Corporate Governance Report
The Group’s policy is to achieve best practice in its standards of business integrity in all of its activities. This includes a commitment to follow the highest standards of corporate governance throughout the Group where possible.
This report describes how the Group has complied with the applicable provisions of the UK Corporate Governance Code (“the Code”) published by the Financial Reporting Council (“FRC”) in September 2012. The Board considers that it has complied with the provisions of the Code throughout the year with the exception that there is no internal audit function and certain Directors have served on the Board for more than three terms of three years. However, all Directors have been subject to rigorous review, performance evaluation and annual election. A further edition of the Code was issued in September 2014 which applies to reporting periods beginning on or after 1 October 2014.
BOARD COMPOSITION
The Board comprises the Chairman, Managing Director, Finance Director and five non-executive Directors, four of whom are considered by the Board to be independent. Details of the Chairman, the Directors and their individual roles are shown on pages 32 and 33. Their biographical details demonstrate a range of corporate, financial, property, investment and NHS experience relevant to the Group’s business and demonstrate sufficient calibre to bring independent judgement on issues of strategy and performance of the Group.
The roles of the Chairman and the Managing Director are distinct and have been agreed by the Board. The Chairman chairs the Board and general meetings of the Company, sets the agenda of such meetings and promotes the highest standards of integrity, probity and corporate governance throughout the Group, particularly at Board level. He ensures that the Board receives accurate, timely and clear information, communicates effectively with Shareholders and facilitates the effective contribution of non-executive Directors and constructive relations between executive and non-executive Directors. He also ensures that any new Directors participate in a full, formal and tailored induction programme and that the performance of the Board, its committees and individual Directors is evaluated at least once a year. There is a clear structure for, and the effective running of, Board committees.
The Managing Director is accountable for the management of the Group with the Adviser as set out in the Advisory Agreement. Steven Owen is the Senior Independent Director. He is available to Shareholders if they have any concerns that cannot be resolved through the normal channels. His role is to support the Chairman and act as his sounding board when required and, if necessary, to act as an intermediary for the other Directors.
As part of its annual self-assessment, the Board critically evaluates the independence of individual Directors and has concluded that all of the Directors continue to act independently in both character and judgement, taking account of the interest of all Shareholders. Alun Jones, Mark Creedy and Steven Owen meet the independence criteria set out in the Code, whilst James Hambro has been on the Board longer than nine years and so does not meet these criteria. During the year under review, Dr Rutter’s period of service as a director passed the period of nine years. Notwithstanding this, the Board consider that Dr Rutter is objective and professional and brings specialist expertise of clinical and NHS matters to the board and remains independent in his capacity as a director of the Company. The Board considers that William Hemmings meets the criteria of independence in spirit. However, having acted as an alternate director since March 2000, he is not considered independent under the Code.
BOARD DIVERSITY
The Board believes that it must include the right blend of individuals whose skills and experience have been derived from a variety of backgrounds. Directors must demonstrate independence of mind, integrity and willingness to challenge constructively. Appointments are made first and foremost on the basis of merit using objective criteria and taking into account the recognised benefits of all types of diversity. The Board will continue to ensure that diversity is taken into account when considering any new appointments.
BOARD CHANGES
On 10 April 2014, the date of the Company’s Annual General Meeting, Graeme Elliot retired from the Board and Alun Jones was appointed Chairman from that date.
On 1 January 2014, Steven Owen was appointed as an independent non-executive director. Steven was elected by shareholders at the 2014 AGM and became chairman of the audit committee and was appointed Senior Independent Director on 10 April 2014.
Phil Holland was appointed by the Board on 17 February 2015 and will also stand for election at the AGM on 22 April 2015.
OPERATION OF THE BOARD
The Board is responsible for leading and steering the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. It also sets the Group’s strategic aims, ensuring that the necessary resources are available for the Group to meet its objectives, reviews the performance of the Adviser through its Advisers Engagement Committee and sets the Group’s values and standards, ensuring that its obligations to its Shareholders and other stakeholders are satisfied.
The Board has a schedule of matters formally reserved to it for its decision such as strategic, major financial and key operational issues. Matters not requiring debate or necessary for the implementation of urgent decisions, on matters previously discussed at Board Meetings, are delegated to a Standing Committee.
The Board has delegated certain activities to the Adviser as described on page 31 in the Advisory Agreement section of the Directors’ Report on page 46.
The Advisory Agreement also provides for the appointment of Nexus as Company Secretary, meaning that it is responsible for ensuring that Board procedures are followed, that applicable rules and regulations are complied with and for advising the Board (through the Chairman) on governance matters. The appointment and removal of the Company Secretary is a matter for the Board as a whole.
The training needs of each Director are regularly reviewed by the Chairman. Directors are able to receive training or additional information on any specific subject pertinent to their role as a Director that they request or require. During the year, the Board has reviewed and discussed the prospective Financial Reporting Council Revisions to the UK Corporate Governance Code and associated Guidance on Audit Committees published by the FRC in September 2014. All Directors have access to independent professional advice at the Company’s expense, if deemed necessary and subject to clearance by the Chairman.
The Group maintains appropriate insurance cover in respect of legal action against the Company’s Directors.
In addition to the Board meetings held during the year, the Board is regularly in touch for consultation by electronic means and met for an off-site strategy meeting and for the AGM. Directors were sometimes unable to attend meetings due to unavoidable business interests, but full Board packs are distributed to all Board members for all meetings and separate discussions were held with, or comments were sought by, the Chairman on all matters of relevance.
There are opportunities throughout the year for the Chairman and Independent Directors to discuss matters without the other Directors being present.
BOARD COMMITTEES
The following Committees have been established by the Board and have been granted specific delegated authority to consider certain aspects of the Group’s affairs:
- Audit Committee
- Remuneration Committee
- Nomination Committee
- Advisers Engagement Committee
The Chairmen of the Committees report back to the Board as and when appropriate. Reports from each committee chairman are included on pages 36 to 40.
MEETINGS AND ATTENDANCE
|
Board Meetings |
Audit Committee |
||
|
Graeme Elliot(1) |
2 |
1 |
|
|
Alun Jones |
9 |
2 |
|
|
Mark Creedy |
9 |
2 |
|
|
James Hambro |
9 |
n/a |
|
|
William Hemmings |
8 |
n/a |
|
|
Harry Hyman |
9 |
n/a |
|
|
Dr Ian Rutter |
9 |
2 |
|
|
Steven Owen |
9 |
2 |
(1) Mr Elliot was eligible to attend two Board Meetings and one Audit Meeting before his retirement from the Board
Terms of reference for each committee are available on the Group’s website at:www.phpgroup.co.uk/governance