Report of the Directors
Governance

Corporate Governance Report

« Previous 1 / 2 / 3 / 4 / 5 » Next

Leadership

The Role of the Board

The names and biographical details of all the members of the board including details of their relevant experience and other significant commitments are set out in the Board of Directors section.

The board’s role is to provide leadership of the company and direction for management. It is collectively responsible and accountable to the company’s shareholders for the long term success of the group and for ensuring the appropriate management and responsible operation of the group in pursuit of its objectives. The board reviews management performance and the operating and financial performance of the group as a whole. The board is responsible for ensuring that the necessary resources are provided for the company to meet those objectives.

The board sets, and is collectively responsible to the company’s shareholders for the achievement of, the group’s strategic objectives and it determines the nature and extent of the significant risks it is willing to take in order to achieve those objectives. Strategy is discussed in detail in the Our Strategy section. The process for the consideration of risk is discussed in the Risks and Uncertainties section.

The board approves the group’s governance structures and reviews the group’s internal control and risk management framework to ensure that they are prudent and effective and that risk is able to be assessed, monitored and managed. The board is collectively responsible to the company’s shareholders for the group’s system of corporate governance and is ultimately accountable for the group’s activities, strategy, risk management and financial performance, for stewardship of the group’s resources and for social, environmental and ethical matters.

Key matters for board decision include approval of the annual group operating and capital expenditure budgets and annual group three year plan, as well as the group strategy. The board also approves announcements of the group’s results, the Annual Report and Accounts, the declaration of the interim dividend and recommendation of the final dividend. The board is responsible for considering and approving major capital projects, major acquisitions and major disposals of assets or operations in excess of defined thresholds.

In discharging its responsibilities the board seeks to set, promote and demonstrate adherence to clear values and ethical standards for the group. The board also remains cognisant of the need to observe the duties owed by directors in law, including the overriding duty for each director to act in the way he or she considers, in good faith, will be most likely to promote the success of the company for the benefit of its members as a whole, whilst balancing the interests of stakeholders (the company’s shareholders, the group’s employees, suppliers and customers and the broader community).

The board determines the structure, size and composition of the board, appointments to the board, selection of the Chairman and the Chief Executive, appointment of the Senior Independent Director and membership and chairmanship of board committees. The board has overall responsibility for succession planning for the Chief Executive and the other executive and non-executive directors and is involved in succession planning for senior management. Further information on the succession planning process is set out below.

Certain types of decision are taken by the board and others are delegated by the board to executive management. A formal schedule of matters specifically reserved for board decision has been adopted by the board. This is set out in full in the Investor Relations / Corporate Governance section of the company’s website.

The board discharges its responsibilities through an annual programme of board and other meetings. Through a planned programme of board agendas, referred to further under ‘The Role of the Chairman’ below, the board ensures that all necessary matters are discussed. The board is afforded sufficient time for debate and challenge, particularly in respect of strategy and risk, including risk appetite. The board also seeks to allow sufficient opportunity for the review of past decisions where necessary. At board meetings, the board receives and considers papers and presentations from management in respect of matters under review. Effective review and decision making is supported by provision to the board of high quality, accurate, clear and timely information and the obtaining by the board of expert and independent opinion, analysis and advice where necessary (see ‘Information and Support’). The board’s processes in respect of conflicts of interest are dealt with under ‘Directors’ Conflicts of Interest’. The board delegates certain specific responsibilities to board committees, as described under ‘Board Committees’.

The Roles of the Chairman and the Chief Executive and Division of Responsibilities

Tim Stevenson was appointed Chairman with effect from the close of the 2011 Annual General Meeting on 19th July 2011, having been appointed to the board on 29th March 2011. Mr Stevenson’s biographical details including details of his relevant experience and other significant commitments are set out in the Board of Directors section.

Neil Carson was appointed Chief Executive in July 2004. Mr Carson’s biographical details including details of his relevant experience and other significant commitments are set out in the Board of Directors section.

There is a clear division of responsibilities between the running of the board and the executive responsibility for the running of the company’s business. No one individual has unfettered powers of decision. The roles of Chairman and Chief Executive are separate and the division of responsibilities between these roles is clearly established in a written statement adopted by the board on 28th April 2005. This is set out in full in the Investor Relations / Corporate Governance section of the company’s website.

The Role of the Chairman

The Chairman leads the board. He is responsible for creating the conditions for, and for ensuring, an effective board and effective contributions from individual directors, particularly non-executive directors, based on a culture of mutual respect, openness, debate and constructive challenge. To achieve this it is necessary for the Chairman to facilitate and encourage open communication and constructive working relations between the executive and non-executive directors. The Chairman seeks to ensure that the executive directors are open and responsive to constructive challenge by the non-executive directors of executive proposals. The Chairman is in frequent contact with the Chief Executive, meeting face to face or by telephone at least once each week. The Chairman also keeps the non-executive directors up to date with significant developments between board meetings. The Chairman is also responsible for ensuring effective communication with shareholders and this is discussed further under ‘Relations with Shareholders’.

The Chairman sets the board’s agenda and ensures that adequate time is dedicated for discussion of all agenda items, particularly strategic issues and risk appetite. Since his appointment as Chairman in July 2011, Mr Stevenson has led a detailed process of board agenda review and planning, working with the Company Secretary, the chairmen of the board committees and the Chief Executive. During the year, the board approved an annual agenda plan designed to ensure that all necessary matters are reserved for board decision and are afforded adequate time for discussion throughout the year. Particular attention has been paid to ensuring that sufficient time is made available for the discussion of strategy in order to allow the opportunity for the non-executive directors to challenge and help develop strategy proposals. Strategy is discussed in detail in the Our Strategy section. The Chairman monitors, with assistance from the Company Secretary, the information distributed to the board to ensure that it is of high quality, accurate, clear and timely.

During the year ended 31st March 2012, the Chairman met with the non-executive directors without the executives being present in order to review executive director performance.

The Role of the Chief Executive

The Chief Executive has day to day management responsibility for the running of the group’s operations, for the application of group policies and for the implementation of group strategy and policies agreed by the board. The board has given the Chief Executive broad authority to operate the business of the group and he is accountable for, and reports to the board on, the performance of the business. The Chief Executive also has a key role in the process for the setting and review of strategy. More broadly, the Chief Executive promotes the company’s culture and standards, including appropriate governance standards, throughout the group. In addition, he ensures that the views of the executive directors on business issues and, as appropriate, employees’ views on relevant issues are communicated to the board in a balanced way.

In carrying out his responsibilities, the Chief Executive is supported by the Group Finance Director who, together with the Chief Executive, is responsible amongst other things for ensuring that high quality information is provided to the board on the company’s financial performance.

The Role of the Executive Directors

The biographical details of the executive directors and details of their relevant experience and other significant commitments are set out in the Board of Directors section.

The executive directors have specific executive responsibilities but as directors their duties extend to the whole of the group’s operations and activities and are not confined to the parts of the business encompassed by their specific executive roles.

The Role of the Non-Executive Directors

The biographical details of the non-executive directors including details of their relevant experience and other significant commitments are set out in the Board of Directors section.

The role of the non-executive directors is to scrutinise the performance of management in meeting agreed goals and objectives and to monitor the reporting of performance. Their role is also to satisfy themselves on the integrity of financial information and that financial and non-financial controls and systems of risk management are robust and defensible.

As members of the board, the non-executive directors have a key role in constructively challenging in all areas and this is vital to the independence and objectivity of the board’s deliberations and decision making. This is particularly important in helping develop proposals on strategy. The Chief Executive and the other executive directors are open and responsive to constructive challenge by the non-executive directors of executive proposals. Non-executive directors also have an important part to play in supporting the Chairman and the executive directors in instilling the company’s culture, values and standards within the board and more broadly within the group.

As chairmen of the board committees (Michael Roney of the Management Development and Remuneration Committee and Alan Ferguson of the Audit Committee), the non-executive directors fulfill important leadership roles. The non-executive directors are also responsible for determining appropriate levels of remuneration for the executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning. Further information on succession planning is set out below.

The Role of the Senior Independent Director

Michael Roney was appointed by the board as the Senior Independent Director with effect from the close of the 2011 Annual General Meeting on 19th July 2011.

The role of a Senior Independent Director is to provide a sounding board for the Chairman, to serve as a focal point and intermediary for the concerns of the other non-executive directors when necessary and to ensure that any key issues not being addressed by the Chairman or the executive management are taken up. While no such circumstances have arisen in respect of the company, the board and the Senior Independent Director recognise that the Senior Independent Director may, if circumstances dictate, be required to work with the Chairman or others or to intervene to resolve any significant issues arising which threaten the stability of the company or the board.

The Senior Independent Director is available to shareholders should they have concerns which contact through the normal channels of Chairman, Chief Executive or other executive directors has failed to resolve or for which such contact may be inappropriate. He is available to attend meetings with major shareholders to listen to their views in order to help develop a balanced understanding of their issues and concerns.

The Senior Independent Director plays an important role in respect of succession to the group chairmanship by ensuring there is an orderly succession process. Alan Thomson, the then Senior Independent Director, led the work of the Nomination Committee in selecting and appointing a successor to Sir John Banham as Chairman of the board.

The Senior Independent Director is responsible for leading the annual appraisal of the Chairman’s performance and this is discussed further under ‘Review of the Chairman’s Performance’.

The Role of the Company Secretary

Simon Farrant was appointed Company Secretary on 1st May 1999. He is secretary to the board and all of its committees. Mr Farrant’s biographical details are set out in the Board of Directors section.

The Company Secretary reports to the Chairman on board governance matters. Together with the Chairman he keeps the efficacy of the company’s and the board’s governance processes under review and considers improvements. He is also responsible to the board in respect of compliance with board procedures. He is responsible, through the Chairman, for advising and keeping the board up to date on all legislative, regulatory and governance matters and developments. Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows within the board and its committees and between senior management and non-executive directors, as well as facilitating induction and assisting with professional development as required. The advice, services and support of the Company Secretary are available to all individual directors.

Board Meetings

The board meets regularly throughout the year in order to effectively discharge its duties.

During the year ended 31st March 2012 the board met seven times. The board met once between 31st March 2012 and the date of publication of this annual report.

At its meeting on 29th September 2011, the board reviewed and approved the board agenda plan for 2012/13 and for subsequent years. The board agreed that the business usually conducted at the meeting held in early May each year could be conducted at other meetings during the year and that such a meeting was not, therefore, required or necessary. Accordingly, the board has agreed to reduce the number of meetings it holds each year to six by eliminating its meeting in early May. The board will keep the efficacy of this change under review.

During the year ended 31st March 2012, the board met outside the UK on one occasion, in September 2011, in Philadelphia, USA when it visited Fine Chemicals’ active pharmaceutical ingredients (API) manufacturing facility at Riverside, Conshohocken, Pennsylvania.

Board Committees

The board has established the following committees:

Click here to read the Nomination Committee Report, the Audit Committee Report and the Remuneration Report, which describes the work of the MDRC.

The reporting framework of the board committees and of the Chief Executive’s Committee and its sub-committees is shown below.

The board ensures that its committees are provided with sufficient resources to undertake their duties, including access to the services of the Company Secretary as required. Each board committee has the authority to seek any information that it requires from any officer or employee of the company or its subsidiaries. In connection with its duties, each committee is authorised by the board to take such independent advice (including legal or other professional advice), at the company’s expense, as it considers necessary. Each committee may request information from, or commission investigations by, external advisers.

The board committees formally report to the board on their proceedings after each meeting and generally on all matters and activities for which they are responsible through the committee chairmen and via committee minutes.

Board Committee Membership

Each independent non-executive director is a member of each board committee. No one other than the board committee chairmen and members is entitled to be present at a meeting of the Nomination Committee, the Audit Committee or the MDRC. Others may attend, however, at the invitation of the board committee. Executive directors are not members of the board committees. The Company Secretary is secretary to each of the board committees.

Alan Ferguson was appointed as Chairman of the Audit Committee with effect from the close of the 2011 Annual General Meeting, having been appointed as a non-executive director on 13th January 2011. Michael Roney took over the chairmanship of the Management Development and Remuneration Committee, also with effect from the close of the 2011 Annual General Meeting.

The current membership of the board committees is shown below:

  Nomination Committee Audit Committee MDRC
Tim Stevenson Chairman Invited to attend Member
Neil Carson Invited to attend Invited to attend Invited to attend
Alan Ferguson Member Chairman Member
Sir Thomas Harris Member Member Member
Robert MacLeod Invited to attend
Larry Pentz
Michael Roney Member Member Chairman
Bill Sandford
Dorothy Thompson Member Member Member

The board takes into account the value of ensuring that board committee membership is refreshed when deciding chairmanship and membership of the committees, and in doing so seeks to ensure that undue reliance is not placed on particular individuals.

Board Committee Terms of Reference

Each board committee has written terms of reference which have been approved by the board and are reviewed periodically to ensure that they comply with the latest legal and regulatory requirements and reflect developments in best practice. The terms of reference of the Audit Committee were reviewed in detail during the year ended 31st March 2012 in order, in part, to reflect the recommendations of the Code. Its amended terms were adopted by resolution of the board on 22nd November 2011.

The terms of reference of each board committee can be found in the Investor Relations / Corporate Governance section of the company’s website, or may be obtained from the Company Secretary. The following is a summary of the terms of reference of each board committee:

NOMINATION COMMITTEE  
Responsibilities Advising the board and making recommendations to the board on the appointment and, if necessary, the removal of executive and non-executive directors
Membership All the independent non-executive directors and the group Chairman
Chairman The group Chairman, Tim Stevenson (the group Chairman may not chair the committee when it is dealing with the matter of succession to the chairmanship of the company)
Attending by invitation The Chief Executive, the Group Director, Human Resources and Environment, Health and Safety and external advisers when appropriate
Quorum Two members, each of whom must be independent non-executive directors
Number of meetings per year As required
Committee report Nomination Committee Report

 

AUDIT COMMITTEE  
Responsibilities

Financial Reporting

  • Monitoring the integrity of the group’s reported financial information and reviewing significant financial reporting issues and judgments which they contain
 

Internal Control and Risk Management Systems

  • Keeping under review the adequacy and effectiveness of the group’s internal financial controls and internal control and risk management systems
  • Reviewing the company’s procedures for handling allegations from whistleblowers
 

Internal Audit

  • Monitoring and reviewing the effectiveness of the group’s internal audit function and approving the appointment and removal of the head of the internal audit function
  • Considering and approving the remit of the internal audit function
  • Reviewing and approving the annual internal audit plan
  • Reviewing internal audit reports
 

External Audit

  • Considering and making recommendations to the board, to be put to shareholders for approval at the annual general meeting, in relation to the appointment, reappointment and removal of the external auditor
  • Overseeing the relationship with the external auditor including approving its fee for audit services and its terms of engagement, assessing annually the effectiveness of the audit process and the independence and objectivity of the external auditor, taking into account the provision of any non-audit services
  • Developing and implementing a policy on the supply of non-audit services by the external auditor and keeping this policy and any fees paid to the external auditor in respect of the supply of non-audit services under review
  • Meeting regularly with the external auditor, including at least once a year, without management being present, to discuss its remit and any issues arising from the audit
  • Reviewing and approving the annual external audit plan and reviewing the findings of the audit with the external auditor
Membership

All the independent non-executive directors, at least one of whom is required to have recent and relevant financial experience. The group Chairman is not a member

Chairman

Alan Ferguson. The chairman is required to be an independent non-executive director

Attending by invitation

The group Chairman, the Chief Executive, the Group Finance Director, the Head of Internal Audit and Risk and representatives from finance and other group functions as and when appropriate and necessary. The external auditor is invited to attend on a regular basis. The chairman of the committee may request the attendance of others at meetings including external advisers and, if so requested, executive directors will also make themselves available

Quorum

Two members

Number of meetings per year

At least four per year at appropriate times in the reporting and audit cycle and otherwise as required

Committee report Audit Committee Report

 

THE MANAGEMENT DEVELOPMENT AND REMUNERATION COMMITTEE (MDRC)
Responsibilities
  • Determining on behalf of the board fair remuneration for the Chief Executive, the executive directors and the group Chairman, which, while set in the context of what the company can reasonably afford, recognises their individual contributions to the company’s overall performance
  • Assisting the board in ensuring that the current and future senior management of the group are recruited, developed and remunerated in appropriate fashion
  • Determining the remuneration and terms and conditions of employment (including in respect of pension entitlement) of the Chief Executive and the executive directors and the remuneration and terms of appointment of the group Chairman
  • Reviewing the proposals of the executive for recommendation to the board on share option schemes, executive bonus / incentive schemes and employee share participation schemes
  • Reviewing training, development and succession plans for senior management of the company
  • Reviewing the disclosure to be made of directors’ remuneration in the annual report
Membership

All the independent non-executive directors and the group Chairman

Chairman

Michael Roney. The chairman of the committee is required to be an independent non-executive director

Attending by invitation

The Chief Executive, the Group Director, Human Resources and Environment, Health and Safety (except when their own performance and remuneration are discussed) and external advisers when appropriate

Quorum

Two members

Number of meetings per year

At least two per year and at such other times as the chairman of the committee requires

Committee report Remuneration Report

Board and Committee Attendance

The attendance of members at board and board committee meetings in the year ended 31st March 2012 was as follows:

  Board Nomination Committee Audit Committee MDRC
Director Eligible to
attend
Attended Eligible to
attend
Attended Eligible to
attend
Attended Eligible to
attend
Attended
Tim Stevenson 7 6(2) 2 1(2) 4(1) 4 3(2)
Sir John Banham 3 3 1 1 2(1) 2 2
Neil Carson 7 7 2(1) 4(1)
Alan Ferguson 7 7 2 2 4 4 4 4
Sir Thomas Harris 7 7 2 1(3) 4 4 4 4
Robert MacLeod 7 7 4(1)
Larry Pentz 7 7
Michael Roney 7 6(4) 2 2 4 3(4) 4 3(4)
Bill Sandford 7 7
Dorothy Thompson 7 7 2 2 4 4 4 4
Alan Thomson 3 3 1 1 2 2 2 2
Robert Walvis 3 3 1 1 2 2 2 2

Notes

(1)
Includes meetings attended by invitation for all or part of meeting.
(2)
Tim Stevenson was unable to attend the board meeting and the meetings of the Nomination Committee and the MDRC on 10th May 2011 as the date coincided with the annual general meeting of The Morgan Crucible Company plc of which he is Chairman.
(3)
Sir Thomas Harris did not attend the meeting of the Nomination Committee on 29th March 2012, at which the matter of the appointment of an additional non-executive director following his prospective retirement from the board was discussed.
(4)
Michael Roney was unable to attend the board meeting on 19th July 2011, the 2011 Annual General Meeting held later that day or the meetings of the Audit Committee and the MDRC held on the previous day because of coinciding commitments at Bunzl plc, where he is Chief Executive.

Where directors are unable to attend a board or board committee meeting, they communicate their comments and observations on the matter to be considered in advance of the meeting via the group Chairman, the Senior Independent Director or the relevant board committee chairman for raising as appropriate at the meeting.

Individuals’ attendance at board and board committee meetings is considered, as necessary, during the one to one meetings conducted by the Chairman with directors as part of the formal annual review of their performance. Further information on performance evaluation is given under ‘Evaluation of the Board, Board Committees and Directors’.

The Chief Executive’s Committee

In discharging his responsibilities, the Chief Executive is assisted by the Chief Executive’s Committee (CEC). The CEC is a management committee chaired by the Chief Executive. It is responsible for the recommendation to the board of strategic and operating plans and on making recommendations on matters reserved to the board where appropriate. It is responsible for the executive management of the group’s businesses.

During the year ended 31st March 2012 the CEC comprised the Chief Executive; the Group Finance Director; the two other executive directors; the division directors who do not sit on the board; the Group Director, Corporate and Strategic Development; the Group Director, Human Resources and Environment, Health and Safety; and the Company Secretary and Group Legal Director.

During the year ended 31st March 2012, the CEC met eight times. In order to more effectively use the time of its members, the CEC no longer meets formally every month (except in August) and after September 2011 moved to a programme of meeting formally every other month and informally on such other occasions as may be necessary.

The CEC has a number of sub-committees as referred to further above.

Back to top