Governance Case study Celebrating our world leading low carbon hydrogen technology Today JM is a leading manufacturer of catalysts used to make ‘grey’ hydrogen from fossil fuels. But since this process generates carbon dioxide (CO2) emissions we’re also developing technologies to make ‘blue’ hydrogen, in which the CO2 is captured and stored, and ‘green’ hydrogen, made from renewable energy and electrolysis. Our LCH™ process is actually world leading for producing blue hydrogen. It not only reduces CO2 emissions by over 95%, but also offers the highest feedstock efficiency with lower capital expenditure, and a 40% smaller required footprint. It’s ready to deploy now, and has already been used in the development of two major UK hydrogen projects, HyNet and Acorn. There’s a lot of buzz about low carbon hydrogen in the industry, and I’m excited to see our technology used at scale soon, helping to kick start the carbon reductions we need to reach net zero. Rob Jolly Business Development 98 Manager Contents 100 Letter from the Chair 102 Board of Directors 104 Group Management Committee 106 Our governance structure 108 Corporate Governance Report 122 Nomination Committee Report 126 Audit Committee Report 136 Remuneration Report 164 Directors’ Report 171 Responsibilities of Directors Johnson Matthey / Annual Report and Accounts 2021 99 Governance Letter from the Chair Patrick Thomas Chair Tackling today’s unique challenges, driving change for the future Dear Shareholder Making sure sustainability stays at the heart of our success I am pleased to present the Governance Report for the year As you will have seen from our strategic report, we are making ended 31st March 2021. it our business to help address the four big transitions the world This year was of course, unlike any other. Many of the needs for a sustainable future: transport, energy, chemicals challenges the board faced were no doubt similar to our peers – decarbonisation, and the circular economy. It is at the heart adapting to a fully virtual meeting schedule, and balancing the of JM’s strategy – so it is vital that we have the governance views of stakeholders as we assessed the impact of the COVID-19 structure to support it, and that the board continues to place a pandemic on our business. For us, there was also significant priority focus on environmental, social, and governance (ESG) added complexity, as we drove the transformation of our issues and the risks associated with them. The board has business to make us ready for the future while adapting to the therefore established a new main board committee in May 2021 fast changing external environment. It meant a year when – the Societal Value Committee – to support all our sustainability strong, effective governance was more important than ever, ambitions, which will be chaired by Jane Griffiths. and I believe our high standards and clear framework supported Our approach to sustainability marches in step with JM’s the effective decision making which is so vital to delivering the approach to business in general, and with the attitude that I’m company’s strategic aims and our vision – a world that is cleaner pleased to say has been evident in the board again this year: and healthier; today and for future generations. where there are challenges, we see opportunities, and we put the creativity and innovation that drives this company to work. Staying in touch with stakeholders, and strengthening our board In last year’s report, we were just beginning to assess the impact of COVID-19 on our business. A year on, we have set out to explain how the board and committees continue to adapt our Patrick Thomas ways of working and adjust how we engage so that we make Chair sure we stay in touch with all our stakeholders. At the same time, we continued to seek to improve the Compliance with the UK Corporate Governance Code 2018 effectiveness of our board, including through an external board effectiveness review. I’m delighted to report that the board Our compliance statement on pages 120 and 121 summarises how the company has applied all principles of the UK Corporate continues to be effective, providing a culture of open debate, Governance Code 2018 (the code). During the year under strong contribution and challenge. Further details on the review review, we have not complied with provision 38 on aligning and the actions arising from it can be found on page 118. executive director pension payments with the workforce. Succession planning remains a key focus, particularly at Group Our Remuneration Report on page 141, contains further Management Committee (GMC) level, where we saw a number details on the plans in place to ensure alignment with the of new appointments during the year. We welcomed Nick Cooper workforce for the next financial year. We have also not fully as General Counsel and Company Secretary, Ron Gerrard as Chief complied with provision 41 engagement with the workforce Environment, Health and Safety (EHS) and Operations Officer, on alignment of executive pay with the wider company pay and Stephen Oxley as Chief Financial Officer. All bring extensive policy. While we seek to ensure that our employees are kept experience in their respective fields and further enhance the informed on global changes to pay and benefits, we have not skills and capabilities of our GMC. I would also like to extend my actively sought a two way dialogue with the workforce over thanks to Karen Hayzen-Smith, our Group Financial Controller, executive pay. We continue to benchmark our remuneration who stepped up as Interim Chief Financial Officer following the against our peers to ensure the pay and benefits that we offer departure of Anna Manz in November 2020. As reported last to the whole workforce are competitive to attract and retain year, following the retirement of Alan Ferguson in July 2020, the highest calibre candidates. John O’Higgins took on the role of Senior Independent Director Go online: The code is publicly available on the Financial and Doug Webb became Chair of the Audit Committee. Reporting Council (FRC) website, frc.org.uk 100 Johnson Matthey / Annual Report and Accounts 2021 We will only achieve our vision for a cleaner, healthier world if we maintain our strong standards of governance and a culture of debate and challenge.” Board at a glance Governance Board and committee attendance Audit Remuneration Nomination Board attendance Board Committee Committee Committee Patrick Thomas 11/11 – 7/7 8/8 Robert MacLeod 11/11 – – – Anna Manz 7/7 – – – Alan Ferguson 4/4 4/4 4/4 3/3 Xiaozhi Liu 11/11 8/8 7/7 7/81 John O’Higgins 11/11 8/8 7/7 8/8 Jane Griffiths 11/11 8/8 7/7 8/8 Chris Mottershead 11/11 8/8 7/7 8/8 Doug Webb 11/11 8/8 7/7 7/81 Attendance is expressed as number of meetings attended out of the number eligible to attend. 1 Doug and Xiaozhi were unable to attend an unscheduled Nomination Committee meeting due to unavoidable diary clashes. All information shown below is as at 31st March 2021. Gender diversity* Tenure Role Nationality Female Male ■ 0-3 years 45% ■ Chair 10% ■ British 72% 2 directors 5 directors ■ 4-7 years 45% ■ Executive 30% ■ Irish 14% ■ Over 9 years 10% ■ Non-Executive 60% ■ German 14% 29% 71% * At the date of signing this report, the board comprised 2 female directors (25%) and 6 male directors (75%). The table below shows the changes to the board during the year and up to the date of this report: Changes to the board Role changes within the board Alan Ferguson stepped down from the board on 23rd July 2020 Doug Webb became Chair of the Audit Committee from 23rd July 2020 Anna Manz resigned from the board on 17th November 2020 John O’Higgins became Senior Independent Director from 23rd July 2020 Stephen Oxley was appointed as Chief Financial Officer from Jane Griffiths became Chair of the new Societal Value Committee 1st April 2021 on 26th May 2021 Johnson Matthey / Annual Report and Accounts 2021 101 Governance Board of Directors 1 2 3 4 Patrick Thomas 1 Stephen Oxley 3 Chair Chief Financial Officer N S Appointed to the board: June 2018 Appointed to the board: April 2021 R Skills and experience S Skills and experience Between 2015 and May 2018 Patrick was Chief Executive Officer Stephen joined from KPMG, where he was a Partner. He brings and Chair of the board of management of Covestro AG. Between experience of both audit and advisory roles for large, complex, 2007 and 2015 he was also Chief Executive Officer of its predecessor, international companies across a variety of sectors, including FMCG, Bayer MaterialScience, prior to its demerger from Bayer AG. healthcare, natural resources and industrials. He has worked with He is a fellow of the Royal Academy of Engineering. major global FTSE 100 and private companies, including JM. Contribution Stephen is a chartered accountant. Patrick has deep experience of leading international specialty Contribution chemical businesses. He also brings a track record of driving growth Stephen brings operational and technical understanding of JM and through science and innovation across global markets. significant experience working with companies going through major Other current appointments change programmes. Non-Executive Director at Akzo Nobel N.V. and member of the Other current appointments Supervisory Board of Covestro AG. Trustee of Care International UK and is Chair of its Finance and Audit Committee. Robert MacLeod 2 John O’Higgins 4 Chief Executive Senior Independent Non-Executive Director S N Appointed to the board: June 2009 Appointed to the board: November 2017 A Skills and experience Skills and experience R Robert was appointed as Chief Executive in June 2014.