Introduction from the Chairman, Sir John Armitt CBE
The existence of strong governance, both inside and outside the boardroom, and strong culture throughout the organisation, remain a key commitment and high priority of the Board. At the same time, we encourage the Executive Directors and management to take a long-term view and invest in the future of the business. I believe we are making good progress along this balanced path as can be seen from this report and the Group’s excellent results for the year which clearly demonstrate that our business continues to grow. The recent recognition of National Express as Britain’s Most Admired Transport Company in the 2018 Management Today Awards – as voted on by our peers, analysts and commentators – is testament to the reputation we have established and the progress we have made under the leadership of Dean Finch, and the hard work of all our employees.
There were no changes in Board membership in 2018. However, the two Executive changes we made last year have bedded in well with both Chris Davies (Group Finance Director) and Matt Ashley (President and CEO, North America) making solid contributions in the first full year of their new roles.
Collectively, the Board and its Committees remain well-structured and balanced and continue to operate effectively, as confirmed in the results from this year’s internal evaluation of their performance. Nevertheless, recognising the benefits that a regular refresh can bring and the fact that three of our Non-Executive Directors are approaching their nine-year tenure on the Board, we have reflected on our succession plans, including skill set requirements and timings, in relation to certain Non-Executive changes. I expect these will be carried out over the next two to three years.
A strong culture is crucially important to the performance and long-term success of any business. While the tone of our culture is set from the top down, its strength lies from the bottom up in the heart of our business. During the year, I have spent time with our employees from across the Group, which included visits to various UK locations on my own and to Boston in September with my Board colleagues. These visits provide the Directors with a valuable opportunity to engage with staff and gauge an insight into their views on the business, our leadership, our strategy and its implementation.
Our impression is that staff are proud to work for National Express in their locations, believe in our Values and what they stand for, have respect for our leaders, understand the strategy and are committed to achieving it. This openness fosters a willingness to work hard, share ideas and best practice across the Group and engage in operational changes aimed at improving efficiency and effectiveness. Staff are enthusiastic about the changing technological and digital landscape and excited about the opportunities it presents to enhance our service to customers. As a Board, this tells us that if we want to continue growing, we must continue to encourage this openness and engagement amongst the workforce and ensure that our culture has customers at the forefront of our business, an area which is of increasing focus for the Executive.
We take the issue of diversity in the boardroom and senior management very seriously as it improves effectiveness, encourages constructive debate, delivers strong performance and enhances the success of the business. Accordingly, we remain committed to the objective of increasing the Board’s female representation from its current 17% status to 33% by 2020, in line with the HamptonAlexander recommendations, and we believe the phased Non-Executive Director rotation identified above represents a natural opportunity to consider and influence our Board diversity, in its widest sense, including gender and ethnicity. In the Group Executive Committee (‘GEC’) membership and their direct reports, the female representation has much improved over the past few years as they both now stand at 29%.
In the business, we continue to make good progress in embracing the benefits of an inclusive and diverse culture and during the year, under the increased impetus of the executive team, a wealth of new activities were undertaken and initiatives launched in all divisions as we seek to drive lasting change over time in this important area.
I am pleased to confirm that throughout the year, we applied the principles and complied with the provisions of the 2016 UK Corporate Governance Code (‘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 are reports from the Chairs of the Nominations, Audit, Safety & Environment and Remuneration Committees detailing the work and activities of each Committee during the year.
A new Directors’ Remuneration Policy (‘Policy’), which we consulted on in draft form with many shareholders and advisory bodies, was overwhelmingly approved at last year’s AGM and the Remuneration Committee has applied and operated within it since then. A summary of the Policy can be found in the Directors’ Remuneration Report and it appears in full on the Company’s website at www.nationalexpressgroup.com/about-us/corporate-governance/remuneration.
The Board is aware of the continued focus by the Government and regulators on the need to strengthen corporate governance and requiring companies to demonstrate higher standards of corporate behaviour, and to fully recognise their obligations to all stakeholders. As per my introduction, good governance is an integral part of our corporate culture and our business principles, commitments and long-term decisions are based on a responsibility to treat the views and interests of our colleagues, customers, suppliers and communities, as stakeholders in our business, with respect. This is a key factor in seeking to protect and deliver sustainable value for our shareholders. With that in mind, the Board welcomes the new Code, issued by the Financial Reporting Council (‘FRC’) in July last year, which applies to the Company from 2019.
Over the past few months, the Board and its Committees have been reviewing activities and working with management to assess our approach to the changes and increased emphasis introduced under the new Code, in particular on how best to formalise and strengthen the taking into account of stakeholder views more generally in our decision-making process and address the workforce voice and engagement requirements. Our review has highlighted that we are already compliant with a number of the new Code principles and provisions; for example, our Policy has a strong link to Group strategy and long-term success and the Directors actively engage with local management and employees when the Board visit operations each year. Additionally, we have already taken some steps to meet compliance; for example, we have established an emerging risk register (to supplement the significant risk one) at both Group and divisional level.
We will continue our assessment work during 2019, for what will undoubtedly be a journey of transition over the coming years, and report on progress and our compliance against the new Code in next year’s Corporate Governance report.
Annual General Meeting
At this year’s AGM, to be held at 2.00pm on Thursday, 9 May 2019 in the Horton Suite of the Burlington Hotel, 126 New Street, Birmingham, B2 4JQ, all Directors will be seeking re-election to office. As the AGM 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