The Board of Directors and Committees of the Board of Directors
The Board, which is headed by the Chairman who is non-executive, comprises three other non-executive and two executive members as at 21st January 2017. This ensures compliance with the Combined Code which states that a smaller company should have at least two independent directors. The Board met regularly throughout the year with ad hoc meetings also being held. The role of the Board is to provide leadership of the Company and to set strategic aims but within a framework of prudent and effective controls which enable risk to be managed. The Board has agreed the Schedule of Matters reserved for its decision which includes ensuring that the necessary financial and human resources are in place to meet its obligations to its shareholders and others. It also approves acquisitions and disposals of businesses, major capital expenditure, annual financial budgets and recommends interim and final dividends. It receives recommendations from the Audit Committee in relation to the appointment of auditors, their remuneration and the policy relating to non-audit services. The Board agrees the framework for executive directors’ remuneration with the Remuneration Committee and determines fees paid to non-executive directors. Board papers are circulated before Board meetings in sufficient time to be meaningful.
The division of responsibilities between the Chairman and the Chief Executive Officer is clearly defined. The Chairman’s primary responsibility is ensuring the effectiveness of the Board and setting its agenda. The Chairman has no involvement in the day to day business of the Group. The Chief Executive has direct charge of the Group on a day to day basis and is accountable to the Board for the financial and operational performance of the Group.
The performance of the Board is evaluated on an ongoing basis informally with reference to all aspects of its operation including, but not limited to: the appropriateness of its skill level; the way its meetings are conducted and administered (including the content of those meetings); the effectiveness of the various Committees; whether Corporate Governance issues are handled in a satisfactory manner; and, whether there is a clear strategy and objectives.
A new director, on appointment, is briefed on the activities of the Company. Professional induction training is also given as appropriate. The Chairman briefs non-executive directors on issues arising at Board meetings if required and non-executive directors have access to the Chairman at any time. Ongoing training is provided as needed. Directors are continually updated on the Group’s business and on insurance and on issues covering pensions, social, ethical, environmental and health and safety by means of Board presentations.
In the furtherance of his duties or in relation to acts carried out by the Board or the Company, each director has been informed that he is entitled to seek independent professional advice at the expense of the Company. The Company maintains appropriate cover under a Directors and Officers insurance policy in the event of legal action being taken against any director.
Each director is appraised through the normal appraisal process. The Chief Executive is appraised by the Chairman, the executive Board members by the Chief Executive and the non-executive Board members by the Chairman. Each director has access to the services of the Company Secretary if required.
The non-executive directors are considered by the Board to be independent of management and are free to exercise independence of judgement. They have never been employees of the Company nor do they participate in any of the Company’s pension schemes or bonus arrangements. They receive no other remuneration from the Company other than the directors’ fees.
It is recognised that the Combined Code does not treat the Chairman as independent after appointment and it is considered best practice that he should not sit on the Audit or Remuneration Committees. The Board, however, takes the view that as the number of non-executive directors is only four, including the Chairman, his participation will continue as the Committees gain the benefit of his external expertise and experience in areas which the Company considers important.
The Audit Committee
The Audit Committee (“the Committee”) is established by and is responsible to the Board. It has written terms of reference. Its main responsibilities are:
- to monitor and be satisfied with the truth and fairness of the Company’s financial statements before submission to the Board for approval, ensuring their compliance with the appropriate accounting standards, the law and the Listing Rules of the Financial Services Authority
- to monitor and review the effectiveness of the Company’s system of internal control
- to make recommendations to the Board in relation to the appointment of the external auditors and their remuneration, following appointment by the shareholders in general meeting, and to review and be satisfied with the auditors’ independence, objectivity and effectiveness on an ongoing basis
- to implement the policy relating to any non-audit services performed by the external auditors.
Alan Aubrey is the Chairperson of the Committee. The other members of the Committee are Trevor Nicholls, Michael Albin and Mike Owen, who are non-executive directors, and have gained wide experience in regulatory and risk issues.
The Committee is authorised by the Board to seek and obtain any information it requires from any officer or employee of the Company and to obtain external legal or other independent professional advice as is deemed necessary by it.
Meetings of the Committee are held once per year (usually during October) to coincide with the review of the scope of the external audit and observations arising from their work in relation to internal control and to review the financial statements. The external auditors are invited to these meetings and meet with the Audit Committee at least once a year. At its meeting, it carries out a full review of the year-end financial statements and of the audit, using as a basis the Report to the Audit Committee prepared by the external auditors and taking into account any significant accounting policies, any changes to them and any significant estimates or judgements. Questions are asked of management of any significant or unusual transactions where the accounting treatment could be open to different interpretations.
The Committee receives reports from management on the effectiveness of the system of internal controls. It also receives from the external auditors a report of matters arising during the course of the audit which the auditors deem to be of significance for the Committee’s attention. The statement on internal controls and the management of risk, which is included in the annual report, is approved by the Committee.
The 1998 Public Interest Disclosure Act (“the Act”) aims to promote greater openness in the workplace and ensures “whistle blowers” are protected. The Company maintains a policy in accordance with the Act which allows employees to raise concerns on a confidential basis if they have reasonable grounds in believing that there is serious malpractice within the Company. The policy is designed to deal with concerns, which must be raised without malice and in good faith, in relation to specific issues which are in the public interest and which fall outside the scope of other Company policies and procedures. There is a specific complaints procedure laid down and action will be taken in those cases where the complaint is shown to be justified. The individual making the disclosure will be informed of what action is to be taken and a formal written record will be kept of each stage of the procedure.
The external auditors are required to give the Committee information about policies and processes for maintaining their independence and compliance regarding the rotation of audit partners and staff. The Committee considers all relationships between the external auditors and the Company to ensure that they do not compromise the auditors’ judgement or independence particularly with the provision of non-audit services.
The Remuneration Committee
The Remuneration Committee is chaired by Trevor Nicholls and the other members of the Committee are Alan Aubrey, Michael Albin and Mike Owen, who are non-executive directors. The Committee meets at least once a year with the Chief Executive Officer in attendance as appropriate. It has written terms of reference. The Committee agrees the framework for executive directors’ remuneration with the Board.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE STRATEGIC REPORT, THE DIRECTORS' REPORT AND THE FINANCIAL STATEMENTS
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent; and
- for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU.