|
| |
|
|
| |
GOVERNANCE > Corporate Governance |
|
| |
|
|
| |
|
|
| |
|
Statement of Compliance
The Company complied with the provisions of The Combined Code on Corporate Governance (the Code) throughout the year ended 31 December 2007. The Company’s application of the principles of the Code is set out in this report and the Remuneration Report.
The Board
The Board of Directors represents the shareholders’ interests in maintaining and growing a successful business including optimising consistent long-term financial returns. The Board has a responsibility to the Group’s customers, employees and suppliers and to the communities where it operates and invests.
The Board has a schedule of matters reserved to it including, but not limited to, strategy and management, structure and capital, financial reporting controls, internal control, Board membership and other appointments, remuneration, delegation of authority, corporate governance, major acquisitions and disposals and development approvals.
Board meetings are held on a regular basis with meetings being programmed throughout the year. Additional ad-hoc meetings are arranged when necessary. Board papers are circulated one week in advance of Board meetings. The Chairman, with the assistance of the Company Secretary, is responsible for ensuring that the Board receives timely advice on all material information about the Company, its subsidiaries, activities, performance, projects and any significant variances from a planned course of progress.
All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. Directors have the right to consult with the Company’s professional advisers and to seek independent professional advice at the Company’s reasonable expense.
The Board has delegated a number of its responsibilities to the Executive, Audit, Remuneration and Nomination Committees. The terms of reference of these committees can be found at www.segro.com as can the terms of appointment for the Non-Executive Directors, Chairman and Chief Executive. One and a half days are set aside each year primarily for the development of the Group strategy.
[ back to top]
Board Composition
The biographical details of the members of the Board are contained on pages 46 to 47. The Board comprises a balance of skills and experience which are appropriate for the requirements of the business. The division of responsibilities between the Chairman and Chief Executive is clearly established, set out in writing and agreed by the Board.
In addition to the Chairman, there are six Non-Executive Directors, Lesley MacDonagh having being appointed as a Non-Executive Director on 1 January 2007. Lord Blackwell is the Senior Independent Non-Executive Director. There are four Executive Directors, Walter Hens having being appointed as an Executive Director on 1 January 2007 and Marshall Lees having resigned on 1 August 2007, following the disposal of the US business. The appointment of Walter Hens, Executive Director Group Business Development, complements SEGRO’s strategy for further development in Continental Europe. Lesley MacDonagh brings a wealth of experience to the Board as a highly regarded City lawyer.
The Board considered the independence of all of the Non-Executive Directors against the Code and determined that each remained independent. The Chairman was considered independent on appointment.
There is a formal and rigorous procedure for the appointment of new Directors to the Board. All Directors are subject to periodic re-appointment by the shareholders at three-yearly intervals and are required to submit themselves for election at the Annual General Meeting (AGM) following their appointment. The Articles of Association of the Company provide for a minimum number of Directors who must retire by rotation.
[ back to top]
Table of Attendance
Directors who were unable to attend meetings received the papers for those meetings, enabling them to send their comments to the Chairman prior to the meeting as appropriate. |
| |
|
| |
| Name |
Board |
Remuneration
Committee |
Audit
Committee |
|
| Nigel Rich* |
10 |
2 |
1 |
| Lord Blackwell |
10 |
4 |
4 |
| Stephen Howard |
10 |
4 |
5 |
| Lesley MacDonagh |
10 |
4 |
n/a |
| Christopher Peacock |
10 |
4 |
n/a |
| Andrew Palmer |
9 |
n/a |
5 |
| Thom Wernink |
9 |
n/a |
4 |
| Ian Coull |
10 |
n/a |
n/a |
| John Heawood |
10 |
n/a |
n/a |
| Walter Hens |
10 |
n/a |
n/a |
| David Sleath |
10 |
n/a |
n/a |
| Marshall Lees** |
4 |
n/a |
n/a |
|
| Total number of meetings |
10 |
4 |
5 |
|
| |
|
|
|
|
| |
| * |
Nigel Rich stepped down from the Audit and Remuneration Committee with effect from 14 May 2007. |
| |
|
| ** |
Marshall Lees resigned from the Board on 1 August 2007. |
|
| |
|
| |
There were no meetings of the Nomination Committee in 2007. The Committee met on 30 January 2008.
[ back to top]
Board Development
On appointment, new Directors are given a comprehensive, formal and tailored introduction to the Group’s business including visits to the Group’s operations and meetings with senior management. Directors are encouraged to continually update their professional skills and capabilities, together with their knowledge of the Company’s business. During 2007, briefings by senior management and the Company’s legal advisors were provided in respect of the changes introduced by Companies Act 2006, including those related to directors’ duties and conflicts of interest and in respect of the new offence of corporate manslaughter. Briefings were also provided on the operation, drivers, key risks and economic outlook for the property market in the UK and Continental Europe and the key risks and economic outlook facing the sector. A number of papers supporting these briefings were provided by external property market analysts.
[ back to top]
Board Performance Evaluation
The Board undertakes a formal evaluation of its own performance. The Chairman, assisted by the Company Secretary, leads this process. The performance evaluation consists of each Director completing a wide ranging appraisal questionnaire which is based on the process and questions outlined in the Code. The questionnaire provides a forum for giving feedback on the running of the Board, any weaknesses which need to be addressed and where the Board is performing well. The responses to the questionnaire are reviewed by the Chairman and the Board.
As a result of the 2007 review, the Chairman recommended the following changes: a more frequent review of strategy in difficult times; the commissioning of a review as to how the Company adds value; suggestions as to the content of Board agendas; and the provision of Audit and Remuneration Committee questionnaires constructed on a similar basis to those used for the Board performance evaluation. It has been agreed that the 2008 Board performance review will be conducted by a third party.
The Senior Non-Executive Director chaired a meeting of the Non-Executive Directors in the absence of the Chairman to appraise the Chairman’s performance taking into account the views of the Executive Directors. A similar review of the Chief Executive took place with the Chairman present. The Chairman and the Non-Executive Directors met during the year with the Chief Executive and Director of Human Resources to discuss succession planning.
[ back to top]
Committees of the Board
The Board is responsible for monitoring the following Committees and the minutes of the meetings of these Committees are made available to the Board on a timely basis:
[ back to top]
Executive Committee
During 2007, the Executive Committee comprised Ian Coull, John Heawood, Walter Hens, Marshall Lees (until 1 August 2007), David Sleath, Andrew Gulliford, John Probert, Jennifer Titford, Michael Waring, Roger Bell and Inès Reinmann, who was appointed to the Committee with effect from 29 October 2007. The Executive Committee is chaired by the Chief Executive and met ten times in 2007. The Executive Committee is responsible for the day-to-day management of the Group, the development of operational plans and strategy, assessment of risk and the allocation of resource where those matters are not reserved for the Board.
[ back to top]
Audit Committee
The Audit Committee comprised Andrew Palmer (Chairman), Lord Blackwell, Stephen Howard, Thom Wernink and Nigel Rich, who resigned from the Committee with effect from 14 May 2007. Andrew Palmer, the Finance Director of a FTSE 100 company is identified as having recent and relevant financial experience as required by the Code. The Committee reviews the clarity and completeness of the disclosures made in the financial statements of the Company and considers significant accounting policies, any changes to them and any significant judgements and estimates. The Committee also considers the appointment, compensation, independence and performance of the external auditors.
During the year, the Audit Committee ran a tender process for the role of external auditors to the Group. As a result of the tender process, Deloitte & Touche LLP were appointed by the Board as external auditors in June 2007. A resolution will be put to shareholders at the forthcoming AGM proposing the formal appointment of Deloitte & Touche LLP as auditors.
The Committee met regularly with the internal and external auditors during the year. The Committee discharged its responsibilities as set out in its terms of reference. |
| |
|
| |
| - |
investigate any activity within its terms of reference; |
| |
|
| - |
seek any information that it requires from any employee of the Company and all employees are directed to co-operate with any request made by the Committee; and |
| |
|
| - |
obtain outside legal or independent professional advice and such advisors may attend meetings as necessary. |
|
| |
|
| |
The types of non-audit work that the auditors may undertake has been restricted and other categories of non-audit work are subject to pre-clearance, as are assignments over certain financial limits. The external auditors have confirmed their independence to the Committee in writing.
[ back to top]
Risk Management
Details of the Group’s risk management processes are provided on pages 20 and 21.
[ back to top]
Nomination Committee
The Nomination Committee consisted throughout the year of Nigel Rich (Chairman), Ian Coull, Andrew Palmer, Christopher Peacock, Lord Blackwell, Stephen Howard and Thom Wernink. Lesley MacDonagh joined the Committee with effect from 31 January 2008. The Committee has responsibility for making recommendations for new appointments to the Board and for ensuring that the process for all appointments is formal, rigorous and transparent. The Committee prepares a job description for the role required in light of the experience and capabilities of the Board and the requirements of the role. Candidates are then assessed by reference to that job description. External search consultancies are engaged by the Committee, as necessary, to provide candidate lists in respect of Board appointments. The Committee is also responsible for succession planning, ensuring the continuity of the Board and ensuring that the Board comprises the appropriate skills and experience appropriate for running the Company.
[ back to top]
The Remuneration Committee
The composition of the Remuneration Committee, its activities during 2007 and the way it applied the principles of the Code are described in the Remuneration Report which can be found on pages 55 to 63.
[ back to top]
Going Concern
After making enquires, at the date of this report, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts.
[ back to top]
Internal Control & Internal Audit
The Board is responsible for monitoring and maintaining a robust and effective internal controls framework across the Group and for identifying, evaluating and managing the Group’s significant risks, in compliance with principle C.2 of the Code and the revised guidance on internal control issued by the Financial Reporting Council in October 2005. This framework and system has been developed in compliance with the Turnbull guidance and is continuously reviewed by the Board, who confirm that it has been in place throughout the year and to the date of this report. The framework and internal controls system are designed to manage but not to eliminate the risk of failure of the Group to meet its business objectives and as such only provide reasonable but not absolute assurance against material misstatement or loss.
The key features of the internal control framework include: |
| |
|
| |
| - |
the establishment of an organisational structure with clearly defined levels of authority and division of responsibilities; |
| |
|
| - |
a comprehensive system of reporting, budgeting and planning against which performance is monitored; |
| |
|
| - |
the formulation of policies and of approval procedures in a number of key areas such as treasury operations, capital expenditures and environmental matters. These are reviewed from time to time by the Board to confirm their adequacy and effective operation; |
| |
|
| - |
the provision of a code of conduct for employees and the monitoring of the quality of personnel through an annual performance appraisal process; |
| |
|
| - |
a regular and ongoing risk assessment process, undertaken at both Group and subsidiary levels which includes identification and evaluation of the likelihood of key risks materialising and assessment of the controls and other processes in place to manage such risks; |
| |
|
| - |
a Group Risk Committee, with the responsibility to oversee the identification, assessment and management of all the risks faced by the Group; |
| |
|
| - |
an internal audit function, with a risk-based programme of work aimed at improving processes and the controls; and |
| |
|
| - |
an annual control self-assessment and certification exercise whereby managers throughout the business carry out an assessment of the controls in their area of responsibility and certify whether such controls have been operating effectively throughout the year. |
|
| |
|
| |
During the year, the Audit Committee reviewed the arrangements put in place whereby employees may raise, in confidence, any concerns which they may have in respect of financial reporting or other matters and the arrangements for the independent investigation of those matters.
The Audit Committee, on behalf of the Board, has reviewed the effectiveness of the systems of internal control and risk management. This review covered all material areas of the business including financial, operational and compliance controls and risk management.
In performing its review of effectiveness, the Audit Committee took into account the following reports and activities: |
| |
|
| |
| - |
internal audit reports on reviews of business processes and activities, including action plans to address any identified control weaknesses; |
| |
|
| - |
management’s own assessments of the strengths and weaknesses of the overall control environment in their area, and the action plans to address the weaknesses; |
| |
|
| - |
external auditor reports on any recommendations for improvements in controls or processes identified in the course of their work, including the follow-up of previous recommendations; and |
| |
|
| - |
risk management reporting, including the status of actions to mitigate major risks. |
|
| |
|
| |
The Board and the Audit Committee monitor management’s action plans designed to address weaknesses in internal controls which have been identified as a result of the above procedures. The Board confirms that it has not been advised of any failings or weaknesses which it regards to be significant.
[ back to top]
Relations with Shareholders
The Chief Executive and Directors are the Company’s principal spokesmen with investors, fund managers, the press and other interested parties. The Chairman and Senior Independent Non-Executive Director are available to shareholders, together or separately, should they have concerns which contact through the usual channels has failed to resolve or is otherwise inappropriate. The Board is kept informed as to the detail of any such discussions with shareholders.
There are regular meetings with institutional shareholders held by the Chief Executive and Finance Director which are reported to the Board. The Chairman and the Senior Independent Non-Executive Director make themselves available for meetings with institutional shareholders and should these occur, the discussions will be reported to the Board.
[ back to top]
Constructive Use of the AGM
At the AGM shareholders and investors are given the opportunity to question the Board and to meet with them afterwards. They are encouraged to participate in the Meeting.
The Chief Executive gives a presentation to shareholders at the AGM on the performance of the Company.
Photographic displays and literature are available to illustrate the Company’s developments. |
| |
|
| |
[ back to top] |
|
|
| |
|
|
|