Governance

Introduction

The Board is accountable to shareholders and is committed to the highest standards of corporate governance. To this end, the company has adopted the UK Corporate Governance Code (2018). The Code is available to download at www.frc.org.uk.

The Board of Gooch & Housego PLC reviewed its corporate governance procedures at its July 2021 meeting. Following this meeting, a number of actions were taken and the Board consider the Company to have fully complied with the Code during the year ended 30 September 2021.

How we Govern the Company

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, which are available on the company’s web site.

The Board

The Board currently comprises two executive and four non-executive Directors. The directors holding office during the period of this report and their biographies are here. In addition to these Directors, Peter Bordui served as a non-executive director until his retirement on 24 February 2021.

The Executive Directors have rolling service contracts that are subject to either six or 12 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 available at the AGM.

All the non-executive Directors are considered by the Board to be independent of management and free of any relationships 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 understands and recognises the benefits that diversity can bring, and our recruitment partners are briefed on our requirements in this regard.

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 not considered appropriate to do this. The Board therefore has a documented schedule of matters reserved for its decision which can be found here.

There are typically eight board meetings a year, although an additional meeting was held in FY2021. At least once annually, the Board meets at one of G&H’s locations other than its head office in Ilminster. This allows the non-executive directors the opportunity to gain a deeper understanding of other G&H businesses and to meet local staff. During FY2021, the majority of board meetings were held by video conference due to the pandemic, but we were able to hold face-to-face meetings in Ilminster in July and Ashford in September after the UK restrictions were eased. We expect to hold a meeting at one of our US sites in FY2022 if appropriate given the pandemic induced restrictions.

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 Directors, 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.

Brian Phillipson was appointed as the Senior Independent Director following the retirement of Peter Bordui in the year ended 30 September 2021. 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 Brian has the appropriate experience, knowledge and independence to continue this role.

The Board is responsible for setting the Group’s strategy. The board calendar includes two multi-day strategy sessions per year. At these sessions, members of the leadership team present updates on strategic progress to the board in advance of wider discussions which form the basis of our ongoing strategy. Further details of our strategy can be found in the Strategic Report.

Maintaining a Dialogue with Shareholders

The Chairman ensures that the Board maintains an appropriate dialogue with shareholders. During FY2021, the Chairman met with a number of major shareholders in order to receive feedback on their key focus areas and to enable a two-way dialogue on matters of importance to the Board and shareholders. The Chairman and the Chair of the Remuneration Committee also met a number of shareholders during the remuneration consultation exercise undertaken in response to the 2021 AGM voting.

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 web site 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.

Engagement with the Workforce

The Code suggests a number of ways in which the board should ensure engagement with the workforce. These include one or a combination of the following: a director appointed from the workforce; a formal workforce advisory panel; and a designated non-executive director.

The Board considered these options during the year and felt it appropriate to appoint a designated non-executive director. After consideration of the individual skillsets of the non-executive directors, the Board felt that Jim Haynes was the most appropriately qualified individual to take on this role and he was duly appointed as our non-executive director with responsibility for engagement with the workforce. This appointment was made at our July 2021 meeting, following which Jim has worked with our global HR teams to agree the scope of his involvement in connection with this role. This will see him attending a number of employee focus groups in FY2022, as well as attending all-employee presentations where possible. He will act as a conduit between the workforce and the Board. A key first step in this process will be the all-employee survey which we expect to complete early in calendar 2022.

The Board reviews the organisation’s culture to ensure it is aligned with the Group’s strategy.  Following the review in the year, it was agreed to launch the Group’s Mission, Vision, Values and Behaviours to further strengthen the Group’s culture in support of its strategic aim. Further information on our work in this regard is given in the ESG Report.

Other ways in which we ensure appropriate engagement with our workforce are set out in the Strategic Report. These activities enable the Board to gauge the Group’s culture and to make changes where necessary to ensure it is aligned with our strategy.

Board 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 took place in September 2021, and was led by the Senior Independent Director Brian Phillipson using a formal structured questionnaire. A number of themes came out of this review in relation to which the Chairman has taken specific actions to address in FY2022. The key themes were board succession, stakeholder communications, and the need for more informal time together among the Non-Executive Directors. We will provide an update on these areas in the FY2022 Annual Report.

The Senior Independent Director leads an annual appraisal of the Chairman’s performance. This review took place during August and September 2021, using a formal questionnaire.  Brian Phillipson collated the feedback received and presented initially to the Chairman and then to the Board. The Chairman summarised the actions arising therefrom at the September 2021 board meeting.

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.

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 company’s web site.

The Board has three formally constituted committees, the Audit committee, the Remuneration committee and the Nomination committee. A report on the activities of each committee follows later in this report.

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.

G&H 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. This year, the risk register was presented and approved at the September 2021 meeting.

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 visit the sites to perform reviews of controls and processes in place. Due to the pandemic driven travel restrictions, we have not been able to arrange senior finance staff site visits in the year, but we have maintained a remote review of controls.  We have also rolled out a new control framework and intend to arrange site visits in FY2022 to ensure the controls are operating in line with this new framework.

Annual budgets and 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.

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