The Board of Directors of Diurnal believes that strong corporate governance is a central element of the successful growth and development of the Group. The Board and its Committees play a key role in the Group’s governance by providing an independent perspective to the senior management team, and by seeking to ensure that an effective system of internal controls and risk management procedures is in place. This section of the website describes our corporate governance structures and processes. These disclosures will be reviewed annually.

The AIM Rules require companies to report against an adopted corporate governance code. Diurnal’s Board considers that the QCA Corporate Governance Code (“QCA Code”) is the most suitable framework for smaller public companies and, consequently, formally adopted the QCA Code during its financial year ended 30 June 2018, having informally followed its principles since its IPO in December 2015.

The table below shows how the Group addresses the ten principles underpinning the QCA Code:

Deliver growth

1. Establish a strategy and business model which promote long-term value for shareholders
See the “Business model and strategy” section of the Annual Report and Accounts.

2. Seek to understand and meet shareholder needs and expectations
The Chief Executive Officer and Chief Financial Officer have primary responsibility for investor relations. Diurnal aims to keep shareholders well-informed through regular press releases providing updates on the progress of the Group, including appropriate use of social media to disseminate information. The Group meets regularly with equity research analysts, to ensure that the markets are well-informed about Diurnal, and with its institutional shareholders, both following its interim and full year results as well as ad hoc meetings. 

Feedback is obtained from all analyst and institutional meetings and is shared with the Board to ensure any concerns are addressed. 

Diurnal is also a regular participant in meetings focused on retail investors, to ensure access for smaller, private shareholders, and engages a paid-for-research service to provide detailed analytical information for all shareholders.

The annual general meeting (AGM) is also an opportunity for shareholders to engage with the Board.

Feedback to date from investors indicates that Diurnal’s investor relations activities are fully meeting the needs of shareholders.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Group’s strategic vision and business model is underpinned by several key elements:

• Diurnal routinely engages with physicians and patient groups to ensure that its products are developed to address significant unmet medical needs. Where appropriate, feedback from these groups is incorporated into clinical trial designs and endpoints.

• Diurnal is engaged with healthcare payers globally to ensure that its products are able to demonstrate cost-effectiveness following regulatory approval.

• In order to underpin its development and commercialisation activities, Diurnal enters into long-term relationships with high-quality suppliers and maintains a regular dialogue, both at an operational level, as well as regular governance interactions with supplier senior management.

• The Group places high importance on creating an attractive environment for its employees. This is monitored and maintained through goal setting, regular appraisals, company communications and meetings.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
Pages 18 and 19 of the Annual Report and Accounts for the year ended 30 June 2017 provide a comprehensive guide to our risk management approach.

Maintain a dynamic management framework

5. Maintain the Board as a well-functioning, balanced team led by the Chairman
Pages 21 to 27 of the Annual Report and Accounts for the year ended 30 June 2017 provide a comprehensive guide to our approach to corporate governance.

6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
See the “Corporate Governance” and “Board of Directors” sections of the Annual Report and Accounts.

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board undertook its first internally facilitated evaluation process during 2018, (reflecting an evolution from previous informal processes) utilising a detailed self-evaluation tool which asks the Board to rank itself in the following areas:

• Board composition;
• Board processes;
• Behaviours; and
• Board activities

The individual responses are compiled confidentially by the Company Secretary and the aggregate results are presented to the Board for discussion, and – where applicable – appropriate actions are implemented. 

The first evaluation process identified several areas which, although considered to be adequate, require formalising in terms of documentation and/or policies. It is envisaged that evaluations will be conducted at least once per year. The Board considered the evaluation tool used to be appropriate for the Group’s current size and complexity and intends to undertake this evaluation process annually.

The Nomination Committee of the Board is responsible for identifying the need for Board and senior management appointments, for agreeing a specification for candidates and ensuring that a rigorous recruitment process is undertaken, including the use of external headhunters where required. The Nomination Committee currently comprises Peter Allen as Chairman, John Goddard, Alan Raymond and Sam Williams. In light of the small size of the Group’s current leadership team, the Board considers it most likely that succession will be addressed through external recruitment rather than internal promotion; consequently, the Group does not currently have a formal succession plan for the senior management team. The Nomination Committee reviews the requirement for a formal succession plan regularly, in particular as the Group grows and develops.

See further detail in the “Corporate Governance” section of the Annual Report and Accounts.

8. Promote a corporate culture that is based on ethical values and behaviours
The corporate culture of the Group is established through the setting of corporate objectives by the Board, which flow through the organisation by the setting of departmental and individual objectives. These objectives are reviewed annually by the senior management team for consistency with the overarching corporate goals. The Board regularly receives updates on the organisational development and discusses behaviours of the wider team.

The Group’s company handbook sets out expectations of staff, including appropriate policies regarding conduct of business. The senior management team monitors behaviours through regular written progress reports, team meetings and individual meetings. For key vendors, the Group has governance procedures in place such that the CEO and/or CFO regularly meet with the vendor’s senior management to discuss working relationships. 

Since the Group operates in a highly regulated sector, it has an extensive set of standard operating procedures (SOPs) which dictate how business should be undertaken. Deviations to the SOPs are addressed through a formalised (CAPA) process. CAPAs are reviewed regularly by the senior management team.

See further detail in the “Corporate Governance” section of the Annual Report and Accounts.

The Board comprises seven Directors: two Executive Directors, a Non-Executive Chairman, one independent Non-Executive Director and two further Non-Executive Directors.

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The roles and remit of the Chairman, Chief Executive Officer and Board are set out in the “Corporate Governance” section of the Annual Report and Accounts.

In order to effectively manage governance of the Group, the Board has delegated certain responsibilities to sub-committees. The Board has established Audit, Remuneration and Nomination Committees, each with written terms of reference. The role of each committee is set out in the “Corporate Governance” section of the Annual Report and Accounts.

The terms of reference for the Audit Committee are set out here.

The terms of reference for the Remuneration Committee are set out here.

The terms of reference for the Nominations Committee are set out here.

Matters reserved for the Board are detailed here.

The Board regularly reviews the appropriateness of the governance framework: at the last updated date below, the Board considers the governance framework remains appropriate to support the Group’s plans for growth.

Build trust

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board is committed to transparency in its dealings with all shareholders and other relevant stakeholders. 

Following each general meeting, Diurnal issues an RNS announcement detailing the voting on matters set out to shareholders in the notice of meeting. To date, there have not been any significant votes cast against any resolution.

Diurnal maintains access to all historic general meetings on its website, as follows:

• Notices of annual general meeting (AGM) are contained within the Annual Report and Accounts, located in the “Financial Reports and Accounts” section of the website; and

• Notices of general meetings other than the AGM are located in the “Shareholder Information” section of the website

See further detail in the “Corporate Governance” section of the Annual Report and Accounts.

The Board considers that it is in full compliance with all the principles of the QCA Code.

Information last updated: 20th September 2018