Introduction from the Chairman, Sir John Armitt CBE
The effective stewardship and governance of the Group remains a key commitment and high priority for the Board, which comes up in many aspects of its work. This is not only because high standards of corporate governance are vitally important in allowing the Directors to discharge their duties and responsibilities, but also because it helps management to enhance performance and protect value, and enables all our employees to embrace excellence and good governance in their day-to-day activities.
Culture and values
As part of its responsibility to provide effective leadership to the organisation as a whole, the Board sets the culture and tone from the top. The Executive Directors, supported by the Non-Executives, lead by example to ensure our high standards and expected values, attitudes and behaviours are understood and consistently applied throughout the Group. Collective opportunities for communicating and demonstrating this to employees and management exist when the Board visits local operations, as it did during the year to Madrid and Washington DC (see page 53). The Board monitors the corporate culture by regularly receiving HR updates and reviewing the outcomes of employee opinion surveys which are normally conducted annually.
However, while culture might originate from the behaviour of leaders, it cannot be sustained by top-down mandates and examples alone. That is why our Values are embedded across the business and represent the way we live and breathe our culture. They underpin our business model, are fundamental to the way we work with our employees, customers, suppliers and other stakeholders, and guide the way we engage with the wider community and environment which is affected by our conduct.
Board changes and effectiveness
The Board completed two Executive Director changes during the year. As previously reported, we welcomed Chris Davies to the Board on 10 May and he took up the position as Group Finance Director on 1 June 2017. He replaced Matt Ashley who, after two and a half successful years and as part of a career development opportunity within the Group, relinquished that role (but not his executive directorship) on 31 May. This was to take up the operational position as President and CEO of our North America business, based in Chicago, on 1 September. I would like to thank Matt for his contribution not only in his previous role but also in ensuring an effective induction and a smooth handover of responsibilities that enabled Chris to get up to speed by the end of the summer. I am delighted to say that both Chris and Matt have settled in well and made good starts in their new roles. As a result of these changes, the quality of the Board, together with our leadership and succession plans (which remain high on our agenda), have been strengthened.
There were no Non-Executive Director changes to the Board or membership of its Committees during the year as these are working well and effectively.
Board composition and diversity
The Nominations Committee undertook a formal review of the Board’s composition and concluded that its current balance (post the executive changes referred to above) remains appropriate to the Group’s forward-looking needs and our ability to continue delivering against our strategy. I believe there is a natural opportunity in relation to Non-Executive Director rotation over the next few years for us to consider our Board diversity, in its widest sense, including gender diversity (where 17% of our Directors are female), as one of the factors when making future appointments. In the business, we continue to embrace the benefits of workforce diversity and we are making progress in this important area. Nevertheless, the Board has challenged the executive to identify and pursue opportunities where we could be more active and drive change over time.
I am pleased to confirm that throughout the year we applied the principles and complied with the provisions of the UK Corporate Governance Code 2016 (‘Code’), a copy of which is available at www.frc.org.uk. The following pages of this report explain our governance framework and the robust processes and procedures we have in place to achieve this under each of the five main principles of the Code, namely: Leadership, Effectiveness, Accountability, Remuneration and Relations with Shareholders. Included as part of this is a report from the Chair of the Nominations, Audit, Safety & Environment and Remuneration Committees detailing the key matters addressed by each Committee during the year.
A new Directors’ Remuneration Policy, which includes only a few changes from the current one, is being recommended to shareholders for approval at this year’s AGM (see below). We are confident that the new policy, intended to last until the AGM in 2021, is fit for purpose, aligns the interests of the Executives with those of shareholders and promotes the long-term success of the Company.
The Board is aware that a new Code is in preparation and we will look to pro-actively respond to developments arising from this as part of our 2018 agenda.
Annual General Meeting (‘AGM’)
This year, our AGM will be held at 2.00pm on Wednesday, 16 May 2018 in the Horton Suite of the Burlington Hotel, 126 New Street, Birmingham, B2 4JQ. As this provides an opportunity for you to meet with and ask questions of your Directors regarding the business, this Annual Report and the matters before the meeting, I would encourage you to attend and look forward to meeting you.
Sir John Armitt, CBE