# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/LSE_ELM.L_2021/LSE_ELM.L_2021.mmd` · pages 92-98_

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Dear Shareholders,

As Chair of the Nomination Committee (the 'Committee'), I am pleased to present the Nomination Committee report covering the work of the Committee during 2021. This report should be read in conjunction with the separate section on compliance under the UK Corporate Governance Code on page 80.

## Role of the Committee

The Committee is responsible for the structure, size and composition of the Board, ensuring that the Board and Committees have the most appropriate balance of skills, knowledge and experience. This Committee ensures and oversees succession planning and has responsibility for the annual evaluation of the Board.

## Key responsibilities

– Regularly reviewing the structure, size, diversity and composition of the Board

– Ensuring that the Company has the right leadership, balance of skills and experience to deliver the Company's strategy and enable the Board to effectively fulfil its obligations

– Succession planning for the Board and ELT

– Leading on the annual performance evaluation of the Board and its Committees

– Identifying and nominating, for approval by the Board, candidates to fill Board vacancies as and when they arise

– Managing potential Directors' conflicts of interests

## Programme of business

– Annual review of Directors' independence and conflicts in accordance with the Committee's terms of reference

– Engagement with external search consultants to assist with the Chair succession approach

– External Board evaluation

– Reviewing structure, size, diversity and composition of the Board

– Succession planning for the Board and oversight of senior management succession plans

– Non-Executive Directors meeting without the Executive Directors present

– Approval of Nomination Committee report

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## Board effectiveness processes

Annually the Chair is responsible for conducting an appraisal with each Non-Executive Director in respect of their skills, experience, contribution and time commitment to the Company.

The Committee also oversees the effectiveness process and agreed that an externally facilitated review was appropriate during the year. Further information regarding this year's effectiveness review can be found on page 90.

## Directors' conflicts

The Committee has oversight of Directors' potential conflicts of interest and during the year, in accordance with policy, considered and approved additional external directorships for Dorothee Deuring and Anne Hyland.

## Board composition and skills

A matrix is maintained which serves as a record of directors' experience, attributes and expertise. The Committee reviews this matrix annually to ensure that the Board has an appropriate composition and range of skills, experience and diversity to prevent any dominance, either individually or collectively over the Board's decision making processes. Highlights from this matrix are noted on page 95.

## Re-appointment of Directors

All Directors are subject to re-election at the next Annual General Meeting, as required by the Code. Following the evaluation activity and taking into account a review of director independence, conflicts and ongoing time commitments, the Committee concluded that each of the Directors continues to make an effective contribution to the Board and, with the exception of Anne Hyland, all Directors will stand for re-election at the AGM.

During the year there was no requirement for the re-appointment of a Director for second or third term. The Committee regularly reviews the schedule of non-executive tenure and the next formal review will take place in 2022. Recommendations for annual re-appointment are supported by considerations regarding the Directors' independence, experience and contribution which they bring to the Board and its Committees. These matters will be subsequently confirmed following the Board evaluation process during 2022 and a review of conflicts and independence. In line with best practice, the continuing Board roles remain subject to annual re-election by shareholders.

## Board induction programme

## Induction – General topics

- The role of a Director

- Board and Committees

- Board Meetings

- Rules and regulations and

guidance

- Board procedures

- Current issues

- Nature of the Company,

its business and its

markets

- The Company's main

relationships

## Induction – Board Committees (as appropriate)

- Role and remit of the Committee

- Link between the Committee's policy and the Company's strategic objectives

- The annual meeting schedule for the Committee

- The main business conducted by the Committee

- The legal requirements relevant to the

Committee's operations

- Market practice and current trends relevant to the Committee

- Current issues

- Views of investors on matters considered by the Committee and potential

areas of focus

- Any technical training on key matters

## Induction – External advisers

Meetings with:

- External auditors

- Internal audit function

- Remuneration consultants

- Brokers

- Lawyers

## Induction – Senior management meetings

Meetings with:

- CEO

- CFO

- SVP Global Coatings and Energy

- SVP Global Personal Care

- SVP Global Chromium

- SVP Global Talc

- Chief HR Officer

- Chief Information Officer

- SVP Global Supply Chain

& Manufacturing

- Group General Counsel

and Chief Compliance Officer

- Group Company

Secretary

- Group Head of Tax

- Group Financial Controller

- Director of Investor Relations

## Induction – Site visits

- Induction – Site visits

- SciPark – New Jersey, US

(US head office)

- Amsterdam, Netherlands (Talc)
- Castle Hayne – North

Carolina, US (Chromium)

- Others as agreed during

the course of the year

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## Corporate governance
Nomination Committee report

## Board induction

The Chair, with the support of the Company Secretary, is responsible for preparing and co-ordinating an appropriate induction programme, which is to be tailored to the needs of each newly appointed Non-Executive Director.

Newly appointed Directors are provided with a thorough briefing on their fiduciary duties and continuing obligations from the Company Secretary, and legal advisers if required.

A typical induction programme can be found on page 93.

## Succession planning

Following the announcement of the Chair's intention to retire from the Board, the Committee discussed the approach for this particular role and appointed Korn Ferry, external search consultants, to assist with the process, which included the sensitivity of managing an internal candidate, John O'Higgins.

As Andrew Duff and John O'Higgins were not able to participate in any of the Committee discussion regarding the Chair succession process, Steve Good, with the support of the Committee, led the Chair succession process.

With input from the Executive Directors, the Committee prepared a role specification and a recruitment brief, which was shared and discussed with Korn Ferry. A longlist comprising candidates with regard for the benefits of diversity, including gender and ethnicity, was prepared by Korn Ferry and considered by the Committee. Having discussed the merits of each of the candidates, the Committee agreed a shortlist, including John O'Higgins, for further discussion.

Having carried out further due diligence including time commitments and potential conflicts, and with the support of the Board, the Committee concluded that John O'Higgins be appointed as Chair.

As a consequence of this appointment, the role of Senior Independent Director had become vacant and, following Committee discussion, there was unanimous support for Steve Good to fill the role in addition to his role as Chair of the Remuneration Committee. These role changes were announced on 29 July 2021 and became effective on 1 September 2021.

In the period from announcement to 1 September 2021, Andrew Duff and John O'Higgins agreed a transition and handover process. For the induction as Chair, the Company facilitated a tailored approach building on the induction programme that John O'Higgins received on joining the Company.

## Diversity policy

The Board has adopted a diversity policy, which is available on the Company's website. The Board acknowledges the importance of diversity in its broadest sense in the boardroom as a key element of Board effectiveness. The Board is fully supportive of the recommendations of the Parker Review and the Hampton-Alexander Review which are discussed in the context of succession planning. Diversity includes perspective, experience (including working internationally), background (including nationality), cognitive and personal strengths and other personal attributes, as well as diversity of gender, social background and ethnicity.

## Progress on our diversity objectives

Our external advisers are selected on their commitment and ability to deliver diverse longlists in the recruitment processes

– The composition of the Board is reviewed on an annual basis

– The gender balance of the Board exceeds our target of 33% (currently 43%)

– Oversight of gender and ethnic diversity profile across the Group including promotion of talent into management roles

– Oversight of senior management succession plans

– Assessment of skills, expertise, backgrounds and experiences are considered prior to Directors joining the Board and on an ongoing basis using a diversity matrix

– Continue to monitor regulatory developments and best practice in respect of diversity

– The policy is reviewed on an annual basis

## Priorities for the year ahead

– Succession planning for new Non-Executive Directors ahead of expiry of tenure for Anne Hyland and Steve Good in 2023

– Review Board and senior management succession plans

– Review Board diversity policy and objectives

– Review of 2021 external evaluation outcomes and planning for 2022 internal evaluation

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## Diversity overview

## Composition of the Board

Independent Non-Executive Directors
Chair
Executive Directors

## Gender of the Board

Female
Male

![](images/95_0.jpg)

Gender, Company-wide

Female
Male

![](images/95_1.jpg)

Overall gender diversity summary

Board

ELT

Senior management (XLT)
Senior managers (s.414 CA 2006 definition)
All employees

![](images/95_2.jpg)

![](images/95_3.jpg)

Average age of Board as at 31 December 2021

## Gender of ELT

Female
Male

![](images/95_4.jpg)

Gender balance of ELT and direct reports

Female
Male

![](images/95_5.jpg)

Nationality of the Board

![](images/95_6.jpg)

Length of tenure

4 to 6 years
3 to 6 years
Less than 3 years

![](images/95_7.jpg)

![](images/95_8.jpg)

## 59

Board expertise and experience matrix

<table><tr><td></td><td>John O&#x27;Higgins</td><td>Paul Waterman</td><td>Ralph Hewins</td><td>Dorothee Deuring</td><td>Steve Good</td><td>Anne Hyland</td><td>Christine Soden</td></tr><tr><td>Manufacturing/industrial processing</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td></tr><tr><td>Specialty chemicals</td><td>●</td><td>●</td><td></td><td>●</td><td>●</td><td></td><td></td></tr><tr><td>Strategy/business development</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td></tr><tr><td>International business &amp; markets</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td><td>○</td></tr><tr><td>Innovation/product development</td><td>●</td><td>●</td><td></td><td>●</td><td>●</td><td>●</td><td>●</td></tr><tr><td>Sales/marketing/customer</td><td>●</td><td>●</td><td>●</td><td></td><td>●</td><td></td><td></td></tr><tr><td>Accounting/tax/treasury/risk management</td><td></td><td></td><td>●</td><td>●</td><td>●</td><td>●</td><td>●</td></tr></table>

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# Audit, risk and internal controls

![](images/96_0.jpg)

Anne Hyland
Chair, Audit Committee

## Highlights

## Areas of focus

– Recommended approval of the 2020 Annual Report and Accounts and 2021 Half Year Statements to the Board

– Approval of audit plans (external and internal) for 2021

– Review of going concern and viability statement

– Assessment of impact of COVID-19 on the key balances and estimates

– Presentation of adjusting items

– Goodwill and indefinite life intangible assets impairment review

– Group tax exposures and tax positions

## Attendance at Audit Committee meetings

<table><tr><td>Anne Hyland (Chair)</td><td>4/4</td></tr><tr><td>Dorothee Deuring</td><td>4/4</td></tr><tr><td>John O&#x27;Higgins*</td><td>3/4</td></tr><tr><td>Christine Soden</td><td>4/4</td></tr></table>

* John O'Higgins stepped down from the Audit Committee on appointment as Chair of the Board, 1 September 2021.

Dear Shareholders,

As Chair of the Audit Committee (the 'Committee'), I am pleased to present the Audit Committee report covering the work of the Committee during 2021. This report should be read in conjunction with the separate section on compliance under the UK Corporate Governance Code on page 80.

All members of the Committee are independent Non-Executive Directors. Members' biographies can be found on pages 76 to 77.

The Chair of the Board, CEO, CFO and Group Financial Controller, alongside representatives from the external auditors, Deloitte, and internal auditors, PwC, have a standing invitation to attend Committee meetings. All Board members have access to Committee papers.

As required by the Code, the Board is satisfied that Anne Hyland has the relevant financial experience to chair this Committee and the Committee as a whole has the financial and commercial competence to meet its responsibility in an independent and robust matter.

## Role of the Committee

To assist the Board by establishing, reviewing and monitoring the Group's financial reporting, internal controls framework and risk management, internal audit programmes and changes in regulatory requirements.

## Composition of the Committee

In accordance with the Code, the Board has confirmed that all members of the Committee are independent Non-Executive Directors and have been appointed to the Committee based on their individual financial and commercial experience.

The Board is satisfied that Anne Hyland, as Chair of the Committee, has recent and relevant financial experience to chair this Committee through her current executive role as CFO at Kymab Group and as chair of the audit committee at Clinigen plc (AIM listed) as well as previous experience as CFO at FTSE-listed Vectura plc. Anne is a chartered accountant (FCA) and a corporate tax adviser (CTA-AITI).

The Committee, as a whole, has financial and commercial competence relevant to the sector in which the Group operates. Further information on the skills, expertise and experience of Committee members can be found on page 95.

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## Key responsibilities

Monitoring the integrity of the Group's financial statements, financial reporting and related statements

Ensuring the appropriateness of accounting policies, any changes to these, and any significant estimates and judgements made

Reviewing the effectiveness of internal controls, compliance and risk management systems (including whistleblowing arrangements)

- Overseeing all aspects of the relationship with the internal and external auditors; approving the policy on non-audit services; making recommendations to the Board for their dismissal or changes; and supervising any tender process

The Committee's terms of reference, which are reviewed and approved annually, are available on the Company's website.

## Activities during the year

The Committee's focus in 2021 has been on:

Meetings with both the internal and external auditors to review their key findings

Reviewing the internal control systems and considering the output of internal audit reviews and management's action plans

Reviewing the integrity, consistency and key accounting judgements made by management in both the Company's full and half year results

Advising the Board on whether the Annual Report and Accounts preparation process is fair, balanced and understandable, and provides the information necessary to shareholders to assess the Group's position and performance, business model and strategy

Reviewing the going concern and viability statements, and the supporting assumptions and assessments in the Company's half year report and Annual Report and Accounts

Ensuring compliance with applicable accounting standards, monitoring developments in accounting regulations which affect the Group and reviewing the appropriateness of accounting policies and practices currently in place

Reviewing the effectiveness of the internal and external auditors, their independence and objectivity and terms and scope of engagement, and recommending their re-appointment

Overseeing matters relating to tax, including the impact of tax rates on the financial statements, the position on EU state aid and approval of the Company's tax strategy

Litigation and compliance reports for both the full and half year

Considering the material legal risks impacting the Company and the associated provisioning for both the full and half year

Receiving updates on the Code of Business Conduct and Ethics, and the associated training and whistleblowing policies

Technical updates on the Annual Report and Accounts key developments, 2021 year end report environment, corporate governance matters and future developments

Reviewing the Group's risk management activities undertaken by each business area, and at Group level to identify and assess the Group's principal risks

Monitoring and assessing the Group's insurance arrangements

Selection and appointment of new lead auditor

FRC correspondence and oversight of the Company's response to the BEIS 'Restoring trust in audit and corporate governance' consultation
Preparation, and reviewing progress, for TCFD disclosure requirements

Identifying, assessing and mitigating climate related risks

## Committee effectiveness

The Committee's performance and effectiveness were reviewed in the year as part of the Board's effectiveness review conducted by Manchester Square Partners. Further details can be found on pages 90-91.

## External auditors

Deloitte have served as external auditors for six years. The Committee engages with Deloitte on a regular basis to ensure this area of oversight is appropriately maintained. The Committee periodically meets privately with the lead audit partner and senior members of the audit team to discuss their work and findings.

## Audit of the 2021 Annual Report

At the end of 2021, Deloitte presented their audit plan for the year ahead, which the Committee considered and then approved. Deloitte highlighted the key areas of risk, which were primarily identified as areas of judgement and complexity and were consistent with those areas identified by the Committee.

As part of the audit process, Deloitte prepared a detailed report of their audit findings, which was reviewed and discussed by the Committee. A similar process is undertaken for the half year results.

## Audit effectiveness

To support the Committee in evaluating the effectiveness of the external auditors, a questionnaire based evaluation is circulated to internal stakeholders who have had the most interaction with the external auditors during the audit process. The data is collated into a score card which is used to assess the strengths and weaknesses of the external auditors.

Management and the external auditors then address any areas of weakness in their regular review meetings, and the lead audit partner from Deloitte updates the Committee on how areas of weakness are being addressed.

The Committee also monitors audit effectiveness by reviewing the Audit Quality Inspection reports published by the FRC.

The Committee will formally assess Deloitte's performance in relation to the 2021 audit following its completion. It is intended that a resolution to re-appoint Deloitte as the external auditor will be proposed at the 2022 AGM.

## Audit independence

The Committee considers the external auditors' objectivity and independence at least twice a year.