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 September 2012. The Company is currently reviewing the provisions of the revised edition of the UK Corporate Governance Code published by the FRC in September 2014 which applies to companies with a premium listing on the London Stock Exchange with accounting periods beginning on or after 1 October 2014. These provisions will apply to the Company for the financial year ending 31 March 2016. We comply with all the main and supporting principles of good governance set out in the Code, save for the Remuneration Committee has comprised only two independent Non-Executive Directors since June 2014. The Committee dealt effectively and ably with the matters it was required to address during this period. Following the succession of Wolfhart Hauser as Chairman after the conclusion of the 2015 Annual General Meeting the matter will be further considered and addressed.This commitment and the alignment of our framework of controls and corporate governance with the delivery of our strategic objectives will contribute to our long term success. 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 for managing the Company on behalf of its shareholders and each Director acts 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 the long term growth and delivering short term objectives is achieved.
The Board provides entrepreneurial leadership of the Company 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 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 significant 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 also delegates authority to four principal Committees: Audit, Remuneration, Nomination and Board Safety Committees, each of which has written terms of reference available. The Committee memberships are spread between the Non-Executive Directors, drawing on each of their relevant skills and experience.
The roles and responsibilities of the Chairman, Chief Executive and Senior Independent Director are clearly defined, documented and approved by the Board.
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 and six Non-Executive Directors. 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. Other than the Group Employee Director, the Board considers each of its current Non-Executive Directors to be independent in character and judgement. In reaching its determination of independence, the Board has concluded that each provides objective challenge to management, is willing to stand up and defend his or her 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 judgement of Warwick Brady, Drummond Hall, Wolfhart Hauser, Brian Wallace, Imelda Walsh or Jim Winestock. The Board carries out a review of the independence of its Directors on an annual basis. The Group Employee Director is not considered by the Board to be independent as he is an employee of one of the Group’s subsidiaries. The Board considers, however, that it is extremely beneficial for its employees to be represented on the Board in this way as it enables employee-related issues to be raised directly at the Board and provides a two-way communication between the Board and employees.
The Board recognises the need to create the conditions that foster talent and encourage all employees to achieve their full career potential in the Group. As part of our overall approach to human resource management a framework has been developed which includes an Equality, Diversity and Inclusion Policy as we encourage employee diversity and aspire to be an inclusive organisation, representative of the communities that we serve.
The Board is an advocate of diversity in the Boardroom and a supporter of Lord Davies’ aim to raise the proportion of women on UK Boards, as reflected in the 2013 Women on Boards report and we are moving towards our aspiration of 25% of Board positions being filled by women as soon as practicable. The Board remains of the opinion that appointments to the Board should be made on merit relative to a number of different criteria including diversity of gender, background and personal attributes, alongside the appropriate skill set, experience and expertise. Future appointments to the Board must also complement the balance of skills that the Board already possesses.
The key principles underpinning the Committee’s approach to executive remuneration are:
Alignment with strategy and business objectives – remuneration for FirstGroup’s Executive Directors and senior managers incentivises the delivery of both.
Reward performance – remuneration provides a strong and demonstrable link between incentives and performance delivery in a consistent and responsible way, ensuring there is a clear line of sight between the performance of the Company and payments made to Executive Directors and senior managers. Alignment between the interests of shareholders and Executive Directors to build a sustainable performance culture is a key focus.
Performance biased framework – components of remuneration offer a performance-biased framework for remuneration which is consistent with the Group’s scale and unique circumstances, and which enables Executive Directors and senior managers to share in the long term success of the Group, without delivering over-generous benefits or encouraging short term measures or excessive risk taking.
Competitive remuneration – designed to facilitate the long term success of the Company and framed in the context of total remuneration packages offered by relevant comparator companies. The ability to recruit and retain high calibre executives with the appropriate skills to implement FirstGroup’s strategy and transformation plans is critical to its success.
Simplicity and transparency – the Committee seeks to deliver both for our shareholders and participants, with performance targets clearly aligned with the Company’s short and long term goals.