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Corporate governance

We are committed to the highest standards of corporate governance.

Corporate governance framework

We are committed to the highest standards of corporate governance in respect of leadership, effectiveness, accountability, remuneration and relations with shareholders as identified by the UK Corporate Governance Code (the 'Code') issued by the Financial Reporting Council (the FRC) in April 2014. The Company is currently reviewing the provisions of the revised edition of the UK Corporate Governance Code published by the FRC in April 2016 which applies to companies with a premium listing on the London Stock Exchange with accounting periods beginning on or after 17 June 2016. These provisions will apply to the Company for the financial year ending 31 March 2018. Throughout the year the Company has applied the main principles and complied with the provisions of the Code, including those regarding risk management and internal control. In our annual report we provide details of our governance structures and processes together with the actions we are taking to enhance governance within the Group.

The role of the Board

The Board is accountable to shareholders for managing the Company in a way which promotes the long term success of the Company for the benefit of the shareholders as a whole. The Board ensures that an appropriate balance between promoting long term growth and delivering short term objectives is achieved.

The Board provides entrepreneurial leadership of the Group within a framework of prudent and effective controls for risk assessment and management. The Board is primarily responsible for: determining strategic direction and demonstrating leadership; focusing on matters that consistently add value for shareholders of the Company, both present and future; the governance and stewardship of the Group to provide protection and security for shareholders’ assets; the management of the Group’s employees; setting the Group’s culture, standards and values, and ensuring that its obligations to shareholders and other stakeholders are understood and met; and determining the nature and extent of the principal risks the Group is willing to take to achieve its strategic objectives. Another key responsibility of the Board is to ensure that management maintains a system of internal control that provides assurance of effective and efficient operations, internal financial controls and compliance with laws and regulations.

The Board is the decision-making body for all matters of such importance as to be significant to the Group as a whole because of their strategic, financial or reputational implications or consequences.

Specific key matters have been reserved for approval by the Board. These include approval of:

  • the Group’s strategy;
  • risk appetite;
  • major acquisitions, mergers or disposals;
  • UK rail franchise bids;
  • dealings with regulatory authorities on matters of significance;
  • capital and liquidity matters;
  • medium term plan and annual budget;
  • Board and Committee membership; and
  • financial results, viability statements and governance.

The Board delegates authority for certain matters to four principal Committees of the Board: Audit, Nomination, Remuneration, and Board Safety; each of which has written terms of reference available.

Board balance and independence

Effective management and good stewardship of the Group are led by the Board. The Board is currently comprised of the Chairman, two Executive Directors, one GED and six NEDs. The balance of Directors on the Board ensures that no individual or small group of Directors can dominate the decision-making process and that the interests of the minority shareholders are protected.

It is the Company’s policy that at least half the Board should be independent Non-Executive Directors. The Board carries out a review of the independence of its Directors on an annual basis. The Board considers each of its current NEDs to be independent in character and judgment. In reaching its determination of independence, the Board has concluded that each provides objective challenge to management, is willing to stand up and defend their own beliefs and viewpoints in order to support the ultimate good of the Company and there are no business or other relationships likely to affect, or which could appear to affect, the judgment of Richard Adam, Warwick Brady, Drummond Hall, Martha Poulter, Imelda Walsh or Jim Winestock. Jimmy Groombridge, the GED, is not considered by the Board to be independent as he is an employee of one of the Group’s subsidiaries.

Diversity

The Company takes account of diversity when recruiting, including when it considers Board appointments, and will continue to do so in the future.

The Board consists of Directors with a wide range of skills and business experience drawn from a number of industries, which is vital for bringing both the expertise required and to enable different perspectives to be brought to Board and Committee discussions.

Furthermore, the Board comprises a range of nationalities, which bring cultural diversity as well as different geographical experiences and viewpoints. The combination of these factors means that the Board benefits from a diverse range of competencies, perspectives and thoughts, which provides a dynamic environment for decision making.

Whilst the Board is currently below its target of 25% female representation at 20%, it remains committed to achieving that goal as soon as practicable. The Board remains of the opinion that appointments should be made on merit and relevant experience, against the criteria identified by the Committee, having regard to the benefits of diversity, including gender. Future appointments to the Board must also complement the balance of skills the Board already possesses.

The Board recognises the need to create the conditions that foster talent and encourage more women to achieve their full potential in their careers in the Group. The Board also welcomes the recommendations of the Hampton-Alexander report. In that sense, as part of an overall approach to HR management, a framework has been developed which includes an Equality, Diversity and Inclusion Policy as well as practical training materials and support for line managers to promote its communication across the Group.

Remuneration

The key principles underpinning the Remuneration Committee’s approach to executive remuneration are:

  • Alignment with strategy and business objectives – the remuneration of our Executive Directors and senior managers is specifically structures to incentivise the delivery of these objectives.
  • Rewarding performance – there is clear line of sight between the performance of the Company and payments made to Executive Directors and senior managers, with the building of a sustainable performance culture being a key focus.
  • Performance-biased framework – the components of the remuneration packages offer a performance-biased framework that enables Executive Directors and senior managers to share in the long-term success of the Group, without delivery over-generous benefits or encouraging short term measures or excessive risk-taking.
  • Competitive remuneration – the remuneration packages offered are framed by reference to relevant comparator companies and are designed to help retain and recruit high-calibre executives with the appropriate skills to implement the Group’s strategy.
  • Simplicity and transparency – the Committee seeks to deliver a remuneration structure and incentive plans that are both simple and transparent, with performance targets clearly aligned to the Company’s short and long-term goals.