Corporate governance
The Board of Directors is responsible to shareholders for the strategic direction and management and control of the Group’s activities and is committed to high standards of Corporate Governance in achieving these goals. The application of the principles contained in the Combined Code is described below.
Composition of the Board
The Board comprised the non-executive Chairman, four executive Directors and three non-executive Directors for the entire year. There were no changes to the composition of the Board during the year. Each of the non-executive Directors is considered to be independent of the executive management of the Group and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. John Manser was considered independent at the date of his appointment as Chairman in October 2004 but for the purposes of the Combined Code and the balance of executive and non-executive Directors on the Board, he is excluded.
The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision-making and proper control of the Group’s business. The Board considers its composition is appropriate in view of the size and requirements of the Group’s business and the need to maintain a practical balance between executives and non-executives. The Nomination Committee keeps the composition of the Board under review.
Each of the executive Directors is a member of a recognised professional body and is expected to act in accordance with the ethical principles of the relevant body. The non-executive Directors are of high calibre and contribute wide-ranging business and financial experience to the Board’s decision making process. Biographies of each member of the Board are set out in the website and their terms of appointment are available for inspection at the Company’s registered office and on this website.
All Directors are required to submit themselves for election at the Annual General Meeting following their appointment and thereafter for re-election at three yearly intervals. Non-executive Directors who have completed nine years service are required to submit themselves for annual re-election in accordance with the Company’s Articles of Association and the Combined Code.
The Chairman, John Manser, holds a number of non-executive directorships. The Board considers that the time commitment required by his other roles does not impact on his Chairmanship of the Group. None of the executive Directors has held any non-executive directorship at a FTSE 100 company or the chairmanship of such a company.
The roles of Chairman and Chief Executive are split. The Chairman is responsible for the leadership of the Board, ensuring its effectiveness and setting its agenda. The Chief Executive has responsibility for the management of the Group’s day-to-day operations. A formal statement of the division of responsibilities between the Chairman and Chief Executive has been adopted by the Board.
The Board has a Senior Independent Director, John Emly, whose role includes being available to shareholders if required. He is also a nominated contact for employees under the Group’s whistle blowing policy.
The Group has a highly committed and experienced executive Board with the qualifications and experience for the running of the Group. The Nomination Committee recognises that succession planning is important to the future continuing performance of the Group and it considers succession planning for the Board and senior management on a regular basis.
Functioning of the Board
The Board's function is to formulate strategy and monitor and control operating and financial performance. This is achieved through the regular review of operations and detailed reports on activity within the Group’s property portfolio, quarterly financial reporting and forecast up-dates, and regular reviews of risks and internal controls.
In addition to Board meetings, there is frequent and regular communication between executive and non-executive Directors to ensure that the non-executive Directors are fully aware of all aspects of the Group’s operations. Non-executive Directors met once during the year without executive Directors or the Company Secretary present.
The Chairman is responsible for ensuring that all the Directors continually update their skills and the knowledge required to fulfil their role on the Board and the Board’s Committees. Technical updates dealing with changes in legislation and regulation relevant to the Group’s business are provided regularly to the Board by the Company Secretary.
There is a formal schedule of matters reserved for the Board for decision which includes, inter alia, approval of all investment property acquisitions and disposals, refurbishment and property management strategies and all significant aspects of finance. The schedule of matters reserved for the Board is available on the Group’s website.
All Directors have access to the Company Secretary, who is responsible for ensuring that Board procedure, corporate governance, statutory and compliance obligations are met and that Board discussions and decisions are appropriately recorded. Directors may seek independent professional advice at the Group’s expense in furtherance of their duties as Directors.
Board Committees
The Board has established three committees to deal with specific aspects of the Group’s affairs: Audit, Remuneration and Nomination. The terms of reference of these Committees are available on the Group’s website. The Company Secretary acts as Secretary to each of the Committees and the minutes are circulated to all Directors.
Board Performance
The Board carries out an annual review of its performance and effectiveness. The process includes completion by all members of the Board of a comprehensive questionnaire which incorporates the criteria recommended by the Good Practice Suggestions contained in the Higgs Report. The questionnaire addresses the composition and function of the Board and each of its Committees and includes an assessment of each Director and the Chairman by his peers.
The results of the Board Performance are considered by the Nomination Committee and the Board. The non-executive Directors, led by the Senior Independent Director, are responsible for the performance evaluation of the Chairman, taking into account the views of the executive Directors.
Relations with Shareholders
The Group encourages dialogue with all shareholders at the Annual General Meeting and during the year. The Chairman and Committee Chairmen are present at the Annual General Meeting to deal with any matters raised by shareholders and all other Directors are encouraged to attend.
The Chief Executive and Finance Director meet investor representatives frequently and regularly during the year to discuss strategic and other issues within the constraints imposed by the Disclosure Rules of the UK Listing Authority. On the announcement of the Group’s annual and half year results, the Chief Executive and Finance Director give presentations to institutional investors and analysts and hold a series of one to one briefings with key shareholders. A copy of the presentation is made available on the Group’s website. The Board receives regular reports on all shareholder meetings from the Chief Executive.
The Senior Independent Director is available to shareholders as an alternative channel of communication with the Board.
Internal Control
The Directors are responsible for the Group’s systems of internal controls and for reviewing their effectiveness. Such systems are designed to manage, rather than eliminate, the risks faced by the business and can provide only reasonable and not absolute assurance against material misstatement or loss.
Executive Directors and staff meet regularly to review both the risks facing the business and the controls established to minimise those risks and their effectiveness in operation. The aim of these reviews is to provide reasonable assurance that material risks and problems are identified and appropriate action taken at an early stage. Reports on this review process are submitted to the Audit Committee and the Board during the year to enable them to assess the effectiveness of the process and ensure that the Group complies with the Turnbull Guidance.
The key risks identified in these review processes are summarised in the Business Review.
The key elements of the Group’s procedures and internal financial control framework, which are reviewed annually, are:
a) The close involvement of the executive Directors in all aspects of day-to-day operations, including regular meetings with senior staff to review all operational aspects of the business.
b) Clearly defined responsibilities and limits of authority. The Board has responsibility for strategy and has adopted a schedule of matters which are required to be brought to it for decision.
c) A comprehensive system of financial reporting and forecasting. Financial accounts are prepared quarterly and submitted to the Board. Profit and cash flow forecasts are prepared at least quarterly, approved by the Board and used to monitor actual performance.
d) Regular meetings of the Board and Audit Committee at which financial information is reviewed and business risks are identified and monitored.
In view of the Group’s controls structure summarised above, and on advice from the Audit Committee, the Board has resolved that at the present time there is no need to establish an internal audit function.
