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Investors  Corporate Governance


Compliance with the UK Corporate Governance Code

The Company is committed to the principles of corporate governance contained in the UK Corporate Governance Code that was issued in 2016 by the Financial Reporting Council (‘the Code’) for which the Board is accountable to shareholders. Throughout the financial year ended 31 January 2018 and to the date of this report, the Group has been compliant with the provisions set out in the Code. Further explanation of how the Main Principles have been applied is set out below and in the Directors’ Remuneration Report and Audit Committee Report.


Leadership

The Board and its role

The Board is collectively responsible to shareholders for the long-term success of the Company. It sets the Company’s strategic objectives and determines the risk appetite and the control framework within which those objectives are achieved. The Board also provides leadership and direction for management, ensuring that the necessary resources are in place to enable the objectives to be met. The Board oversees the Company and its businesses within a robust governance structure to deliver sustainable shareholder value.

Throughout the financial year there were three Executive Directors. Mark Garratt took over from Richard Ashcroft as Group Finance Director on 27 April 2017 as part of a planned succession. Adrian Gunn was nominated by the Group’s largest shareholder and joined the Board on 1 October 2017, increasing the number of Non-Executive Directors from four to five. A list of Directors, their biographies and roles is set out on pages 28 and 29. The Board members with executive responsibility were the Chief Executive Officer, Group Finance Director and European Managing Director.

The Board meets at least eight times a year and has a fixed schedule for reviewing the Group’s operating performance. Additional meetings are arranged as required to deal with specific issues or transactions.

The Board has a schedule of matters and responsibilities specifically reserved to itself, the main items of which include:

  • setting the Group’s strategic aims and corporate objectives;
  • approval of the published financial results and other external reporting;
  • approval of Nomination Committee recommendations;
  • annual approval of the Group Strategic Plan and budget;
  • approval of acquisitions, mergers and disposals;
  • new businesses which require start-up capital;
  • material capital expenditure and leasehold agreements;
  • material contracts and transactions not in the ordinary course of business;
  • risk management and the underlying internal control environment;
  • treasury policy and significant financing arrangements; and
  • recommendation of the proposed level and payment of dividends.

Outside the formal schedule of matters reserved for the Board, the Chairman and Non-Executive Directors make themselves available for consultation with the executive team as often as necessary.

Division of responsibilities

The division of responsibilities between the Chairman and Chief Executive Officer is clear, set out in writing and agreed by the Board. There is strong non-executive representation on the Board. The independent Directors meet during the year without the Executives and provide effective balance and challenge.

The Executive Directors are responsible for the overall operational and financial management of the Group within the framework set by the Board. The Executive Council, which comprises senior operational management including the Executive Directors, sits below the Board and carries out the day-to-day running of operations. The Senior Independent Director and the Company Secretary monitor procedural compliance. The appointment and removal of Directors is a matter for the Board as a whole. Independent professional advice and training are available to all the Directors. The Senior Independent Director is available for consultation with shareholders. The Executive Directors meet with the Company’s major shareholders and other potential investors on a regular basis and report to the Board on those meetings.

Board and Committee attendance

 

Number of meetings

Group Board

 Nomination Committee

 Remuneration Committee

 Audit Committee

Total number of meetings

13

2

8

4

Non-Executive Directors

Julie Baddeley

13

2

8

n/a

David Bezem

12

2

8

4

Ian Davies

13

2

8

4

Kevin Thomas

13

2

7

4

Executive Directors

Albert Ellis

13

2

n/a

n/a

Simon Wassall

13

n/a

n/a

n/a

Mark Garratt

11

n/a

n/a

n/a

Richard Ashcroft

3

n/a

n/a

n/a

Audit Committee

The Audit Committee meets at least twice a year with the Group’s senior financial management and the External Auditor to review the interim and annual financial statements, the accounting policies of the Group, its internal financial control procedures and compliance with accounting standards. The Audit Committee also meet the External Auditor and Internal Auditor without management present at least annually.

The members of the Committee during the year were Ian Davies (Chairman), David Bezem and Kevin Thomas. The Board considers that the members of the Committee both individually and as a whole have sufficient recent and relevant financial experience to discharge its function.

The Audit Committee Report on pages 36 to 39 includes details of the Audit Committee policy, practices and engagement with the External Auditor.

Remuneration Committee

The Remuneration Committee meets at least twice a year. The members of the Committee during the year were David Bezem (Chairman), Julie Baddeley, Ian Davies and Kevin Thomas.

The Remuneration Committee determines and approves the policy and remuneration of the Company’s Executive Directors and the Chairman of the Board. The Chief Executive Officer may be invited to attend meetings of the Committee but does not participate in discussions of his own remuneration arrangements.

The remuneration of the other Non-Executive Directors is set by the Executive Directors.

The Directors’ Remuneration Report on pages 40 to 59 includes details of remuneration policy and the report on remuneration in the 2018 financial year.

Nomination Committee

The Nomination Committee provides a formal, rigorous and transparent procedure for the appointment of new Directors to the Board. The members of the Committee during the year were Julie Baddeley (Chairman), Ian Davies, David Bezem, Kevin Thomas and Albert Ellis.

The Committee’s terms of reference include:

  • responsibility for identifying and nominating candidates for appointment to the Board;
  • evaluating the balance of skills, knowledge and experience required on the Board; and
  • succession planning.

In making appointments, the Nomination Committee takes account of the diversity of experience, gender, background and the composition of the Board.

The Committee considers succession plans for the members of the Group Board and other senior managers over the short and longer term, keeping in mind the balance of skills, experience and background required to ensure that the Group’s commitment to deliver sustainable shareholder value is met.

In September 2016 Richard Ashcroft informed the Board of his intention to step down at the end of September 2017. The process for the selection of his successor was conducted by the Committee and involved determining the profile of the candidate required to fill the vacancy. The Committee was assisted by an independent executive search company. Following a thorough process, Mark Garratt was recommended to the Board as Group Finance Director Designate. The Board approved the appointment and Mark joined the Board as an Executive Director on 3 April 2017, taking over as Group Finance Director on 27 April 2017.

A clear career progression for employees is key to the Group’s growth and helps to attract and retain talented individuals. The Group is committed to maximising career opportunities through significant investment in training and professional development at all levels. The Committee supports internal development programmes to build the skills required of future leaders amongst relevant employees.

The terms and conditions for the appointment of Non-Executive Directors are available for review at 110 Bishopsgate, EC2N 4AY during normal business hours. They will also be available 15 minutes before the AGM begins, at 9.30am on 28 June 2018.

Our culture and values

Harvey Nash is a global Group and we recognise the benefits that a diverse workforce brings. We have a strong commitment to attracting, developing and retaining employees with different backgrounds, knowledge and experience.


Effectiveness

Re-election of Directors

The Company’s Articles of Association provide that each Director must retire from office every three years. Julie Baddeley will stand for re-election at the AGM on 28 June 2018. The Board is satisfied that Julie has sufficient skills and experience to qualify her for re-election.

Adrian Gunn joined the Board as a nominated non-independent Non-Executive Director in October 2017
and will stand for election at the AGM.

Performance evaluation

Each year a rigorous evaluation of the Board’s performance is conducted, covering individual Directors, each of the Committees and the Board itself. In the current year, this was undertaken by the Senior Independent Director and was completed in January 2018. A survey was conducted to allow the members of the Board to provide confidential feedback. This feedback was discussed and actions set where required. The survey concluded that the Board remains effective and that the improvements identified in the 2017 review had been put in place.

The Board sets objectives annually and reviews its performance and membership regularly. As part of this process the Board considers whether the Directors have sufficient time to discharge their responsibilities effectively. The Directors’ profiles and other commitments are set out on page 28.

Professional development

The Board has a policy of providing reasonable funding for independent professional advice for all Directors in furtherance of their duties and continued professional development. Directors have access to suitable resources to update and develop their knowledge and capability.

On joining the Board, a new Director receives an appropriate induction, including meetings with other Directors and senior management, and opportunities to meet the Group’s principal advisers.


Accountability

A statement of Directors’ responsibilities in respect of the Annual Report is set out on page 63. The Board’s responsibility to present a fair, balanced and understandable assessment of the Company’s position and prospects extends to interim and other public reports.

Audit Committee and Auditor

A separate Audit Committee Report is set out on pages 36 to 39 and provides details of the role and activities of the Committee and its relationship with the External Auditor.

Risk management and internal control

The Board identifies and appraises risks, and maintains control and direction over appropriate strategic, financial and organisational structure matters, with formally defined lines of responsibility and delegation of authority.

The Directors have overall responsibility for ensuring that the Group maintains a system of internal controls, for monitoring their effectiveness to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication, and that assets are safeguarded. There are inherent limitations in any system of internal control, and accordingly even the most effective system can only provide reasonable, and not absolute, assurance against misstatement or loss.

A full evaluation of the Group’s risk management and internal control systems is performed at least annually. This is delegated to the Audit Committee.

The Board has delegated to executive management the implementation of the systems of internal financial control within an established framework that applies throughout the Group. This is monitored by an internal audit function which reports back to the Board through the Audit Committee. Further details of internal audits performed in the year are provided in the Audit Committee Report on page 38.

The Directors believe the following to be the key procedures established to provide internal financial control:

  • the operation of authorisation procedures;
  • appropriate segregation of duties;
  • clearly delegated responsibilities;
  • close involvement of senior management in day-to-day activities;
  • setting of detailed annual budgets with monthly reporting of variance analysis;
  • the operation of an Audit Committee, supported by an internal audit function; and
  • an established whistleblowing policy, the governance of which is overseen by the Audit Committee.

The Board considers a significant failing to be any item
that would lead to a material misstatement of the financial statements. In considering whether an item represented a significant failing, qualitative aspects of any failing would also be considered, as would the potential for the failing to affect the wider Group. All weaknesses identified, whether significant or otherwise, are discussed at Audit Committee meetings, with actions agreed and subsequently monitored.

Going concern

A going concern statement is set out in the Strategic Report on page 23.


Remuneration

The Directors’ Remuneration Report sets out in full its policies and practices which demonstrate the Company’s implementation of the Code.


Relations with shareholders

The Board maintains regular dialogue with its major shareholders and city analysts through formal annual and interim presentations, meeting to discuss long-term issues and communicating regularly throughout the year. During the year, the Chief Executive Officer and Group Finance Director met significant shareholders to update them on results and key developments. The views of shareholders and market perceptions are regularly communicated to the Board.


Constructive use of the Annual General Meeting

Shareholder attendance and participation at the AGM is welcomed. Amendments to the Company’s Articles of Association require shareholder approval at the AGM. The Company proposes separate resolutions on each substantially separate issue and the proxy appointment forms for each resolution provide shareholders with the option to direct their proxy to vote either for or against a resolution or to withhold their vote. The Company’s registrars ensure that all valid proxy appointments received for the AGM are properly recorded and counted and a schedule of proxy votes cast is made available to all shareholders attending the meeting. There is also full disclosure of the voting outcome on the Company’s website as soon as practicable after the AGM. All Directors normally attend the AGM and are available to answer questions. Issues can also be raised informally following the meeting. Notice of the AGM and related papers are sent to shareholders at least 20 working days before the meeting.