GOVERNANCE POLICY & PRINCIPLES

Our Governance Policy & Principles

Our governance policy framework is comprised of 8 principles of good governance to which we are taking a dynamic phased approach from 2018.

This defines roles, responsibilities and an agreed distribution of power amongst shareholders, the board, management and other stakeholders.

A key step in the development of our governance is the decision to invite external directors onto the board.

 

Corporate Governance Principles

Principle 1: Shareholders should establish an appropriate constitutional and governance framework for the company.

Principle 2: We should strive to establish an effective board, which is collectively responsible for the long-term success of the company, including the definition of the corporate strategy. However, an interim step on the road to an effective (and independent) board may be the creation of an advisory board.

Principle 3: The size and composition of the board should reflect the scale and complexity of our activities.

Principle 4: The board should meet sufficiently regularly to discharge its duties, and be supplied in a timely manner with appropriate information.

Principle 5: Levels of remuneration should be sufficient to attract, retain, and motivate executives and non-executives of the quality required to run the company successfully.

Principle 6: The board is responsible for risk oversight and should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets.

Principle 7: There should be a dialogue between the board and the shareholders based on a mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. The board should not forget that all shareholders have to be treated equally.

Principle 8: All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.

Shaun Green, Director

Shareholders should establish an appropriate constitutional and governance framework for the company.

Key Points

• Shareholders should establish a basic framework of corporate governance through the company’s constitutional documents (i.e. the articles of association).
• There should be a formal schedule which states which matters are specifically reserved for the shareholders’ decision and which are to be delegated to the board (see Principle 2).
• However, shareholders should minimise the extent to which the articles constrain the ability of the board to shape the detailed governance framework.

We should strive to establish an effective board, which is collectively responsible for the long-term success of the company, including the definition of the corporate strategy. However, an interim step on the road to an effective (and independent) board may be the creation of an advisory board.

Key Points

• The board’s role is to provide leadership of the company.
• As an intermediate step on the road to an effective main board, we may consider the establishment of an additional advisory board, without formal decision-making responsibilities.
• All directors must take decisions objectively in the interest of the company. As the company develops, inviting an independent director onto the board can help in focusing the board on the corporate interest.
• The board should elect a chairman. The chairman is responsible for leadership of the board, ensuring its effectiveness on all aspects of its role and setting its agenda.
• The board should appoint a Chief Executive (or managing director) to lead the management team, and exercise executive authority over the operation of the company.
• The board should set the company’s strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives.
• The board is responsible for monitoring and evaluating management performance.
• The board should set the company’s values and standards and ensure that its obligations to its shareholders and other stakeholders are understood and met. The board should be involved in the strategic development process and – as a minimum – approve the strategy, and ensure that it lies within the framework of shareholders’ expectations.
• It is the responsibility of the board to ensure that the company complies with its articles of association as well as relevant legal, regulatory, and governance requirements.
• There should be a formal schedule of matters which states which matters are specifically reserved for the board’s decision and which are to be delegated to management.
• Where directors have concerns which cannot be resolved about the running of the company or a proposed action, they should ensure that their concerns are recorded in the board minutes.

The size and composition of the board should reflect the scale and complexity of the company’s activities.

Key Points 

• The board should not be so large as to be unwieldy. The balance of skills and experience should be appropriate for the requirements of the business. Changes to the board’s composition should be manageable without undue disruption.
• There should be an explicit procedure for the appointment of new directors to the board. Appointments to the board should be made after careful examination against objective criteria.
• The board should satisfy itself that plans are in place for orderly succession for appointments to the board and to senior management. The aim is to maintain an appropriate balance of skills and experience within the company and on the board.
• The period of appointment of directors should be carefully considered. The board should balance the flexibility of open-ended appointments against the need to ensure planned and progressive refreshing of the board.

The board should meet sufficiently regularly to discharge its duties, and be supplied in a timely manner with appropriate information.

Key Points

• Consideration should be given to the appropriate organisation of board meetings.
• The chairman is responsible for ensuring that the directors receive accurate, timely, and clear information.
• Management has an obligation to provide such information. However, directors should seek clarification or amplification from management where necessary. The board should establish explicit procedures which allow directors to approach management for further information.
• The board should ensure that directors – especially non-executive directors – have access to independent professional advice at the company’s expense where they judge it necessary to discharge their responsibilities as directors.

Levels of remuneration should be sufficient to attract, retain, and motivate executives and non-executives of the quality required to run the company successfully.

Key Points

• A clear distinction must be made between the remuneration of executives and non-executives. The former are full-time employees of the company, and are responsible for its operational activities. In contrast, non-executives are “office holders” rather than company employees, and dedicate their time to the company on a part-time basis. Remuneration structure should reflect these differing roles.
• Members of the board are ultimately accountable to shareholders for their remuneration. However, in practice, many boards will themselves define and propose to the shareholders’ meeting any change in their annual remuneration.
• Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role.
• Caution should be exercised when linking non-executive remuneration to company performance.
• The board should develop a formal executive remuneration policy and a transparent procedure for implementing the policy, e.g. in terms of fixing the remuneration packages of individual executives and non-executives.
• No one should be involved in deciding on his or her own remuneration.
• Boards should compare the remuneration of their executives and non-executives with that of other relevant companies. But they should use such comparisons with caution, in view of the risk of an upward ratchet of remuneration levels with no corresponding improvement in performance.
• Boards should be sensitive to pay and employment conditions elsewhere in the company, especially when determining annual salary increases.
• A significant proportion of executive remuneration should be structured so as to link rewards to corporate and individual performance. They should be designed to align their interests with those of shareholders and other key stakeholders, and give these executives incentives to perform at the highest levels.
• The board should consider the financial implications of early termination of executives’ terms of office. In addition, careful thought should be given to notice or contract periods. The aim should be to avoid rewarding poor performance.

The board is responsible for risk oversight and should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets.

Key Points

• The board should attempt to identify the main risks facing the company. It should satisfy itself that all material risks are being appropriately managed.
• The board should establish formal and transparent arrangements for applying financial reporting and internal control principles, and for maintaining an appropriate relationship with the company’s auditors.
• The board should periodically assess the need to establish a formal internal control and risk management function. Moreover, a periodic check on the effectiveness of the company’s approach towards internal control is necessary. Such review should cover all material controls, including financial, operational and compliance controls, and risk-management systems.

There should be a dialogue between the board and the shareholders based on a mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. The board should not forget that all shareholders have to be treated equally.

Key Points

• The board should keep in touch with shareholder opinion in whatever ways are most practical and efficient.
• The chairman has particular responsibility for the effectiveness of communication between shareholders and the board, and should discuss corporate governance and strategy with shareholders.
• The chairman is the primary means of ensuring that the views of shareholders are communicated to the board as a whole. However, other directors should also be offered the opportunity of attending meetings with shareholders.
• A key role of the chairman is to set the agenda of the Annual (and Extraordinary) General Meetings.
• The relationship with the shareholders should be viewed as a continuous process and not limited to an annual formal meeting.

All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.

Key Points

• The rigour and formality of the induction should reflect the size and complexity of the enterprise.
• The chairman should ensure that the directors continually update their skills, and obtain the knowledge and familiarity with the company required to fulfil their role on the board.
• The chairman should encourage board members to engage in professional training that specifically enhances their functioning as company directors.