Governance

 

Introduction

The Board is accountable to shareholders and is committed to the highest standards of corporate governance.  To this end, the company adopted the UK Corporate Governance Code (2016) during the year. The Code is available to download at www.frc.org.uk.

Gooch & Housego PLC complies with the Code, save that it was not in compliance with the following provision during the year ended 30 September 2018:

Code Provision E1.1 states that the senior independent director (SID) should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders. The senior independent director has not met with shareholders during the year, although the board believe the level of dialogue with shareholders during the year has been appropriate. The Chief Executive and Chief Financial Officers have regular meetings with the shareholders and following his appointment during the year, the Chairman also met with a number of key shareholders.  All of the non-executive Directors receive a report prepared by our brokers summarising the shareholder feedback from the half and full year investor roadshows. The senior independent director was available at the annual general meeting and will engage with shareholders in FY19 to determine if individual meetings are desired.

Leadership

The Board leads the Group’s governance framework. It is responsible for setting the strategic targets for the Group, monitoring progress made, approving proposed actions and for ensuring that the appropriate internal controls are in place and that they are operating effectively.

The Board is assisted by three principal committees (Audit, Nomination and Remuneration) each of which is responsible for dealing with matters within its own terms of reference.

The Board

The Board currently comprises two executive and four non-executive Directors.  The directors holding office and their biographies are available at the link at the bottom of the page.

The Executive Directors have rolling service contracts that are subject to either six or twelve months’ notice. The Chairman and non-executive Directors do not have contracts of service. The terms of appointment of the Directors are available for inspection during business hours at the registered office of Gooch & Housego PLC and are also be available at the AGM.

All the non-executive Directors are considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement.

The nomination committee is responsible for approving appointments to the board. The board’s policy is to appoint the highest calibre individuals regardless of an individual’s background, race or gender.  The board has not set any specific objectives in relation to diversity, but understands and recognises the benefits that diversity can bring.

Roles and responsibilities

There is a documented clear division of responsibilities between the Chairman and the Chief Executive Officer to ensure that there is a balance of power and authority between leadership of the Board and executive leadership.

All Directors are entitled to seek independent, professional advice at the Company’s expense in order to discharge their responsibilities as Directors.  Gooch & Housego PLC maintains appropriate directors’ and officers’ insurance cover.

Board activities

Day-to-day responsibility for the running of the Company is delegated to executive management.  However, there are a number of matters where, because of their importance to the Group, it is considered appropriate to have enhanced oversight from the Board. The Board, therefore, has a documented schedule of matters reserved for its decision. This schedule is available here:  Matters reserved for the Board

There are typically eight board meetings a year. At least once annually, the Board meets at one of Gooch & Housego’s locations other than its head office in Ilminster.  This allows the Board, particularly the non-executive directors, the opportunity to gain a deeper understanding of other Gooch & Housego businesses, to meet local staff and wider stakeholders.

Meetings between the non-executive Directors, without the executive Directors present are scheduled in the Board’s annual programme. These meetings are encouraged by the Chairman and provide the non-executive Directors with a forum in which to share experiences and to discuss wider business topics, fostering debate in Board and committee meetings and strengthening working relationships.

The Board has established a procedure for any Director, if deemed necessary, to take independent professional advice at the Company’s expense in the furtherance of their duties. The Chairman ensures that the Board is kept properly informed and is consulted on all matters reserved to it. Board papers and other information are distributed in a timely fashion to allow directors to be properly briefed in advance of meetings.

In accordance with best practice, the Chairman addresses the developmental needs of the Board as a whole, with a view to further developing its effectiveness as a team, and ensures that each Director refreshes and updates his or her individuals skills, knowledge and expertise.

A formal, comprehensive and tailored induction is given to all non-executive Directors following their appointment, including access to external training courses, visits to key locations within the Group and meetings with members of the senior management team.

Peter Bordui is the Senior Independent Director.  His role includes providing a sounding board for the Chairman and acting as an intermediary for the non-executive Directors, where necessary. The Board believes that Peter has the appropriate experience, knowledge and independence to continue this role.

Board Committees

The Board has established a number of committees to assist in the discharge of its duties. The formal terms of reference for the principal committees can be found on the link to the Board Committees at the bottom of the page.

The Board has three formally constituted committees, the Audit committee, the Remuneration committee and the Nomination committee.

Effectiveness

The Chairman is responsible, with assistance from the Nomination Committee, for ensuring that the Company has an effective Board with a suitable range of skills, expertise and experience.  Every year, a performance evaluation of the Board is carried out. This year, the evaluation will take place in September 2018, and will be led by the Senior Independent Director, Peter Bordui.

The Senior Independent Director annually arranges a meeting of the non-executive directors to appraise the Chairman’s performance. Due to appointment of Gary Bullard on 21 February 2018, this review did not take place during the year ended 30 September 2018.  A first review of Gary’s performance will take place in the year ending 30 September 2019.

The Board focuses on formulation of strategy, management of effective business controls and review of business performance.  The Board is specifically responsible for the approval of annual and interim results and interim management statements, acquisitions and disposals, major capital expenditure, borrowings, director and company secretary appointments and removals, any material litigation, strategic forecasting and major development projects.

A framework of delegated authorities is in place that details the structure of delegation below Board level and includes matters reserved for the Board.

Accountability

The Directors acknowledge that they are responsible for the Group’s system of internal financial control.  The system can provide only reasonable, and not absolute, assurance against material misstatements and losses.

Gooch & Housego adopts a formal risk identification and management process designed to ensure that risks are properly identified, prioritised, evaluated and mitigated to the extent possible. A formal group wide risk register is maintained and approved by the Board on an annual basis.

There are defined lines of responsibility and delegation of authorities.  There are also internal financial controls in existence which are centrally maintained and documented and provide reasonable assurance of the maintenance of proper accounting records and the reliability of financial information used within the business.

The audit committee is responsible for reviewing the effectiveness of the Company’s financial reporting, internal control policies and procedures for the identification, assessment and reporting of risk. It is also responsible for Advising the Board on whether the Committee believes the Annual Report taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

The Group does not have an internal audit department, but senior finance staff regularly visit the sites to perform reviews of controls and processes in place.

Annual budgets and three year strategic plans are prepared for each company.  Financial and operational reports enable the Board to compare performance against budget and to take action where appropriate.

Remuneration

The remuneration committee is responsible for setting remuneration packages of the Executive Directors which are designed to promote the long term success of the Company and take account of current corporate governance practice. The committee ensures that performance related components of Executive Director remuneration are transparent, stretching and rigorously applied. The committee also monitors the level and structure of remuneration for other senior management.

No director is involved in deciding his or her own remuneration.

Relations with shareholders

The Chairman ensures that the Board maintains an appropriate dialogue with shareholders. The Chief Executive Officer and the Chief Financial Officer regularly meet with institutional investors to discuss strategic issues and to make presentations on the Company’s results.

In addition to the full and half year results, the company publishes Regulatory News Service announcements through the London Stock Exchange.

The Company’s website contains an archive of information on the Company’s history, leadership, governance, financial results, dividend history and up to date share price information.

Although the non-executive Directors are not formally required to meet the shareholders of the Company, their attendance at the Annual General Meeting and at presentations of the interim and annual results is encouraged to promote a mutual understanding of objectives.

Our compliance with the code was last reviewed in August 2018.

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