Board effectiveness and evaluation

Our externally facilitated Board evaluation in 2015 identified some demand to widen the Board’s discussions on strategy and risks to the strategy, for greater diversity in terms of gender, nationality and sector and to enhance the induction process for executive Directors. We took action to address these points in 2016. Board agendas and their supporting papers have focused more on strategic matters, with an emphasis on the impact of the headwinds in our industry and how we react to them. In terms of diversity we have broadened the range of sector skills on the Board and increased the proportion of women. We have also confirmed that our aim is to increase female representation to 33% by 2020. We have not appointed any new executive Directors in 2016, but when we do, a tailored induction will be developed.

The 2016 Board evaluation was undertaken internally. The Chairman with the Company Secretary had individual meetings with each Director to discuss the following core questions:

  • How effective has the Board been in 2016?
  • Have we focused on the right things and what would you like to change this year?
  • How can we make the Board more effective?
  • How well has the transition to Peter Harrison gone?
  • What would you like from Peter Harrison this year?
  • What concerns do you have about the Board?
  • Where are the weaknesses on the Board?
  • Are the Board Committees operating effectively?
  • Is there any feedback on individual Directors?
  • How well did we manage the independent non-executive Director search and do we now have the right skills around the table?
  • What are our succession challenges in 2017?

Directors were free to raise any other issues they wished to. Following the interviews, a report was prepared and discussed by the whole Board at the February 2017 meeting. The overall conclusion was that the Board continued to operate effectively, that there had been a significant shift in focus to more strategic issues and that the process to find the new independent non-executive Directors had been thorough and had gone well.

Looking forward, there was support for continuing the shift in emphasis to strategic issues and to look in more detail at the strategic choices open to us to address the challenges facing the industry. Directors also wanted see more opportunities for ‘first line’ attendees at Board and Committee meetings and to expose more senior managers to the Board in support of succession planning. There was a clear desire for a continued focus on Board and executive succession.

Philip Howard, as Senior Independent Director, led the review of Michael Dobson’s performance. Philip Howard held regular meetings and discussions with the Chairman, the Group Chief Executive and individual Directors. In 2017, he met with all the non-executive Directors and the Group Chief Executive to discuss the Chairman’s overall performance. The consensus was that Michael Dobson had been a highly effective Chairman. He had stood back from his executive responsibilities fully and had assumed an entirely non-executive role. He had undertaken his external duties diligently, having numerous meetings with key clients and regulators, as envisaged when he was appointed. His time commitment had been approximately two days per week, although this was an average rather than a fixed commitment. He had acted as a sounding board for Peter Harrison and he had taken the Board in a more strategic direction, which was what the Board had asked for. He had led the search for the two additional non-executive Directors in a highly effective way. The Board reiterated its support for Michael Dobson as Chairman.

The Board has gone through a period of significant change over the past year. In light of this, the Chairman proposed that the evaluation for 2017 should be externally facilitated again, one year earlier than would normally be expected. The Board supported this proposal and therefore it is anticipated that Independent Board Evaluation will conduct a review in late 2017.

Directors’ conflicts of interest

The Company has procedures in place to identify, authorise and manage conflicts of interest, and these procedures have operated effectively during the year. Any planned changes in the Board’s directorships outside the Group are subject to prior approval by the Board. In circumstances where a potential conflict arises, the Board (excluding the Director concerned) will consider the situation and either authorise the arrangement in accordance with the Companies Act 2006 and the Company’s Articles of Association or take other appropriate action.

All potential conflicts authorised by the Board are recorded in a conflicts register which is maintained by the Company Secretary and reviewed by the Board on an annual basis. Directors have a continuing duty to update the Board with any changes to their conflicts of interest.

Company Secretary

Graham Staples, the Company Secretary, is responsible for the following key matters in relation to the effective operation of the Board:

  • advising and supporting the Chairman and the Board on all obligations and developments in corporate governance;
  • ensuring that appropriate and timely information is provided to the Board and its Committees and that there are good information flows between senior management and the non-executive Directors;
  • acting as a point of contact for shareholders on matters of corporate governance; and
  • implementing a robust governance framework throughout the Group.

All Directors have access to the advice and services of the Company Secretary and can arrange through him to receive professional advice independently of the Company, at the Company’s expense.

Shareholder engagement

The Board recognises the importance of establishing and maintaining good relationships with all of the Company’s shareholders and the wider investment community. As part of the Company’s investor relations programme, the Group Chief Executive and Chief Financial Officer participated in a number of roadshows in the UK, continental Europe and the US as well as attending several investor conferences. Feedback from these meetings and conferences is provided to the Board to ensure that the Directors develop an understanding of the views of our major shareholders. All Directors are available to engage in dialogue with shareholders and would do so if requested.

In early 2016 we engaged directly with our major shareholders, who between them represented over 70% of our issued ordinary shares, to discuss our succession plans. Whilst the vast majority of those shareholders supported our proposals, we recognised that a significant minority did not. We appreciated the feedback from those shareholders and we gave commitments to provide them with reassurance regarding the elevation of the Chief Executive to the role of Chairman. This included a commitment to appoint two additional independent non-executive Directors such that there was an absolute majority of independent non-executive Directors on the Board, and a commitment to update shareholders following those appointments on how the transition from Michael Dobson to Peter Harrison had gone. Consequently, a number of meetings have been held with major shareholders to provide the promised update and also to discuss our proposed remuneration policy. Most of these meetings were with the Senior Independent Director and the Company Secretary, but both the Chairman and the Group Chief Executive were available to meet any shareholder who wished to see them.

The primary means of communicating with the Company’s shareholders is through the Annual Report and Accounts and half-yearly results. These are available on the Company’s website and the Annual Report and Accounts is posted to all shareholders who elect to receive it. Our Group website also contains information on the business of the Company, Corporate Governance, all regulatory announcements, key dates in the financial calendar and other important shareholder information.

The AGM is another important opportunity to meet with shareholders, hear their views and to answer their questions about the Group and its business. All resolutions are voted on by way of a poll. This allows the Company to count all votes rather than just those of shareholders attending the meeting. All resolutions are voted on separately and the final voting results are published as soon as practicable after the meeting. Together with the rest of the Board, the Chairmen of the Audit and Risk, Remuneration and Nominations Committees will be present to answer questions. The 2017 AGM is to be held on Thursday 27 April 2017.