Board of Directors
The Board is accountable to shareholders for the creation and delivery of strong sustainable performance and the creation of long term shareholder value.
The Board meets frequently and is responsible for organising and directing the affairs of the Company and the Group in a manner that will promote the success of the Company and is consistent with good corporate governance practice and for ensuring that in carrying out its duties the Company and the Group meet legal and regulatory requirements.
The specific duties of the Board are clearly set out as a formal schedule of matters specifically reserved to it, which is reviewed annually. Matters reserved to the Board include:
- Approval of the Group’s long term objectives and commercial strategy
- Approval of changes to the Group’s senior management structure
- Approval of the Group’s overall risk appetite
- Annual review of the effectiveness of internal control arrangements
- Approval of the annual operating and capital budgets
- Changes to the Group’s capital structure
- Approval of the Group’s financial results and any significant changes to accounting practices or policies.
The Board met twelve times during the year ended 31 December 2009. The attendance of Directors at meetings of the Board and at Board Committees of which they were members during the year is set out on page 47 of the Annual Report.
Board balance and independence
At least half of the Board, excluding the Chairman, comprises of Non-Executive Directors, all of whom have been determined by the Board to be independent. The Chairman meets regularly with the Non-Executive Directors both individually and collectively without the Executive Directors being present.
The Chairman is currently Non-Executive Chairman of Aegis Group plc and Andy Haste is a Non-Executive Director of ITV plc which is currently a member of the FTSE 250. No other Executive Director serves on the board of a FTSE 100.
Appointments to the Board
The Board considers the leadership needs and succession planning of the Board when making decisions on new appointments. The Board also ensures that succession planning processes and plans are in place with regard to senior appointments both below and at Board level. When appointing new Directors, regard is given to the size of the Board; balance of Executive and Non-Executive Directors; the skills and experience already represented; likely future retirements; and those appointments to the Board which would be desirable going forward.
In accordance with the Articles and the Combined Code, the Directors submit themselves for reappointment at the first AGM after their appointment and for re-election every three years thereafter. Resolutions to reappoint Directors at the AGM are subject to the approval of the Board, taking into account the recommendations of the Nomination Committee.
Induction and professional development
On appointment to the Board, Directors undertake an induction programme and receive a range of information about the Company when they join the Board. This includes background information on the Group and details of Board procedures, governance issues and directors’ responsibilities. The induction programme also includes a series of meetings with members of the Board and executive management, together with various briefings and presentations regarding the business and regulatory matters from executives.
Development and training for the Directors is an ongoing process which includes briefings on legislative and regulatory changes and on corporate governance issues. Directors also receive regular presentations about the Company’s operations and there are regular discussions on strategy, customer marketing, employee engagement and environmental, social and governance matters. Opportunity is also created for Non-Executive Directors to make informal visits to different parts of the Group and to meet with local management.
Performance evaluation
In 2009 the Board undertook an annual evaluation of its performance to assess how well the Board, its Committees and the Directors were performing. The review included the use of a comprehensive questionnaire. Responses from the questionnaire were collated and subsequently discussed by the Board and they have concluded that the Board was operating well. Following the 2009 review the Board have continued to improve agenda management for Board meetings to ensure that adequate time is made for the debate and exchange of ideas to support effective decision making.
The Chairman has recommended that an external review of the Board be carried out in 2010 in accordance with current best practice.
Chairman and Chief Executive Officer
The roles of the Chairman and the Group CEO are separate, with responsibilities clearly divided between them. This separation of responsibilities is formalised in role statements which have been reviewed and approved by the Board.
The Chairman is responsible for leading the Board, liaising as necessary with the Group CEO on developments between Board meetings and ensuring that both the Group CEO and his executive management team have appropriate objectives and that their performance against those objectives is reviewed. The Group CEO is responsible to the Board for the executive management of the Group and for liaising with the Chairman and keeping him informed on all material matters.
The FSA
The Board is also responsible to the Financial Services Authority (FSA) for ensuring compliance with the Group’s UK regulatory obligations. The Board attaches great importance to its regulatory responsibilities and is committed to dealing with the regulator in an open, cooperative and transparent manner. In the second half of 2009 the FSA conducted an ARROW Risk Review of both the Group and UK operations. This included a review of the Company’s Individual Capital Assessment and of Treating Customers Fairly. During 2009 the FSA also conducted private meetings with several members of the Board and executive management as a part of their ‘close and continuous’ programme.
In addition, the Group includes a number of regulated entities which rely on various licences to carry out their business. Accordingly, maintaining effective relationships with the Group’s regulators is integral to the success of the Group’s strategies and its long term value.
Corporate governance framework
The Group’s corporate governance framework describes and prescribes how the Group is directed and managed by setting out the matters reserved for the Board, the terms of reference of the Board and management committees, role statements, policies, systems, procedures and controls.
Financial Control Framework
The Financial Control Framework aims to deliver a consistent approach to finance related controls across the Group that is ‘fit for purpose’ for all regions, embedding a control culture that will strengthen the Group’s finance environment by ensuring that the Group’s financial processes are managed effectively in order to mitigate the associated risks. This is done by documenting and testing the way that core elements of the business work, providing a high degree of transparency around the Group’s financial control environment. The Group has people, procedures and tools embedded in the business to maintain and streamline the control environment, and to provide ongoing reporting and assurance. Quarterly reports are presented to the GAC which include notification of any control deficiencies or breaches in the period and action taken.
Delegated authorities
The Group operates a Delegated Authority Framework which specifies how executive authority is delegated from the Board to the Group CEO and on to other executives in the Group. Individual executive licences set out specific limits of authority in terms of entering into financial, underwriting and other business commitments. Each executive is responsible for ensuring a similar process of delegation is in place within his or her area of responsibility.