CORPORATE GOVERNANCE

BOARD OF DIRECTORS
INTERNAL CONTROLS AND RISK MANAGEMENT
STATEMENT OF DIRECTORS´ RESPONSIBILITIES

Luxfer follows principles of corporate governance in so far as is practical for a company of its size.

BOARD OF DIRECTORS:
Board composition — The Board of Directors consists of five members: a Non-Executive Chairman, two Executive Directors and two Non-Executive Directors appointed by the non-management shareholders. The Chairman and two Executive Directors are also shareholders.

See “Director Profiles”.

The Role of the Board:
The Board has responsibility for the overall management and performance of the Group and approval of its long-term strategy. They have determined a schedule of appropriate matters reserved to the Board, which is reviewed periodically. There are six scheduled meetings each year with additional meetings called as appropriate. They normally meet at least once a year at one of the Group's overseas locations as part of their monitoring role and to ensure a better understanding of the Group's operations.

Board Committees: The Company has a Remuneration Committee and Audit Committee, which deal with various appropriate aspects of the affairs of both the Company and the Group in accordance with written terms of reference which are reviewed periodically. 

Membership of these Committees is shown in Director Profiles.

The Chief Executive is responsible to the Board for the management and performance of the business within the framework of the matters reserved to the Board. Both he and the Group Finance Director each provide routine monthly reports to the Board which cover all aspects of the business as agreed with the Board and which are then further commented upon at scheduled Board Meetings and elaborated upon as necessary.

Executive Management Board:  The Group also has an established Executive Management Board, chaired by the Chief Executive which is normally scheduled to meet monthly. This board consists of senior management at Group and divisional level and provides a forum where matters of interest or concern to the Group can be reviewed and discussed, policies agreed and appropriate measures implemented. It also provides a forum for senior management to update themselves with progress in other parts of the Group outside their remit. See "Executive Profiles".

INTERNAL CONTROLS AND RISK MANAGEMENT:
The Group operates to established procedures, which are designed to identify, evaluate and manage significant risks in the Group.  These procedures are reviewed on an on-going basis as considered appropriate and cover both financial and non-financial risks.  The Board receives periodic reports on internal controls, the management of identified risks and the processes involved in their identification. The following are the Group´s principal internal control procedures:

Risk Management - The Group has over the years developed and implemented a Risk Management Process with the help of external advisors.  On an annual self-certification and monitoring basis, local management create a risk profile for their business by identifying and evaluating the likelihood and magnitude of their key operational, commercial and financial risks.  These risk factors are also consolidated annually to form an overall risk profile for the Group.  Risk profiles are used as a management tool both at business unit and Group level with a view to reducing, transferring or eliminating risk as appropriate and where possible.

Health and Safety - The Group is fully committed to achieving and maintaining the highest standards of health and safety for all its employees, contractors, visitors and all those who may be affected by its operations as an integral part of good business practice. Members of the Executive Management Board have been designated to monitor, co-ordinate and report upon the health and safety aspects of specific regions of the Group's international operations.

The main elements of our approach to health and safety are:

• A requirement that all operating units comply with the Group´s health and safety policy and relervant local health and safety legislation and regulation.
• Health and safety is considered as an element in both the business unit and corporate risk assessment.
• Each operating site has a designated health and safety officer who is appropriately trained and responsible for health and safety matters and compliance with relevant legislation at the site. Risks are identified on a site basis and appropriate training of employees is undertaken.
• Site health and safety issues are discussed at the regular business review meetings undertaken by the Chief Executive and the Group Finance Director on each site.
• A system of periodic cross audits between operating units.  The results of these audits are reported upon to the site managing director with appropriate recommendations.  Progress on implementation of any recommendations is followed and reported upon in the business review meetings undertaken by the Chief Executive.
• There are also periodic regional meetings of health and safety officers from operating units across the Group.
• Professional expertise is sourced as and when appropriate.
• A quarterly report is made to the Board by the Chief Executive Officer who also reports any issue of which the Board should be aware if and when such issues may arise.

To further heighten the profile of health and safety within the Group, in 2009 we introduced two new health and safety awards which will be competed for annually within the Group. They are awarded on a site basis for the "Best Overall Safety Performance" and the "Most Improved Safety Performance". All employees at the winning site participate in the reward.

Environment - The Group remains committed to a high standard of environmental management to ensure legislative compliance across the Group. Members of the Executive Management Board have been designated to monitor, co-ordinate and report upon the environment and environmental issues revervant to the Group and its activities for specific regions of the Group's international operations.

The main elements of the Group´s approach to the environment are:

• A Group Environmental Policy and site-specific Environmental Management System (EMS) with which all operating sites are required to comply.  The Group is committed to achieving ISO 14001 certification at larger sites and several of our business units have already achieved this standard.  Many of the elements of the current EMS and work carried out for IPPC registration are consistent with ISO 14001.
• All UK manufacturing sites that require IPPC permits have attained them.
• The environment is managed and reported on at various levels within the Group.  Each operating site has a manager designated with responsibility for environmental matters who has appropriate knowledge and expertise.
• External expertise and advice is sought as necessary and appropriate.
• The Chief Executive reports to the Board annually on the main environmental issues affecting the Group and any significant individual issues are brought to the attention of the Board as appropriate and as they arise during the year.
• The environment is considered as an element of the Group´s corporate risk assessment.  No acquisition involving land or an operating site is undertaken without first obtaining an independent environmental report.

Internal Financial Controls - The key controls consist of:

• The preparation of comprehensive monthly financial reviews submitted to and discussed with the Directors at regular Board Meetings.
• Hedging policies approved by the Board and operated by a hedging committee which is chaired by the Group Finance Director. The policy covers the Group´s exposure to and management of metal costs and foreign exchange rates as appropriate.  The Board also receives regular monthly reports on such activities. Policies are reviewed periodically as circumstances dictate.
• Group Accounting Manual and Group Authority Manual requiring proper, consistent, and legally compliant financial management at all levels.
• Regular performance reviews with divisional management carried out by the Chief Executive and the Group Finance Director at site.
• Periodic internal audits carried out by Head Office finance staff.
  

STATEMENT OF DIRECTORS´ RESPONSIBILITIES

A copy of the Statement of Directors' Responsibilities can be downloaded below:

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