allowed by Code Provision 8A.2, it has not appointed a Remuneration Committee, but rather establishes itself the remuneration policies of the Company. The Non-Executive members of the Board establish the policies and decides on the performance related remuneration of its Executive Directors.
The Board notes that the organizational set-up of the Company and the size of the Board itself, together with the fact that Non-Executive Directors are not entitled to performance related remuneration, does not, in the opinion of the directors, warrant the establishment of a Remuneration Committee. Remuneration policies have therefore been retained within the remit of the Board itself, and as already stated in the case of the Executive Directors, it is the Non-Executive members of the Board that decide on their performance related remuneration.
The directors believe that certain committees that are suggested in the Code are either not required by the Company or the functions of a number of committees may efficiently be merged or undertaken by the Board itself. In addition, the Board believes that its size and composition is sufficient for the proper direction and management of the Company and its business and that there would be no value added to the Company and its shareholders to increase the number of Board members simply to be able to have separate committees of the Board – when the same functions can properly be undertaken by the Board itself. The directors will retain the need of such committees under review and as in the past, may appoint ad hoc committees of directors to deal with specific issues as and when these arise.
The aggregate amount of remuneration paid to all directors, including salaries paid to the CEO, CFO and CCO amount to €621,166. For the purposes of the provisions of article 63 of the Company’s articles of association, the aggregate emoluments paid to the directors is €415,482 which is within the amount approved by the shareholders of €465,875 for the purpose of that article.
Principle Eight B – This principle deals with the requirement of a formal and transparent procedure for the appointment of directors.
The Board believes that the main principle has been duly complied with, in that it is the Articles of Association themselves that establish a formal and transparent procedure for the appointment of directors. The Articles however do not contemplate the existence of a Nominations Committee as suggested by the Code.
Principles Nine and Ten
Principles Nine and Ten of the Code deal with relations with shareholders and with the market, and institutional shareholders
The Board is of the view that over the period under review the Company has communicated effectively with the market through a number of Company announcements that it published informing the market of significant events happening within the Company.
The Company also communicates with its shareholders through the Annual General Meeting where the Board communicates directly with shareholders on the performance of the Company over the last financial year and to inform shareholders of the challenges that lie ahead.
Business at the Company’s Annual General Meeting (AGM) will cover the approval of the annual report and the audited financial statements, the declaration of a dividend, if any, the election of directors, the determination of the maximum aggregate emoluments that may be paid to directors, the appointment of auditors and the authorisation of the directors to set the auditors’ remuneration. Any other matter that may be placed by the directors before the Annual General Meeting will be dealt with as ‘special business’.
Apart from the AGM, the Company has continued to communicate with its shareholders and the market by way of the Annual Report and Financial Statements, by publishing its results on a six-monthly basis during the year and through the directors’ statements which are also published on a six-monthly basis, and by Company announcements to the market in general. The Company recognises the importance of maintaining a dialogue with the market to ensure that its strategies and performance are well understood. The Company’s website (www.maltairport.com) also contains information about the Company and its business which is a source of further information to the market.
Principle Eleven deals with conflicts of interest and the principle that directors should always act in the best interests of the Company.
The Board has established procedures on how conflicts are to be handled, if and when they arise. A director having a personal conflict on any matter is bound to inform the other members of the Board of such a conflict whether it is an actual, potential or a perceived conflict. It is then the other members of the Board that would decide on whether there exists such a conflict, actual or potential. By virtue of the Memorandum and Articles, in the event that, in the opinion of the Board such a conflict exists then the conflicted director is invited to leave the meeting when it proceeds to the vote, if any, on the matter concerned. As a matter of practice discussions of such matters are normally conducted in the absence of the conflicted director. The Board feels that this is a procedure that achieves compliance with both the letter and the rationale of principle eleven.
Commercial relationships between the Company and other companies may be related by way of common directors and shareholders (“Related Party Transactions”). Contracts are entered into in the ordinary course of business with shareholders and other parties in which the directors have a beneficial interest. Terms and conditions of contracts negotiated with related parties are reviewed by the Company’s Audit Committee. Full disclosure of Related Party Transactions entered into during the financial year under review is made in note 33 to the financial statements.
The following directors have declared their interests in the share capital of the Company:
Nikolaus Gretzmacher – a non-beneficial interest
Karl Dandler – a non-beneficial interest
Youssef Sabeh – a non-beneficial interest
Rita Heiss – a non-beneficial interest
Cory Greenland – a beneficial interest
Austin Calleja – a beneficial interest
No other director has a beneficial or non-beneficial interest in the Company’s share capital.
Principle Twelve encourages directors of listed companies to adhere to accepted principles of corporate social responsibility.
The directors are committed to high standards of ethical conduct and to contribute to the development of the well-being of employees and their families as well as the local community and society at large.
Non-Compliance with Code provisions
The directors set out below the code provisions with which they do not comply and a careful explanation as to the reasons for such non-compliance:
|2.1||Whilst the Company has segregated the functions of the Chairman and the CEO, in that the two posts are occupied by different persons, the division of responsibilities between them has not been established in writing, although there is significant experience and practice that determines the two roles.|
|4.3||For the purposes of Code Provision 4.3, whilst the Board reports that for the year under review it has not organised any information sessions as set out in that provision, during its meetings the Board regularly discusses the Company’s operations and prospects, the skills and competence of senior management, the general business environment and the Board’s expectations.|
The Board believes that the size of the Company and the Board itself does not warrant the proliferation of several committees. Whilst the requirement under Code Provision 7.1 might be useful in the context of larger companies having a more complex set-up and a larger Board, the size of the Board is such that it should enable it to evaluate its own performance without the requirement of setting up an ad hoc committee for this purpose. The Board shall retain this matter under review over the coming year.
Having conducted an informal review of its own performance over the period under review it is the Board’s view that all members of the Board, individually and collectively, have contributed in line with the required levels of diligence and skill. In addition the Board believes that its current composition endows the Board with a cross-section of skills and experience, not only with respect to the specific business of the Company, but also in a wider range of business areas and skills.
The Board has not appointed a Nominations Committee in line with Code Provision 8B, particularly in the light of the specific manner in which the Articles of Association require that Non-Executive Directors be appointed by a shareholding qualification to the Board. The Executive Directors are, in accordance with the Articles, appointed by the Non-Executive Directors after their appointment as aforesaid. The Board believes that the current Articles of Association do not allow the Board itself to make any recommendations to the shareholders for appointments of directors and that if this function were to be undertaken by the Board itself or a Nominations Committee, they would only be able to make a non-binding recommendation to the shareholders having the necessary qualification to appoint directors pursuant to the Articles of Association.
The Board intends to keep under review the utility and possible advantages of having a Nominations Committee and following an evaluation may, if the need arises, make recommendations to the shareholders for a change to the Articles of Association.
|9.3||The memorandum and Articles of Association does not provide any mechanism for the resolution of conflicts between shareholders or any process that would trigger arbitration in these instances.|
THE AUDIT COMMITTEE
As part of its corporate governance structures the Company has an Audit Committee in line with the requirements of the Listing Rules. Unlike the provisions of the Code which are not mandatory in nature, the directors acknowledge that the requirement of having an Audit Committee in place is an obligation under the Listing Rules. The principal role of the Audit Committee is the monitoring of internal systems and controls. During the course of the period under review the Board established the Audit Committee under formal terms of reference designed both to strengthen this function within the Company and to establish the scope of the duties and responsibilities of this Committee. The Committee currently consists of the three (3) Non-Executive Directors, namely Ms Rita Heiss, Mr Youssef Sabeh , and Dr Cory Greenland. The Committee has the power and authority under its terms of reference to summon any person to assist it in the performance of its duties. The directors believe that each of Mr Nikolaus Gretzmacher until he served on the committee and following him Ms Rita Heiss, is independent and competent in accounting and/or auditing in terms of Listing Rule 5.117. The directors believe that each of Mr Nikolaus Gretzmacher (until he served on the committee) and subsequently Ms Rita Heiss, satisfy the independence criteria as they are both independent within the meaning of the Code as explained above in this Statement.
When the Audit Committee’s monitoring and review activities reveal cause for concern or scope for improvement, it shall make recommendations to the Board on the action needed to address the issue or make improvements.
In the period under review the Audit Committee has held four meetings.
The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk to achieve business objectives, and can provide only reasonable, and not absolute, assurance against normal business risks or loss.
Through the Audit Committee, the Board reviews the effectiveness of the Company’s system of internal controls, which are monitored by the Internal Auditors on a regular basis.
The key features of the Company’s system of internal control are as follows:
The Company operates through the CEO and Executive Committee with clear reporting lines and delegation of powers.
The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations. Company policies and employee procedures are in place for the reporting and resolution of improper activities.
The Company has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Company objectives.
Company management is responsible for the identification and evaluation of key risks applicable to their respective areas of business. In addition, through regular checks the internal auditors test the Company’s internal control systems and processes and make recommendations to management and the audit committee on any deficiency in such systems.
The general meeting is the highest decision making body of the Company and is regulated by the Company’s Articles of Association. All shareholders registered on the register of members of the Company on a particular record date are entitled to attend and vote at general meetings. A general meeting is called by twenty-one (21) days’ notice.
At an Annual General Meeting what is termed as “ordinary business” is transacted, namely, the declaration of a dividend, the consideration of the accounts, balance sheets and the reports of the directors and the auditors, the election of directors, the appointment of auditors and the fixing of remuneration of directors and auditors. Other business which may be transacted at a general meeting (including at the Annual General Meeting) will be dealt with as “Special Business”.
Voting at any general meeting takes place by a show of hands or a poll where this is demanded. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands each shareholder is entitled to one vote and on a poll each shareholder is entitled to one vote for each share carrying voting rights of which he is a holder. Shareholders who cannot participate in the general meeting may appoint a proxy by written or electronic notification to the Company. Appointed proxy holders enjoy the same rights to participate in the general meeting as those to which the shareholder they represent is entitled. Every shareholder represented in person or by proxy is entitled to ask questions which are pertinent and related to the items on the agenda of the general meeting and to have such questions answered by the directors or such persons as the directors may delegate for such purpose.
The directors’ statement of responsibilities for preparing the financial statements is set out on page 8.
Approved by the Board of Directors on 24 February 2016.