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The policy of the Board is to manage the affairs of the Company in accordance with the principles of the Combined Code (2006) on Corporate Governance and annexed to the Listing Rules of the Financial Services Authority (‘the Code’). This statement explains how the Company applies the principles of the Code.
Board
The directors believe that it is essential that the Company should be both led and controlled by an effective Board. The Board has adopted a formal statement of its powers, duties and responsibilities, and recognises that its main functions are as follows:
- agreeing objectives, policies and strategies, and monitoring the performance of the executive management;
- keeping under review the general progress and long-term development of the Group in light of the political, economic and social environments in which it operates;
- controlling and monitoring the financial state and performance of the Group (including investment and financing plans), determining the desired financial ratios and approving the objectives of the Group’s business plan;
- deciding on major changes in organisation and the shape of the Group, including entry into new fields of operation and departure from those which are no longer appropriate;
- approving major expenditure and transactions with other companies including, for example, acquisitions, disposals, joint ventures and significant supply arrangements;
- ensuring that the Group pursues sound and proper policies in relation to:
- safety, health and environmental matters; and
- corporate governance;
- delegating clear responsibility and authority to the chairman, committees of the Board, the chief executive, directors or groups of directors, officers and others; and
- giving approval or support, as appropriate, to the most senior appointments in the Group and ensuring that adequate career development, succession and remuneration arrangements exist for them.
There is a formal schedule of matters reserved for the Board’s decision.
Regular Board meetings are held (not fewer than eight times in a year). At least one meeting is devoted to strategy, and is held away from the Company’s head office. Ad hoc meetings may be convened in between regular meetings to address any matters requiring Board consideration. The chairman holds at least one meeting a year with the non-executive directors without the executive directors being present and, led by the senior independent director, the non-executive directors meet without the chairman present at least once a year to appraise his performance.
The Company has arranged insurance cover in respect of legal action against its directors. To the extent permitted by UK law, the Company also indemnifies the directors. Neither the insurance nor the indemnity provides cover in situations where a director has acted fraudulently or dishonestly.
Chairman and chief executive
There is a clear division of responsibilities at the head of the Company, with the chairman responsible for the effective operation of the Board, encouraging the active participation of all directors, and the chief executive responsible for the running of the Company’s businesses. The Board has approved formal statements describing the role and remit of both the chairman and the chief executive, which emphasise this division of their responsibilities.
The Board is mindful of the need to ensure that the chairman has enough time available to devote to the job. Peter Johnson was chairman from 1 March 2007 (succeeding Alun Cathcart who left the Board on 28 February 2007) and the Board is satisfied that his other significant commitments had no material impact upon the amount of time that he was able to devote to his chairmanship of the Group during the year.
Board balance and independence
The Board includes a balance of executive and independent non-executive directors, whose biographical details are given on page 28. Richard Greenhalgh has been the senior independent director since May 2006. The directors have wide-ranging business experience, and no individual, or group of individuals, dominates the Board’s decision-making process. The Board also considered Peter Johnson as independent on his appointment as a director.
Appointment of the Board
The Board accepts that there should be a formal, rigorous and transparent procedure for the appointment of new directors. The Board has formalised and adopted terms of reference for its Nominations Committee which are available on request to the company secretary. A report of the Nominations Committee’s work during 2007 is given on page 36. The Board has agreed the terms and conditions for the appointment of non-executive directors, which are also available for inspection and comply with the Code. Peter Gill and John Warren will retire by rotation at the Annual General Meeting and, being eligible, are offering themselves for re-appointment. Peter Gill is the Company's finance director and has a service agreement terminable on one year's notice; John Warren is chairman of the Audit Committee and a member of the Nominations and Remuneration Committees, he does not have a service agreement with the Company.
Information and professional development
The Board receives a steady flow of information to enable it to discharge its duties, including a monthly report detailing current and forecast trading results and treasury positions. It also receives regular updates on shareholders’ views as part of the monthly report, and more formal briefings on shareholders’ views are given to the Board following the presentation of the Company’s interim and annual results. Board papers are generally distributed not less than five days in advance of the relevant meeting to allow the directors fully to prepare for meetings, and minutes of committee meetings are circulated to all directors. The Board is kept fully informed of developments within the Company’s businesses through regular presentations by divisional management. Induction programmes for newly-appointed directors are devised to ensure that directors spend time with divisional management and can visit operational sites.
All directors have access to the advice and services of the company secretary, who is responsible for ensuring that Board procedures are followed, and to independent professional advice, if required, at the Company’s expense.
Performance evaluation
The evaluation process for the performance of the Board as a whole, and that of individual directors, was carried out through a questionnaire process between the chairman and each director. This was designed to provide an objective assessment and covered the areas of Board process and administration, and the contribution made by each individual. In addition, led by Richard Greenhalgh, the chairman’s performance was evaluated by means of a questionnaire. The outcomes of these assessments were then reported to, and discussed by, the whole Board. The conclusion was reached that the Board continues to function effectively and that both the Board and its committees were discharging their duties in full accordance with their terms of reference.
The performance of the Remuneration Committee during the year was also appraised by the Board. The Audit Committee’s performance and the effectiveness of the external audit process were evaluated through the completion of suitable questionnaires. The results of these evaluations, which were carried out by the members of the Committee, were then reviewed by the Board.
Re-election of Directors
All directors are subject to re-appointment by shareholders at the first Annual General Meeting following their appointment, and thereafter at intervals of not more than three years apart. Non-executive directors are engaged for an initial period of three years, subject to their re-appointment having been confirmed by shareholders as described above.
The Board is satisfied that the chairman, and each non-executive director, is able to devote the necessary amount of time required to attend to the Company’s affairs.