Governance framework

Governance framework

Governance framework (graphic)

* Reports to the Chairman of the Audit and Risk Committee.
† Composed of independent non-executive Directors of Schroder & Co. Limited.

Division of responsibilities of the Chairman and Group Chief Executive

There is a clear division of responsibilities between the Chairman and Group Chief Executive that is set out in job descriptions. This has not changed following the appointment of Michael Dobson as Chairman.

Role of the Chairman

The Chairman is responsible for leadership of the Board, ensuring its effectiveness and setting its agenda. He is responsible for creating an environment for open, robust and effective debate. This includes ensuring that the Directors receive accurate, timely and clear information in order to discharge their responsibilities. The Chairman is also responsible for ensuring effective communication with shareholders and other stakeholders. This involves supporting the Group’s relationships with major clients, shareholders, strategic and commercial partners and regulators.

Role of the Group Chief Executive

The Group Chief Executive is responsible for the executive management of the Company and its subsidiaries, including the creation of shareholder value over the long term through growth in profits and the recommendation of the Group’s strategy and budget. He is assisted by members of the GMC in the delivery of his and the Board’s objectives for the business.

Role of the Senior Independent Director

The role of the Senior Independent Director is an essential part of the Group’s governance structure.

Philip Howard’s role is to act as a sounding board for the Chairman, oversee the evaluation of the Chairman’s performance and serve as an intermediary for the other Directors if necessary. He is also available as an additional point of contact for shareholders should they wish to raise matters with him rather than the Chairman or Group Chief Executive. Philip Howard led the process for the appointment of a new Chairman in 2016 and has overseen a review of the relationship between Michael Dobson and Peter Harrison. He is fully aware of the importance of the role of the Senior Independent Director, particularly in light of Michael Dobson’s appointment as Chairman.

In addition, as Chairman of the Remuneration Committee, he has also led the review of the Directors’ remuneration policy and subsequent consultation with major shareholders. More information can be found in the Remuneration report.

Role of the non-executive Directors

Non-executive Directors have a responsibility to uphold high standards of integrity and probity and are expected to provide constructive challenge and help develop proposals on strategy. Non-executive Directors are also expected to monitor the performance of management in meeting agreed objectives while satisfying themselves on the integrity of financial information and that financial controls and risk management systems are robust and appropriate. The Board assesses the independence of its non-executive Directors using the criteria set out in the Code. The non-executive Directors participate fully in open and constructive Board and Committee meetings and their views are actively sought, particularly when developing and setting strategy.

Key areas of focus during the year

The Chairman, in conjunction with the Group Chief Executive and Company Secretary, maintains an annual rolling agenda which sets the framework for Board meetings so that the Board covers an appropriate range of topics from matters of strategy and reviews of the Group’s businesses and operations through to more routine business.

Each Board meeting receives a report from the Group Chief Executive on the performance of the business, the Chief Financial Officer on financial performance, a governance report and, where relevant, a report from each of the Board committees. In addition to these regular matters, specific areas of focus by the Board during 2016 included:

Meeting dates

Key areas of discussion

March

  • Annual Report and Accounts, dividend proposal and AGM
  • Global Distribution
  • Brexit
  • Board succession

May

  • Key trends in Asset Management
  • Equities review
  • Intermediary and Defined Contribution strategy
  • Wealth Management strategy
  • Efficiency and effectiveness

July

  • Half–year results and dividend proposal
  • Remuneration strategy
  • Asset management trends
  • Private Assets strategy
  • Brexit
  • ICAAP

September

  • Talent and people strategy
  • North America strategy
  • Corporate and Social Responsibility
  • Regulation
  • Appointment of the external auditor
  • Group recovery plan and resolution pack
  • ILAAP

November

  • UK Distribution Strategy
  • UK investment strategy
  • Global Operating Model strategy
  • 2017 budget
  • Audit tender
  • Charitable donations

One additional unscheduled Board meeting was held in October to consider the acquisition of our interest in Benchmark Capital.

Director appointments, tenure and time commitment

The rules providing for the appointment, election, re-election and the removal of Directors are contained in the Company’s Articles of Association. Under the Company’s Articles of Association Ian King and Rakhi Goss-Custard will resign and offer themselves for election at the Company’s AGM on 27 April 2017. All other Directors seek re-election on an annual basis.

Non-executive Directors are expected to serve two three-year terms, although the Board may ask a non-executive Director to serve an additional three year period. Where an appointment extends beyond six years, continued appointment is subject to particularly rigorous review, taking into account the need for progressive refreshing of the Board. Details of the Directors’ length of tenure are set out in the below chart.

Length of tenure

Length of tenure (pie chart)

Non-executive Directors’ letters of appointment stipulate that they are expected to commit sufficient time to discharge their duties. The Board considers the time commitments and, where relevant, the independence of all Directors standing for election or re-election before making a recommendation to shareholders. The Board has adopted a policy that does not normally allow executive Directors to take up more than one external non-executive directorship. Non-executive Directors are required to notify the Chairman before taking on any additional appointments. The Board is satisfied that all Directors continue to be effective and demonstrate commitment to their respective roles.

Details of executive Directors’ service contracts, termination arrangements and non-executive Directors’ letters of appointment are set out in chapter Directors’ remuneration policy summary.

Independence

The Board considers all of its non-executive Directors, with the exception of Michael Dobson, Philip Mallinckrodt and Bruno Schroder, to be independent under the criteria set out in the Code. All are independent in terms of character and judgement and free from any business or other relationship that could materially interfere with the exercise of their judgement.

Michael Dobson, as the former Chief Executive, is not considered independent under the Code. Philip Mallinckrodt is not considered independent as he is a former executive Director and is a member of the principal shareholder group. Bruno Schroder is not considered independent as he is a member of the principal shareholder group and because he has served on the Board for more than nine years.

The Nominations Committee believes that their experience continues to add value to the Board and Nominations Committee discussions. The Board will therefore recommend their re-election at the 2017 AGM.

Board induction and training

The Company Secretary supports the Chairman and Group Chief Executive in providing a personalised induction programme to all new Directors. This helps to familiarise them with their duties and the Group’s culture and values, strategy, business model, businesses, operations, risks and governance arrangements.

Following Ian King’s and Rakhi Goss-Custard’s appointments in January 2017, comprehensive induction programmes were developed and are ongoing. The induction process involves:

  • meeting all members of the GMC to gain an insight into and an understanding of the opportunities and challenges facing their areas of the business;
  • one-to-one meetings with other senior management across the Company, including from the first, second and third lines of defence to understand the Group’s internal control and risk management framework (see chapter Key risks and mitigations);
  • access to an online board portal which holds copies of all recent Board and Committee reports and minutes, the Company’s Articles of Association, Committee terms of reference and previous Annual Report and Accounts; and
  • briefing sessions with the Chairman of the Nominations Committee on the responsibilities and activities of this Committee.

The Board believes firmly that the ongoing development and briefing of Directors is an important aspect of the Board’s agenda. Briefing sessions are arranged each year which, during 2016, included presentations on the development of the ICAAP and updates on Real Estate and Quantitative Equity Products. Members of the Board Committees also receive regular updates on technical developments at scheduled Committee meetings.