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 year ended 30 September 2020 was the first year to which the 2018 Code was applicable. In order to ensure compliance with the revised code we have made a number of changes. Our pension contribution level for Executive Directors was brought in line with the wider UK workforce in FY2019, and we have also introduced a two year holding period for shares vesting under the LTIP.
Gooch & Housego PLC complied with the Code during the year ended 30 September 2020.
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 currently comprises two executive and four non-executive Directors.
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 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 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.
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. This schedule is available here: Matters reserved for the Board
There are typically 8 board meetings a year. 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 FY2020, this was not possible due to Covid-19 travel restrictions, so a number of board meetings were conducted by video conference. We expect to hold a meeting at one of our US sites in FY2021 if the current travel restrictions are lifted.
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 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.
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. 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 is satisfied that the level of engagement with the workforce is appropriate absent one of the above specific recommendations. The 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.
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 October 2019, and was led by the Senior Independent Director, Peter Bordui. One of the key themes coming out of this review was the need for greater gender diversity on the Board. Progress has been made in this area during FY2020 and the board remains cognisant of the benefits diversity can bring.
The Senior Independent Director leads an annual appraisal of the Chairman’s performance. This review took place during August and September 2020. Peter Bordui met with each of the Directors and the Company Secretary to obtain feedback on the Chairman’s performance. This feedback was collated and fed back to the Chairman by Peter Bordui. The Chairman summarised the key aspects of the feedback and the actions arising at the September 2020 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.
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.
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.
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. We recruited a new member of the Group finance team early in FY20. Our intention was for a proportion of this person’s time to be spent visiting sites in a quasi-internal audit role. However, due to the travel restrictions brought about by COVID-19, we have not progressed this as far as had been intended. As soon as travel restrictions are lifted, we expect regular site visits to resume.
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.
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.