Corporate governance statement
This report for shareholders sets out Dairy Crest’s approach to and compliance with the principles contained in the Combined Code on Corporate Governance published by the Financial Reporting Council and explains any departure from its provisions. As the 2008/09 financial year commenced after November 2006 but prior to 29 June 2008, references to the Combined Code in this report are to the Combined Code on Corporate Governance of June 2006 (‘Code’). This report has been prepared following the main principles of the Code. Those not referred to in this statement are dealt with elsewhere in the annual report. In accordance with listing rule 9.8.10R(2), the relevant parts of this report have been reviewed by Ernst & Young LLP and their opinion is set out on page 106.
The Board
Code main principle A.1: “Every company should be headed by an effective board, which is collectively responsible for the success of the company.”
Dairy Crest’s Board recognises its responsibility to provide entrepreneurial and responsible leadership to the Group within a framework of prudent and effective controls (described below) allowing assessment and management of the key issues and risks impacting the business. The Board sets Dairy Crest’s overall strategic direction, reviews management performance and ensures that the Group has the necessary financial and human resources in place to meet its objectives. The Board is satisfied that the necessary controls and resources exist within the Group to enable these responsibilities to be met.
The Board also ensures that the principal goal of the Company is to create shareholder value, while having regard to other stakeholder interests and takes responsibility for setting the Company’s values and standards. Accordingly, the long-term interests of shareholders, together with consideration of the wider community of interests represented by employees, customers and suppliers, and community and the environment are factored into the Group’s management processes. They are reinforced through employee participation in share ownership plans. Appropriate account is also given to social, environmental and ethical issues within the Company’s control and risk assessment processes. The steps taken to achieve these goals are communicated to shareholders and other interested parties through the Company’s External Affairs Director, the Company’s website (www.dairycrest.co.uk) and to employees via the Group intranet and through formal and informal briefings and newsletters. Through formal policies (summaries of which are published on the Company’s website) the Board seeks to engender a culture where business ethics, integrity and fairness are values that all employees endorse and apply in their everyday conduct.
During 2008/09, the Company continued its programme of embedding its core values with employees. Details of activity undertaken during the year are set out in the Corporate Responsibility report on pages 22 to 25. Further details will be provided in the CR report which will be published on the Company’s website in the summer.
The Board meets at least eight times a year, with additional meetings as required. In 2008/09, it met 12 times. On one occasion this was preceded by a Senior Executive strategic review meeting at which Board members were present. Details of Directors’ attendance at meetings during the year are set out below. Throughout the financial year a number of formal Board meetings are held at the site of operational business units. In 2008/09 the Board visited the Group’s manufacturing sites at Crudgington (Shropshire), Fenstanton (Cambridgeshire) and Foston (Derbyshire).
There is a documented schedule of matters reserved to the Board including strategy and management, financial structure and capital, reporting and controls, Board and committee appointments, executive remuneration, dividend policy and corporate governance compliance. During 2008/09, the Board received regular briefings upon the Group’s performance (including detailed commentary and analysis) and key issues and risks affecting the Group’s business. Reports on Group operations, human resources, governance and regulatory matters affecting the Group were provided to the Board on a regular and timely basis. Briefings on market activity, together with the views of shareholders and analysts on the Company, were also provided to the Board. The Group maintains appropriate insurance cover for the Directors and Officers and in 2005 the Company’s articles were amended to provide that the Company shall indemnify its Directors and other Officers out of the assets of the Company to the extent permitted by law.
Board committees
Summary
There are five principal Board committees: the Management Board; Audit; Corporate Responsibility; Nomination; and Remuneration. The roles and responsibilities of each of these committees are detailed below. All the Audit, Corporate Responsibility and Remuneration Committee members and a majority of Nomination Committee members are independent Non-Executive Directors under the Code. The Committees are provided with sufficient resources via the Company Secretariat and, where necessary, have direct access to independent professional advisers to undertake their duties.
Details of Directors’ attendance at each of the Board meetings and Audit, Nomination, Remuneration and Corporate Responsibility Committees are set out below:
| Board | Audit Committee | Corporate Responsibility | Nomination Committee | Remuneration Committee | |
| No. of meetings in year | 12 | 3 | 3 | 1 | 2 |
| Mr M Allen | 12 | – | – | – | – |
| Mr A Fry1 | 12 | 2 | 1 | 1 | 2 |
| Mr H Mann2 | 11 | 3 | 0 | 1 | 2 |
| Mr N Monnery | 12 | 3 | 3 | 1 | 2 |
| Mr A S N Murray | 12 | – | – | – | – |
| Mr M N Oakes3 | |||||
| (resigned 11.12.08) | 7 | – | – | – | – |
| Mr S M D Oliver | 12 | – | – | 1 | – |
| Ms C Piwnica | 12 | 3 | 3 | 1 | 2 |
| Mr D H Richardson | 12 | 3 | 3 | 1 | 2 |
| Mr M Wilks | 12 | – | – | – | – |
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Management Board
The Chief Executive chairs the Management Board which comprises the other Executive Directors, the Company Secretary & General Counsel and the Group Human Resources Director. Other Senior Executives, such as the Director of Group Financial Control and Director of Corporate Development attend by invitation. The Management Board is responsible, amongst other matters, for implementing the Group’s strategic direction, monitoring the performance of the business and its control procedures on a day-to-day basis. Members normally meet weekly.
Audit Committee
David Richardson continues to be chairman of the Audit Committee but has announced that he will step down from the Board once his successor has been appointed. The other members are Anthony Fry, Howard Mann, Neil Monnery and Carole Piwnica. David Richardson is a chartered accountant. Consistent with the Smith Guidance, all members of the Committee are independent Non-Executive Directors. David Richardson is deemed by the Board to be the Audit Committee financial expert with recent and relevant financial experience and independent for the purposes of the Code. All of the Committee members have extensive commercial experience (see page 30). Further information on the Company’s application of the Code and on the Audit Committee and its work during the year is set out in its report on pages 35 and 36.
Corporate Responsibility Committee
The Corporate Responsibility (‘CR’) Committee was established by the Board in year ended 31 March 2008 under the chairmanship of Carole Piwnica. The Committee, whose other members are Anthony Fry, Howard Mann, Neil Monnery and David Richardson, oversees the Group’s CR programme and ensures that key social, ethical and environmental risks are identified, assessed and prioritised accordingly. Terms of reference for the Committee are available on request and are published on the Group’s website. During the year 2008/2009 the Committee has focussed on strategy and commitment across four key areas: Workplace, Marketplace, Community and Environment. A report on the Committee’s activities during the year 2008/09 is set out at pages 22 to 25.
Nomination Committee
The members of the Nomination Committee are Howard Mann, (the Senior Independent Director and chairman of the Committee), Anthony Fry, Neil Monnery, Simon Oliver, Carole Piwnica and David Richardson. The Committee meets as and when required. During the year it met once and details of Directors’ attendance at that meeting during the year are set out above. Company executives and advisers attend meetings by invitation only. The Committee updates the Board and makes recommendations as and when required.
The terms of reference of the Nomination Committee are available on request and are published on the Group’s website. In essence, this Committee is responsible for succession planning at Board level, overseeing the selection and appointment of Directors and making its recommendations to the Board. It is also responsible, in conjunction with the Chairman of the Group, for evaluating the commitments of individual Directors and the balance of skills, knowledge and experience on the Board. It also ensures that the membership of the Board and its principal committees are refreshed periodically. Where appropriate, the Committee will prepare an outline of the role and capabilities required for particular appointments and use an external search consultancy and/or advertising in relation to Board appointments.
During 2008/09, its focus was upon succession planning for the Board and it has commenced a suitable search process, including the use of external consultants, to identify a successor for David Richardson, following the announcement in April 2009 that he will step down from the Board once his successor has been appointed.
The Remuneration Committee
Neil Monnery has chaired the Remuneration Committee for the year ended 31 March 2009. Its other members have been Anthony Fry, Howard Mann, Carole Piwnica and David Richardson. The Committee has met twice in 2008/09. Details of Directors’ attendance at meetings during the year are set out above. A detailed description of the Committee’s remit and work during 2008/09, including further information on the Company’s application of the principles of the Code, is contained in the Remuneration Report (which was approved by the Board) on pages 38 to 44. Its terms of reference comply with the Code, are available on request and are published on the Group’s website. The full terms and conditions of appointment of the Company’s Non-Executive Directors are available for inspection at its registered office, and a summary is available on the Group’s website. The chairman of the Committee provided a report to the Board following each meeting of the Remuneration Committee.
Other committees
The Group’s Strategy and Policy Leadership Team, chaired by the Chief Executive, which consists of executive Board members and Senior Executives responsible for the key business units also meets regularly. The Strategy and Policy Leadership Team is used to assist the Executive Directors in the execution of their duties by helping to shape and influence the Group’s strategy and policy. Through its diverse membership representing the various constituencies of the Group it helps to ensure that key stakeholders are consulted and have the opportunity to input into the design and preparation of the Group’s strategy, policy and key business decisions. Within each of the Group’s commercial divisions there are operating boards responsible for monitoring the performance of those business units. To ensure consistency of approach and cross-learning, members of the Strategy and Policy Leadership Team also chair Group leadership teams responsible for the following areas: finance; information technology / systems; supply chain; human resources; innovation; marketing; sales; vision & values; health and safety. Reports are provided from these various leadership teams, as appropriate, to the Management Board, the Strategy and Policy Leadership Team and the Board.
Chairman and chief executive
Code main principle A.2: “There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.”
There is a clear division of responsibilities between the roles of Chairman (who serves in a non-executive capacity) and Chief Executive which is set out in writing and which has been approved by the Board.
Board balance
Code main principle A.3: “The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking.”
As at the date of this report, the Board comprises three Executive Directors and six Non-Executive Directors (including the Chairman). Simon Oliver is Non-Executive Chairman and Mark Allen, Chief Executive; Alastair Murray, Group Finance Director; Martyn Wilks, Executive Managing Director (Foods); Anthony Fry, Non-Executive Director; Howard Mann, Non-Executive and Senior Independent Director and chairman of the Nomination Committee; Neil Monnery, Non-Executive Director and chairman of the Remuneration Committee; Carole Piwnica, Non-Executive Director and chairman of the Corporate Responsibility Committee; and David Richardson is Non-Executive Director and chairman of the Audit Committee.
During the year, on 11 December 2008, Martin Oakes resigned as an Executive Director from the Board.
Biographies of each of the current Directors, their responsibilities and principal Board committee memberships can be found on page 30.
Following review of the provisions of the Code by the Nomination Committee and the Board, the Board considers all the Non Executive Directors, excluding the Chairman who was independent on appointment, to be independent.
Appointments to the Board
Code main principle A.4: “There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.”
Appointments to the Board and its committees are reserved for the Board, based on recommendations from the Nomination Committee (see above). The appointment and removal of the Secretary is a matter reserved to the Board as a whole.
Information and professional development
Code main principle A.5: “The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.”
Robin Miller, who was Company Secretary during the year, was responsible for advising the Board on all governance matters, under the stewardship of the Chairman, ensuring Board procedures were followed and applicable rules and regulations were complied with. During 2008/09, Mr Miller ensured that Board and Board Committee papers containing accurate, timely and clear information, were generally circulated at least seven days before meetings. Periodic updates were circulated as and when required.
Training and briefings are available to all Directors on appointment and thereafter Directors keep abreast of the Group’s business through meetings with and presentations by senior management below Board level and through site visits to operating divisions. During 2008/09, as part of the process of enhancing the Non-Executive Directors’ knowledge of the business, various visits and presentations from management teams took place.
All Non-Executive Directors undergo induction programmes upon appointment and have full access to management and to the internal and external auditors. The induction process includes the provision of background materials on the Company, together with information on the responsibilities of Directors under the Listing Rules, briefings by key Senior Executives at and below Board level and the Company’s Head of Internal Audit and site visits to the main operating locations. An overview of the business is provided, along with information on its financial performance and the Risk Register. The Non-Executive Directors variously receive independent training on technical accounting and other governance related matters from professional service providers and institutions and bulletins from the Group on developments in the dairy sector generally.
All Directors individually, and each of the Board Committees, have access to the advice and services of the Company Secretariat and the Secretary. They all receive from the Company Secretariat a regular report on corporate governance issues. There are also procedures in place enabling Directors in the furtherance of their duties to seek independent professional advice at the Company’s expense.
Performance evaluation
Code main principle A.6: “The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.”
The Board conducts an annual evaluation of individual Directors, its own performance and of Board Committees. The evaluation process is designed to improve the effectiveness of the Board.
Individual Director performance is usually reviewed as follows:
- Each Director completes a self-assessment questionnaire and the Chairman then meets separately with each Director in order to appraise their individual performance and effectiveness and to identify any training requirements.
- Appraisal of the Chairman’s performance is conducted by the Non-Executive Directors, led by the Senior Independent Non-Executive Director (taking into account the views of the Executive Directors) using completed assessment questionnaires.
- The Chief Executive appraises the performance of the other Executive Directors with regard to their management and operational responsibilities, in accordance with the Company’s normal performance and development review procedures.
Appraisals were performed for the Directors for their performance in 2008/09. The Chairman reported to the Board on the outcome of the appraisals, in relation to the Board’s overall effectiveness, at its meeting on 15 May 2009. A summary of the completed self-assessment questionnaires indicated that Board processes and frequency of meetings were satisfactory, that the level of information provided was good and that Board relationships were strong with open debate on all subjects. The Board also reviewed the performance of its Board Committees and it was agreed that the practice of all Non-Executive Directors (except for the Chairman) being members of all Board Committees (apart from the Management Board) was effective in ensuring good communication and awareness of all relevant issues.
The Senior Independent Director has led the process to evaluate the performance of the Chairman. Assessment questionnaires have been completed on this by the other Board members. During the year, the Non-Executive Directors met alone and with the Chairman to review his performance.
Re-election
Code main principle A.7: “All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. The board should ensure planned and progressive refreshing of the board.”
All Directors are subject to election by shareholders at the first Annual General Meeting (‘AGM’) following appointment and thereafter to re-election at least every three years. The Company’s articles require the retirement of one third of the Directors who are subject to retirement by rotation at each AGM, however, if the number of Directors eligible for retirement by rotation at any given AGM is less than three, one Director must retire by rotation. Details of the Directors retiring by rotation at the 2009 AGM are set out at page 48 in the Directors’ report.
As detailed above under ‘performance evaluation’ the contribution that each of the candidates seeking re-election by shareholders makes to the Group was evaluated. This was a particularly rigorous evaluation in respect of the Senior Independent Director, Howard Mann, as he will have completed more than six years service as a Director at the date of the AGM in 2009. The Nomination Committee’s conclusion was that, having regard to the roles that they perform and individual input and contribution they make, each candidate’s performance more than justified nomination for re-election by shareholders. The Board unanimously endorses the views of the Nomination Committee on all Directors seeking re-election. In particular, it was felt that Howard Mann’s nomination for re-election would help provide Board continuity, in view of the appointment of three new Non-Executive Directors in 2007.
The Code is clear at provision A.2.2 that the Chairman should be independent on appointment; however, footnote 2 to Code provision A.3.1 is explicit that thereafter, the test of independence is not appropriate to the Chairman. Notwithstanding, at its meeting in May 2007, the Nomination Committee resolved that because the Chairman would have completed more than nine years service as a Director as at the date of the AGM in 2008, in accordance with the spirit of the Code he should stand for re-election annually. Accordingly, Mr Oliver will retire from the Board again at the 2009 AGM and offer himself for re-election. The Nomination Committee has recommended that Mr Oliver be proposed for re-election and the Board supports this recommendation and is satisfied that his performance continues to be effective and demonstrates appropriate commitment to the role, including devoting adequate time for Board and committee meetings and other duties.
Risk management and internal controls
Code main principle C.2: “The board should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets.”
Introduction
The Board has overall responsibility for ensuring a sound system of internal control and risk management. The schedule of written matters reserved to the Board ensures that the Directors are responsible for the control of, amongst other matters, all significant strategic, financial and organisational risks.
An overview of some of the principal risks surrounding the Group is contained in the business review section of the Directors’ report at pages 45 to 47. To manage these and other commercial and operational risks the Group has an established programme that assists management throughout the Group to identify, assess and mitigate business, financial, operational and compliance risks on a continuous basis. The Board views management of risk as integral to good business practice. The programme is designed to support management’s decision making and to improve the reliability of business performance. The risk management process operates throughout the Group, being applied to the main business divisions and corporate functions.
Internal controls
The Directors have overall responsibility for the Group’s system of internal control and risk management and for reviewing its effectiveness to support its strategy and objectives. The systems of internal control are based on an ongoing process of identifying, evaluating and seeking to manage key risks and includes the risk management processes set out above. The systems of internal control were in place throughout the year and up to the date of approval of the Annual Report and Financial Statements. The effectiveness of these systems has been periodically reviewed by the Audit Committee and the Board, in accordance with the Turnbull Committee Guidance On Internal Control (revised October 2005).
Control systems
The main components of the organisation for internal control are summarised below. Their foundation is in the considerable value that the Group places, throughout its activities, on seeking to ensure that employees are of the highest quality and integrity. Formal control is exercised through a management structure, which includes clear lines of responsibility and documented delegations of authority from the Board. Processes underpinning the financial reporting systems are managed and monitored by line and functional management and regular reporting. Separately, the effectiveness of these internal controls is reviewed by an Internal Audit function that operates on a Group wide basis. It reports its results to the executive management team and directly to the Audit Committee. These controls and processes have been in place for the year under review and up to the date of approval of the Annual Report and Accounts.
• Board – the Board exercises its responsibilities through an organisational structure with clearly defined levels of responsibility and rules relating to delegated authorities. The Board meets regularly throughout the year and receives oral and written presentations to maintain control over strategic, financial, operational and compliance matters. The Management Board is responsible for monitoring financial performance, assessing capital expenditure proposals, agreeing media spend, senior management appointments and embedding risk management and controls in the Group. The Managing Director of each Division, in conjunction with senior management, operates and maintains controls appropriate to its own activities which conform to Group policies and procedures.
• Financial reporting – there is an annual budget presented to and approved by the Board which includes consideration of the major business risks, an assessment of the likelihood of crystallisation and actions in place to mitigate these risks. Each Division is required to report monthly to the Board on financial performance. Monthly financial information includes trading results, balance sheet and cash flow information by business Division with comparison against prior year and budget. Each Division periodically reassesses its forecast for the financial year. Annually, a strategic plan is also presented to the Board, which reviews financial projections for the following three years and includes consideration of current and likely future strategic, operational and market environment matters.
• Business Division reviews – on a quarterly basis, each business Division is required to complete a self-assessment controls questionnaire that requires the approval of business unit management. In addition, the Audit Committee and the Management Board receive copies of all Group Internal Audit reports which detail audit issues noted and corrective action plans. They also receive reports from the external auditors on the conclusions of their interim review and final audit.
Control of significant risks
As required by the Code, the Board has established an ongoing process, in accordance with the Turnbull Committee Guidance On Internal Control (revised October 2005), to identify, evaluate and manage significant risks faced by the Group. This process includes the consideration of a register identifying and evaluating the Group’s significant risks and related financial, operational and compliance controls. With oversight from the Board and Audit Committee (which uses the services of the Group Internal Audit function), individual members of the Group’s senior management team are responsible for the ownership and mitigation of significant risks. The Audit Committee and the Board review the identified key risks, changes in their status or the composition of the risk matrix regularly.
Function of controls
The Board has reviewed the effectiveness of the Group’s system of internal control (including that of its former joint venture Yoplait Dairy Crest Limited, its stake in which the Company sold in March 2009). The systems of internal control are designed to manage rather than eliminate the risk of failure to achieve business objectives. They can only provide reasonable and not absolute assurance against material errors, losses, fraud or breaches of laws and regulations.
Report of the Audit Committee
Code main principle C.3: “The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors.”
Members
The Audit Committee met three times in 2008/09. Details of Directors’ attendance at meetings during the year are set out at page 31. The chairman of the Audit Committee provided a report on the work of the Committee and any significant issues that may have arisen at the Board meeting following each Committee meeting.
Attendees at meetings
The Chief Executive, Group Finance Director and Chairman of the Group and other senior management attend Committee meetings by invitation of the Committee. Representatives of the Group’s external auditors and the head of Group Internal Audit, also attend these meetings by invitation. In 2008/09, the external and internal auditors attended all meetings, had direct access to the Committee during the meetings and time was also set aside for them to have private discussions (jointly and independently) with the Committee, in the absence of management.
Audit Committee compliance with the Code
The Audit Committee’s terms of reference (available on request and published on the Group’s website) comply with the Code. During 2008/09, the formal calendar of items (which were reviewed at each Audit Committee meeting and within each annual cycle) embraced the Code requirements to:
- monitor the integrity of the financial statements of the Company, and any formal announcements relating to the Group’s financial performance, including reviewing significant financial reporting judgements and any disclosures contained in them;
- review the Company’s internal financial controls and its internal control and risk management systems and to make recommendations to the Board;
- monitor and review the effectiveness of the Group’s Internal Audit function;
- make recommendations to the Board, for it to put to the shareholders for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditors and to approve the remuneration and terms of engagement of the external auditors;
- review and monitor the external auditors’ independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements; and,
- review the Group’s policy on the engagement of the external auditors to supply non-audit services.
Audit Committee activities
An overview of the work undertaken by the Audit Committee during 2008/09 is described below.
The Audit Committee determined that it was satisfied that the independence of the external auditors had been maintained, having taken into account the external auditors’ written representations and the Committee’s own enquiries.
The Audit Committee reviewed the external auditors’ audit scope, plans and materiality levels and the resources proposed to execute the plans. Having done so, the Committee approved the terms of engagement and the audit fees. The Committee also reviewed the findings of the external auditors, their management letters on internal financial controls and audit representation letters.
The Audit Committee also assessed the qualifications, expertise and resources and independence of the external auditor and the effectiveness of the audit process. Ernst & Young LLP was first appointed as external auditor to the Company in 1996. There are no contractual restrictions on the Company with regard to its appointment. The Audit Committee has not considered it necessary since its initial appointment to require the firm competitively to tender for the audit work. In the light of the assessments and review undertaken and having considered a recommendation of the Committee to re-appoint Ernst & Young LLP as the Company’s and Group’s external auditors, the Board endorsed the Committee’s recommendation which was approved by shareholders in July 2008.
Where the external auditors have provided non-audit services the Group Finance Director has obtained prior authorisation from the chairman of the Committee to instruct Ernst & Young LLP to carry out this work. In the year ended 31 March 2009, non-audit work undertaken by Ernst & Young was principally advice on tax. A statement of fees for services from the external auditors in relation to 2008/09 is set out at note three to the Financial Statements on page 64. Having undertaken a review of the nature and amount of non-audit related work, the Audit Committee has satisfied itself that the services undertaken during 2008/09 did not prejudice the auditors’ independence.
The Audit Committee met prior to the Board meetings at which the interim Financial Statements and the Annual Report and Financial Statements were approved. The Committee reviewed significant accounting policies, financial reporting issues and judgements and, in conducting this review, considered reports from the external auditors, financial management and Internal Audit.
The Committee considered authority limits; the adequacy of the Group’s accounting systems and internal controls; the Group’s Risk Register and its compliance with the Code. It reviewed the Group’s treasury operations including, net debt levels, facility headroom, compliance with banking covenants, Group pension scheme funding arrangements, and the level and appropriateness of hedging arrangements.
During the year the Committee reviewed and considered reports from the head of Group Internal Audit including findings from the Internal Audit function concerning internal controls and the status of the correction of any weaknesses in internal controls identified by the internal and the external auditors. In addition, the Audit Committee reviewed and approved the remit, organisation, plans and resources of the Group’s Internal Audit function; and, carried out a review of the effectiveness of the Internal Audit function and met the head of that function without management being present.
The Committee reviewed its written terms of reference and, in revising these, took account of the latest changes to relevant legislation, regulation and best practice.
Whistle Blowing
The Audit Committee reviews the arrangements by which employees of the Group may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other respects, under the Group’s whistle blowing policy. The Company Secretary leads the whistle blowing team. The Audit Committee is satisfied that these arrangements allow for appropriate independent investigation of any such matters and suitable follow-up actions.
Communication with investors
Code main principle D.1: “There should be a dialogue with shareholders based on the mutual understanding of objectives.
The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.”
Introduction
The Group believes it is important to explain business developments and financial results to its shareholders and to understand any shareholder concerns, and that suitable arrangements are in place to ensure a balanced understanding of the issues and concerns of major shareholders. The Chief Executive and Group Finance Director have primary responsibility for investor relations. They are supported by the Company’s External Affairs Director who, among other matters, organises presentations for analysts and institutional investors and holds meetings with key institutional shareholders to discuss strategy, financial performance and investment activities immediately after the full year and interim results announcements. Slide presentations made to institutional shareholders are also available on the Company’s website. All the Non-Executive Directors and, in particular, the Chairman and Senior Independent Director, are available to meet with major shareholders, if such meetings are so required. Further financial and business information is available on the Investor Centre section of the Company’s website.
Feedback from meetings with shareholders is provided to the Board to ensure that the Non-Executive Directors have a balanced understanding of the issues and concerns of major shareholders. This includes communication with the shareholders at the AGM, regular feedback from the Chief Executive and the Group Finance Director on their meetings with major shareholders, and periodic reports to the Board on investor relations together with feedback from the Company’s brokers on the views of major shareholders.
The principal method of communication with private shareholders is through the Annual and Interim Reports, the AGM and through the Company’s website.
Annual general meeting
Code main principle D.2: “The board should use the AGM to communicate with investors and to encourage their participation.”
A business review is presented by the Chairman at the AGM to facilitate shareholder understanding of the Group’s activities. Arrangements are made for all Executive Directors, the Chairman, the Senior Independent Non-Executive Director, the remaining Non-Executive Directors and the chairmen of Board Committees to attend the AGM and to be available to answer shareholders’ questions. Unfortunately Mr Anthony Fry was unable to attend the AGM in July 2008 as a result of his attendance at a family funeral overseas. Notice of the AGM is, in accordance with the applicable Companies Act and the Company’s articles, either posted in hard copy to shareholders or posted on the Company’s website at least 21 days before the date of the AGM. Resolutions are proposed for each substantial separate issue and details of the proxy voting on each resolution are announced at the AGM after the results of the show of hands is known and are posted on the Company’s website following the conclusion of the meeting.
The Company counts all proxy votes and indicates the level of proxies lodged on each resolution. It also publishes the level of votes for and against resolutions and the number of abstentions. The Company ensures that votes cast are properly received and recorded.
Separate resolutions are proposed on each substantially discrete subject and the Company does propose a resolution at the AGM relating to the Annual Report and Financial Statements.
Access to information
Electronic communication continues to become the principal medium for shareholders, providing ready access to shareholder information and reports. Recognising this, Annual Reviews, Annual Reports and Financial Statements and Interim Reports are published on the Company’s website. Pursuant to changes introduced by the Companies Act 2006, the Company sought shareholder approval at the 2007 AGM, subject to certain requirements, to communicate electronically with its shareholders. Other information which shareholders and third parties are entitled to access is made available in accordance with legislative and regulatory requirements. In future, where company law permits, the Company intends notifying shareholders of the electronic publication of notices of meetings on its website.
Compliance with the provisions contained within the Combined Code
Throughout the year the Group was in compliance with the provisions of the Code except that: no meetings were requested or held between shareholders and the Chairman and Senior Independent Non-Executive Director during the year; and, for reasons explained above, one of the Non-Executive Directors was unable to attend the AGM in July 2008.
Approval
The Corporate Governance Statement and the Audit Committee report contained in it have been approved by the Board.
By order of the Board
Robin Miller
Company Secretary
18 May 2009