1. Understanding the role of a Public Member

The Board is seeking individuals (a) with a genuine interest in the role of Network Rail as a private sector company providing a public service and (b) who believe that they can contribute to its corporate governance. Wide ranges of experience (gained, for instance, through involvement with a company, or other type or organisation) are relevant to this role.

The role of Members is similar to the role of shareholders in companies that have a share capital. In practice this means:

• reviewing the overall performance (including safety) of Network Rail against the operational and financial business plans published by Network Rail as well as against railway industry benchmarks. This is a monitoring role rather than an involvement in day-to-day management
• holding the Board to account for its management of Network Rail and in particular its achievement measured against its business plans
• monitoring Network Rail's management against high standards of corporate governance

Members carry out these important responsibilities in the context of the complex structure of the rail industry. Network Rail operates within a regulated environment where the Office of Rail Regulation (providing economic and safety regulation in the rail industry) is tasked with monitoring that Network Rail complies with its regulatory obligations. In addition, the Department for Transport and Transport Scotland have roles in setting the strategy for the rail industry.

Information about each of these bodies, and a chart setting out the relationship between them, are set out in Appendix 3 to this document.

1.1. Within this structure Members have an important role

In summary Members have the right to:

• attend general meetings of Network Rail and speak on the matters considered at these meetings
• vote on a number of important business matters, including:
  • the Annual Report and Accounts
  • the appointment or re-appointment of Network Rail's Directors
  • the appointment or re-appointment of the Auditors
  • the Remuneration Report of the Annual Report and Accounts
  • the terms of the long-term element of the incentive scheme for Executive Directors
  • changes to Network Rail's constitution (i.e. the documents governing the structure of the company and the manner by which it is run) 

1.2. Members have a very real impact

• There are no institutional shareholders providing block votes. Each Member's vote counts, as it is a “one Member, one vote” system
• Communication between Members and Network Rail is easy - Network Rail provides means of direct contact by Members with senior Network Rail people
• Communication between Members is easy - Network Rail provideds a Members' website for discussion and the contact details of Members to other Members so they can talk to each other
• Members have a common objective - delivery of a safe and efficient rail network
• Members have practical rights such as voting and speaking at general meetings as well as powers to require debate on specific matters

2. Responsibilities of a Public Member

The Member's role is to seek assurance from the Board of Directors that the necessary governance processes are in place and are being implemented.

Members need to review carefully the contents of the Annual Report and Accounts to see if the Board is performing its role on key issues such as:

• the overall stewardship of Network Rail including delivery of its published business plan objectives, railway infrastructure performance and proper use of finances
• having appropriate Board governance processes including through special committees of the Board (e.g. audit, remuneration) and appropriate composition of the Board
• adequate disclosure of information about the company especially as to Directors' remuneration, financial and other internal controls

The Office of Rail Regulation's reports on Network Rail as to its stewardship of its responsibilities and compliance with its regulatory duties is also a valuable document providing guidance to members.

3. The obligations of a Member

Members must not:

• take decisions or exercise rights as Members for any financial or other gain for themselves, their family or their associates
• use their position as Members to promote private interests or seek to frustrate or to influence decisions of Network Rail in an improper manner
• conduct themselves in a manner that would bring Network Rail's name or reputation into disrepute
• use their position as Members to take up complaints or pursue other causes on behalf of railway users or other interest groups

Members must leave their particular rail issues on one side - they need to focus on the overall interests of Network Rail. Members must not pursue local/personal issues in their capacity as Members. In short, Members must act in the interests of Network Rail.

4. Essential to the role - an appreciation of Corporate Governance

“Corporate Governance” covers the principles of the structure and process by which the business of companies is administered and controlled. It is not, however, the actual decision making of companies.

There are a number of formal requirements in place requiring a company's compliance with corporate governance principles:

4.1 Legislation principally in the form of the Companies Acts which provides the basic framework of corporate governance. This includes the requirement that companies should have at least a certain number of directors who are responsible for the company, procedures for calling and conducting meetings of the directors and also of the Members/shareholders of the company, and that certain decisions have to be taken by Members/shareholders.

Legislation often uses the term “Member”, rather than “shareholder”, when referring to the “owners” of a company. The rights and obligations of Members of a company limited by guarantee are recognised, therefore, in legislation as being largely those of shareholders.

4.2 For companies listed on the London Stock Exchange, there are requirements for them to comply with a set of additional requirements under the “Listing Rules” aimed at protecting investors by specifying the principles and procedures by which a company is run.

4.3 The “Combined Code” is annexed to the Listing Rules and sets out various requirements or expectations as to corporate governance. Listed companies are required to disclose their compliance with the Code and, where they do not comply, to explain why not.

Further information about the Combined Code can be found at the website of the Financial Reporting Council www.frc.co.uk.

Under its network licence Network Rail, whilst not being a company listed on the London Stock Exchange, is required to comply with the Combined Code.

The responsibility for implementing good corporate governance rests with the Board of Directors. The Annual Report and Accounts - in particular the Corporate Governance section - contains important written descriptions of the company's performance specifically aimed at giving Members the information upon which they can assess compliance.

5. The role of Members in the context of the structure of Network Rail's overall accountability

Network Rail is held to account by a variety of mechanisms of which the role of Members is one:

5.1 Regulatory regimes - for economic & safety performance

5.2 General law - company law, health & safety law, competition law, contract law, etc

5.3 Members - for Board's management of Network Rail

5.4 Contracts - with customers & funders

5.5 Financial requirements - ORR's periodic reviews set Network Rail's income

5.6 Network capacity - ORR approves access contracts

5.7 Operational & technical - rail industry codes - rules & procedures for all industry

6. The core competences a Public Members will need to demonstrate

6.1 an appreciation of the context of the role

6.2 an understanding of the issues facing a large complex organisation;

6.3 the ability to constructively challenge the opinions of others and work to achieve a shared consensus;

6.4 the ability to make balanced analytical judgements;

6.5 excellent communication skills with the ability to express yourself clearly and succinctly;

6.6 experience of working with disparate groups.