The Board supports the principles of good governance. In fulfilling their responsibilities, the Directors believe that they govern the Group in the best interests of the shareholders, whilst having due regard to the interests of other stakeholders in the Group including clients, employees, our regulator (the FSA) and suppliers.
The Group is not bound by the London Stock Exchange Listing Rules, including those relating to corporate governance. The Board is therefore providing the following information on a voluntary basis.
The workings of the Board and its committees
The Plc Board
The Plc Board (the 'Board') currently comprises the Group Chairman (Non-Executive), the Deputy Chairman (Executive), three additional Non-Executive Directors and four Executive Directors. At each Annual General Meeting ('AGM') of the Company, at least one third of the Directors retire from office by rotation.
The four Non-Executive Directors are considered to be independent of management and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. Les Owen is the Group Chairman. To enable the Board to discharge its duties, all Directors have full and timely access to all relevant information. They are also able to take independent professional advice as appropriate.
The Board meets once a month and has adopted a formal schedule of matters specifically reserved for decision by it, thus ensuring that it exercises control over appropriate strategic, financial, operational and regulatory issues. At these meetings, the Board reviews trading performance, financial strength, sets and monitors strategy, examines investment and acquisition opportunities, examines risk, control and compliance issues and discusses reports to shareholders. The following committees have been established to deal with specific aspects of the Group's affairs.
Operating Board
The Operating Board is chaired by the Group Chief Executive and comprises the Group Chief Executive, the Group Finance and Operations Director, the Group Development Director, the Group Compliance Director, the Chief Executive (Insurance) and the Managing Directors of Employee Benefits and Financial Planning. It meets once a month to discuss trading performance, operational matters, risk management, regulatory compliance and development opportunities.
Audit Committee
Chaired by a Non-executive Director, the Audit Committee comprises two additional Non-Executive Directors. The Group Finance and Operations Director, representatives from Internal Audit and our external auditors participate in the meetings as non-voting observers. The Group Chief Executive attends by invitation. The Committee meets four times each year.
On 1 October 2010 the Board split the existing Audit & Compliance Committee into separate Audit and Risk & Compliance Committees. The Board believes having separate committees promotes enhanced governance over each of these areas.
The Committee's primary activities include:
- Monitoring the integrity of financial statements and interim financial statements
- Reviewing the effectiveness of internal controls and internal audit function
- Overseeing the relationship with the Group's external auditor
- Reporting to the Board of Directors
The Committee also advises the Board on the appointment, independence and objectivity of the external auditors and on their remuneration for both audit and non-audit work. It also discusses the nature, scope and results of the audit with the external auditors. The Audit Committee Chairman separately meets with our external auditors during the course of the year.
Remuneration & Nominations Committee
Chaired by a Non-Executive Director, the Remuneration & Nominations Committee comprises all the Non-Executive Directors including the Group Chairman. The committee meets at least two times each year.
Solvency Committee
The Solvency Committee is chaired by the Finance Director (Insurance) and comprises one Non-Executive Director, Finance Directors from Financial Planning and Employee Benefits businesses, Compliance representatives and at least one senior manager from the Group's Insurance business. This Committee meets four times each year. The Solvency Committee supports the Board's Corporate Governance responsibilities, specifically in respect of monitoring the financial security of insurers and the Group's banking partners
TCF (Treating Customers Fairly) Committee
Chaired by a Non-Executive Director, the TCF Committee comprises the Managing Directors of Employee Benefits and Financial Planning and the Chief Executive (Insurance), with a Compliance department representative. The Group Chief Executive attends by invitation. The Committee's primary activities include:
- Co-ordinating the assessment of TCF Management Information ('MI') within all areas of Group operations
- Reviewing actions taken in response to adverse TCF MI indicators
- Developing, implementing and monitoring measures designed to ensure that Group staff are trained and aware of the Group's TCF strategy and requirements
- Assisting in the resolution of issues relating to unfair customer treatment that may arise in any Group workplace
- Assisting in the formulation and implementation of policies and procedures which are consistent with the fair treatment of customers.
The Committee supports the Board's desire for our clients to be at the centre of everything we do and for everything we do to exceed our clients' expectations. Our TCF policies are designed to ensure that customers are treated fairly in all their dealings with us throughout the lifecycle of their policy and relationship with us.
Risk & Compliance Committee
The Risk & Compliance Committee is chaired by the Group Development Director and comprises a Non-Executive Director, the Group Chief Executive, the Group Compliance Director and a senior manager from each of the three operating businesses. It meets every two months. The Committee supports the Board's Corporate Governance responsibilities to oversee internal controls, compliance performance, risk management systems and activity, anti-money laundering controls and conflicts of interest arrangements.
Data Security Committee
Chaired by the Group Compliance Director, the Data Security Committee comprises the Chief Operating Officer (Insurance), the Group Finance and Operations Director and senior managers from IT, HR, operations and marketing. The purpose of the Committee is to provide a consultative forum that can address matters of data security arising within the Group with particular reference to the Data Protection Act 1998. The key functions of the committee are to co-ordinate the assessment of data security risks across the Group and to initiate, implement and monitor the data security control environment. The committee meets on a quarterly basis.
Internal controls
The Board has overall responsibility for the Group's system of internal control. This system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and aims to provide reasonable assurance against material misstatement. In order to discharge its responsibility in a manner that ensures compliance with laws and regulations and promotes effective and efficient operations, the Directors have established an organisational structure with clear operating procedures, lines of responsibility and delegated authority. There is an established framework of internal controls set out in procedures approved by Executive Management. These procedures are readily accessible to staff, who follow their guidance. The more important elements of this framework are as follows:
Management structure
The Board has overall responsibility for the Group and each Executive Director has been given responsibility for specific aspects of the Group's affairs.
Corporate accounting and control procedures
Responsibility levels are communicated throughout the Group as part of the corporate communication procedure. Accounting, delegation of authority, authorisation levels, segregation of duties and other control procedures, together with the general ethos of the Group are included in these communications. Oversight responsibility for accounting control procedures across the wider Group, including compliance with FSA client money rules, is held by the Group finance function.
Quality and integrity of personnel
The integrity and competence of personnel are ensured through high recruitment standards and processes, a comprehensive induction programme and subsequent training. Quality personnel are seen as an essential part of the control environment and the ethical standards expected are communicated through senior members of staff. A formal process of assessment of fitness and propriety, using credit referencing and FSA guidelines, is undertaken on joining. All staff are set performance objectives that link to the Group's strategy. These are reviewed in regular one-to-one meetings and twice yearly formal reviews.
Liquidity and covenant compliance
Liquidity levels and compliance with debt covenants are projected forward for five financial years and updates are monitored on a monthly basis by the Group Finance and Operations Director. Various scenarios are run to understand the key sensitivities and stresses. They are reviewed and approved by the Board.
Budgetary process
Each year the Board approves the annual budget, which includes an assessment of key risk areas. Performance is monitored and relevant action taken throughout the year by monthly reporting to the Plc and Operating Boards of updated forecasts together with information on key risk areas.
Investment appraisal
Capital expenditure is regulated by the use of authorisation levels. For all expenditure beyond specified levels, Operating Board approval is required.
Internal monitoring
The Audit Committee and the Risk & Compliance Committee are responsible for reviewing the Group's internal controls.
The Directors have reviewed the effectiveness of the system of internal controls in operation. As a result of this review, the Directors believe current processes to be fit for purpose.
Relations with shareholders
The Company seeks to maintain good communications with shareholders. The Executive Directors make presentations to institutional shareholders, covering the interim and annual results, and maintain regular dialogue throughout the year. They ensure that the Board is regularly updated on institutional views.
The Company despatches the notice of each AGM with an explanatory circular describing items of special business, at least 21 days before the meeting. All shareholders have the opportunity (formally or informally) to put questions at the Company's AGM. At each AGM, the Board advises shareholders of the proxy voting details on each of the resolutions, which are dealt with by a show of hands.
Going concern
Further to their formal review the Directors have reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.