Corporate Governance
Introduction
The Company is listed on AIM. Although the AIM Rules for Companies do not require compliance with the Financial Reporting Council’s Combined Code on Corporate Governance (the “Code”), the board fully supports and has applied, whenever it has been appropriate to do so, the principles recommended by the 2006 version of the Code and is committed to ensuring that high standards of corporate governance are maintained by the Group.
The board considers that during the financial year it has made progress in establishing good corporate governance practice principles. The Company is not yet fully compliant with provisions of Section 1 of the Code but is seeking compliance wherever practical, given both the size of the Company and the resources available.
Board structure
The board comprises two non-executive Directors, one of whom is the Chairman, and two executive Directors, David Hussey (Chief Executive) and Jonathan Cook (Group Finance Director) who was appointed to the board on 1 May 2008.
In accordance with the Code, the roles of the Chairman, James Kerr-Muir, and the Chief Executive, David Hussey, are separate and the responsibilities of each independently defined, and have been approved by the board. In addition to chairing the board, the Chairman is responsible for matters considered by the Nomination Committee, which he chairs, such as succession planning and the process for board appointments, and is further responsible for evaluating the individual performance of each director. The Chairman is also responsible for ensuring that the members of the board receive accurate, timely and clear information in relation to the Group and its business to enable the Directors to make sound decisions and fulfil their statutory duties. The Chairman ensures effective communication with shareholders, and makes their views known to the board to ensure that they are considered effectively. The Chief Executive is responsible for the overall management of the Group’s business, the development of the Group’s strategic direction, implementation and delivery of the annual business plan and the effective leadership, co-ordination and performance of the executive team. The Chief Executive also ensures that the Group’s strategies, plans and major developments are effectively communicated to shareholders and he maintains strong relationships with key external stakeholders in order to understand any concerns they may have regarding the Company and communicates these back to the board.
The Code recommends that the board should appoint one of its independent non-executive directors to be the Senior Independent Director. Adrian Burn is the Senior Independent Director nominated by the Board, and is available to shareholders if they have any concerns that contact through the normal channels of Chairman, Chief Executive or Group Finance Director has failed to resolve or where such contact is inappropriate.
The non-executive Directors possess a wide range of skills and experience and the board considers that each of the non-executive Directors who served throughout the financial year was independent within the meaning of the Code (notwithstanding that two of the non-executive Directors hold ordinary shares in the Company) and that the Chairman was independent at the time of his appointment in April 2006.
The board appointed John Davies as Company Secretary in June 2007 in order to take responsibility for the Group’s Secretariat and to ensure that the Group implemented procedures to enable it to meet its regulatory, compliance and governance requirements. The Chairman and Company Secretary meet on a regular basis to discuss corporate governance and other issues including, inter alia, information flows and the induction and training programmes for Directors and senior management. All Directors have access to the advice and services of the Company Secretary and also to independent professional advice where required.
Upon his appointment as Group Finance Director in May 2008, Jonathan Cook received an induction programme which included detailed background information about the Group and its activities and details of the board procedures and governance policies, including procedures for dealing in the Company’s shares. As part of Jonathan Cook’s induction, meetings were arranged with all board members and with senior management across both divisions, together with some of the Company’s advisors. Visits were also arranged to all significant corporate locations both in the UK and Germany.
Each of the non-executive Directors have, during the course of the financial year, been provided with briefings and information relevant to their role.
During the financial year the Chairman, James Kerr-Muir, continued his appointment as chairman of Davenham Group Plc; his commitments to this are not considered to be such that he would not be able to devote sufficient time to his Chairmanship of the Company.
The board has established a formal policy of delegated authorities setting out matters which require its express approval and the authorities delegated to the executive Directors. The board receives a board pack in advance of each monthly meeting containing a report from the executive Directors, management accounts and any other material deemed necessary for the board to discharge its duties. The board has responsibility for formulating, reviewing and approving the Group’s strategy, budgets, major items of capital expenditure, corporate transactions, risk management policies, treasury policies, succession planning, appointments to the board, material investments and disposals and reporting to shareholders.
The Company maintains adequate insurance cover in respect of legal actions against Directors and officers as well as against material loss or claims against the Group.
Under the Code (and the Company’s articles of association) all Directors are subject to election by shareholders at the first AGM following appointment and thereafter to re-election at least every three years. John Sword and David Hussey offered themselves and were re-elected as directors at the last AGM.
The board conducted an assessment of the balance, skills and experience of the board and its individual members during the financial year and also assessed the performance of its three committees (discussed below). A questionnaire was circulated to the Directors with regard to the performance of the board and the committees. Following this assessment the responses were collated and summarised. The key points arising from the evaluation included:
- a recommendation for the board to undertake a more formal review of succession planning and human resource management which will be taken forward during 2008;
- the need for additional time to allow Directors to review board and committee papers in advance of meetings. The Company will address this in 2008 with the introduction of a new financial reporting framework;
- a recommendation that the individual performance of each Director is evaluated in a more clearly defined manner. This will be addressed in 2008 by the Chairman conducting one-to-one meetings with the Directors so that formal objectives can be set against which each individual Director’s performance will then be measured.
The Chairman and non-executive Directors also met during the financial year without the executive Directors, to discuss a wide range of issues, including the performance of the executive Directors.
Board Committees
The board has appointed three committees, Audit, Remuneration and Nomination, each having written terms of delegated responsibilities which are summarised below.
Audit Committee
The Audit Committee is chaired by Adrian Burn and its other member is James Kerr-Muir. The board considers that Adrian Burn has recent and relevant experience in accordance with the requirements of the Code. The committee is responsible for ensuring that the appropriate financial procedures and controls are properly maintained and reported on and for monitoring the external auditors and reviewing their reports relating to the Group’s accounts and internal control systems. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports nevertheless remains with the board. The committee also assesses annually the cost effectiveness, objectivity and independence of the external auditors. It is the practice of the committee to include the executive Directors at its meetings through invitation. The committee also has responsibility for the Group’s Whistle Blowing policy and annually reviews its arrangements under this policy.
Relationships with PricewaterhouseCoopers LLP (“PwC”), the Company’s external auditor, are dealt with largely through the Group Finance Director. In addition, PwC meet with the Audit Committee at least annually without the presence of executive management. They also have direct access to the Audit Committee and to senior employees.
The Group uses PwC for non-audit services such as taxation advice. When appointing advisors for non-audit work the Group considers the experience and objectivity required. The committee is satisfied that PwC carefully consider each piece of non-audit work offered, in order to ensure that acceptance would not impair independence and they report annually on this issue to the committee. The report for the year under review, which was accepted by the committee, concluded that PwC were independent and that their objectivity was not impaired.
The committee met three times in order to review the results of the full audit, to approve the interim results, to review the performance of the external auditors and to steer the Company though the independent investigation of the accounting misstatement in BRC. Following this investigation the Group has appointed KPMG to provide an internal audit function that reports to the audit committee on a regular basis. All committee members attended all meetings.
Remuneration Committee
The Remuneration Committee is chaired by Adrian Burn and its other member is James Kerr-Muir. Under the Code the Company Chairman, James Kerr-Muir, may now serve on the committee, where he was considered independent on his appointment as Chairman. James Kerr-Muir will not be involved in any meeting in which his remuneration is discussed by the committee. The committee is responsible for reviewing the performance of the executive Directors and other senior executives and for determining appropriate levels of remuneration and benefits, including bonuses. The Board is responsible for setting the remuneration of the non-executive Directors. The committee met five times during the financial year to review the pay and the performance of Directors and senior management in relation to bonuses and to consider the granting of share based incentives. All committee members attended all meetings.
Nomination Committee
The Nomination Committee is chaired by James Kerr-Muir and its other member is Adrian Burn. It will make recommendations on all new board appointments. The committee met once during 2007, with all committee members present, to consider the composition of the board and the appointment of Rod Holdsworth who acted as Interim Group Finance Director from 1 December 2007 to 1 May 2008.
The terms of reference for all board committees are available for viewing at the Company’s registered office.
Shareholder Relations
The Company recognises the importance of maintaining strong relationships with its shareholders and the Chief Executive and Group Finance Director make presentations to, and meet regularly with, institutional shareholders and analysts as appropriate. The Company uses its web site to encourage communication with private, existing and prospective shareholders and welcomes feedback from investors on its published reports and web site. Please address your feedback to John Davies, Company Secretary by e-mail to info@acertec.com or in writing to Acertec plc, 15, Shottery Brook, Timothy’s Bridge Road, Stratford upon Avon, Warwickshire, CV37 9NR.
In compliance with AIM rules the Company has established a policy and share dealing code related to dealing in the Company’s shares by Directors, employees and connected persons.
The Company also recognises that the AGM provides an important forum for communicating with investors and provides an opportunity for all shareholders to meet the board. The Company’s second AGM as an AIM listed Company took place on 20 May 2008 and all of the Company’s current board of Directors attended.
Internal Control and Risk Management
The Board is responsible for the Company’s system of internal controls and for reviewing the effectiveness of such systems.
The internal control system is designed to manage rather than eliminate the risk of failure to achieve business objectives. The board is responsible for the system of internal control and for reviewing its effectiveness. It can provide reasonable, but not absolute, assurance against material misstatement or loss.
The Board, via the Audit Committee, conducts a review, at least annually, of the Group’s system of internal controls. Such a review examines material controls, including financial, operational and compliance controls and risk management systems.
Further development of internal controls and risk management
During 2007 the Group engaged the services of risk advisers, Marsh, to undertake risk interviews and independently facilitate a number of workshops with executive Directors and senior operational management. These workshops focused on the identification, monitoring and management of risk. Each risk identified by the Group was mapped according to its likelihood of arising and its potential impact on the Group. Formal risk registers are now being established in each of the BRC and Stadco divisions. With assistance from the new internal audit function, these registers will form the basis for regular monitoring and review of Group risk.
Internal Audit
The Group did not have an internal audit function during 2007 but has since appointed KPMG to provide an internal audit function that reports to the Audit Committee on a regular basis. The internal audit programme will involve a series of core financial and systems reviews at key trading locations and will focus on key risk areas identified by the recent risk assessment work.
Whistle Blowing Policy
The Company has established, operates and has published within the Group a Whistle Blowing Policy. This provides the necessary access for, and the protection of, employees wishing to bring matters that they suspect of being malpractice or impropriety to the attention of the relevant person. Any incidents reported are fully investigated and the results are reported to the Audit Committee.
Operational Review
The Company follows a programme of operational reviews designed to visit all major businesses on a frequent basis. These reviews are conducted by the Chief Executive and Group Finance Director and their findings are reported to the board monthly.
This information is being disclosed for the purposes of rule 26 of the AIM Rules for Companies. The information on this page was last updated on 20 June 2008. |
