Page 16 - CIMA SCS Workbook November 2018 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

in some additional research staff that have further expertise in pharma IT to take the research
even further.

Without doubt, any Board review should consider the role of an HR Director; with over 100,000
people employed worldwide and with the quality of staff we need to retain and attract,
particularly within our research centres, a strong HR culture is critical to Novak’s ongoing success.

Given the letter from Grie Dee Capital and the review of the committees, there is definitely a
need for Novak to consider the role of the Non-Executive Directors on the Board at the moment.
This is not to call into question the performance of Winston Alade, Marcia Conelli or Henry Wong,
but they have a significant work load. Excluding our chair, we only have these three non-executive
directors, and so perhaps they have been unable to perform their roles as well as they are capable
of due to the volume of work. This could then have led to inappropriate targets being set and
excessive performance-related pay being paid out.

The Cronland Code of Corporate Governance* states that there should be an equal number of
executive and non-executive directors, but at present Novak has almost twice as many executive
directors. Given we are considering additional executive directors, and given the concerns of
some of our shareholders, it is also time to increase the number of non-executive directors. Part
of their role is a control function to make sure the Board is operating effectively, discharging its
duties appropriately; it could be argued Grie Dee Capital’s concerns suggest this may not be the
case, and our non-executive directors are not able to operate effectively.

Other considerations, as well HR, research, IT and non-executive directors, could be other
specialist directors depending on future strategies that Novak considers. I know that some of our
competitors operate in some additional markets to Novak, whether that is generic medication or
even veterinary medication. If Novak were to move into any of these fields then making sure
there was a representative for this at a strategic level would be an important consideration too.

Conclusion

Given the concerns of our shareholders the most pressing issue appears to be the control
mechanism for our Board of directors, the non-executive directors are under resourced. Any plans
to restructure the Board should include at least as many non-executive directors as executive
directors. The need for a director to oversee the critical aspect of human resource management is
also a high priority for any Board restructure, we cannot risk losing or failing to attract high quality
employees.

*Tutorial note. This is based on Dirk Lepain’s email in the trigger for this task. Be prepared for
other information about the Cronland Code of Corporate Governance.

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