The Board has established an Audit Committee, a Nomination Committee and a Remuneration Committee to oversee and debate relevant issues and policies outside main Board meetings. Throughout the year, the Chairman of each Committee provided the Board with a summary of key issues considered at the Committee meetings. Board Committees are authorised to make enquiries of the Executive Directors and other executives across the Group as they feel appropriate and to engage the services of external advisers as they deem necessary in the furtherance of their duties at the Company’s expense.
The Audit Committee
Role and Responsibilities
The Committee supports the Board in fulfilling its responsibilities in relation to financial reporting, monitoring the integrity of the financial statements and other announcements of financial results published by the Group; and reviewing and challenging any significant financial reporting issues, judgements and actions of management in relation to the financial statements. The Committee reviews the effectiveness of the Group’s internal controls and risk management systems and the effectiveness of the Group’s Internal Audit function. On behalf of the Board, the Committee manages the appointment and remuneration of the External Auditor and monitors its performance and independence. The Group supports an independent and confidential whistleblowing procedure and the Committee monitors the operation of this facility.
In accordance with the Code, the Board requested that the Committee advise it whether it believes the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
Membership and Meeting Attendance
The Committee members have been selected to provide the wide range of financial and commercial expertise necessary to fulfil the Committee’s duties and responsibilities. As a qualified chartered accountant, I am considered by the Board to have recent and relevant financial experience, as required by the Code. The Committee is considered by the Board as a whole to have competence relevant to the sector in which the Group operates. Details of the skills and experience of the Directors are contained in the Directors’ biographies on pages 56 and 57 of the Annual Report and Accounts.
The Committee has access to the Group’s finance team, to its Internal Audit function and to its External Auditor and can seek further professional training and advice, at the Group’s cost, as appropriate.
The quorum necessary for the transaction of business by the Committee is two, each of whom must be a Non-executive Director. Only members of the Committee have the right to attend Committee meetings, however, during the year, Stewart Gilliland (in his capacity as Chairman), Stephen Glancey, Group Chief Executive Officer, Jonathan Solesbury, Group Chief Financial Officer, the Head of Internal Audit together with members of her team, Group Finance Director, and representatives from Ernst & Young (“EY”), the External Auditor, were invited to attend meetings. The Committee also meets separately with the Head of Internal Audit and the External Auditor without management being present.
The Company Secretary is Secretary to the Committee.
Internal Controls and Risk Management Systems
The Committee is responsible, on behalf of the Board, for reviewing the effectiveness of the Group’s internal controls and risk management systems, including financial, operational and compliance controls.
In order to keep the Committee abreast with latest developments, the Head of Internal Audit reported to each meeting on developments and emerging risks to internal control systems and on the evolution of our principal risks. The Committee reviewed the updated principal risks, their evolution during the year, and the associated risk appetites and metrics in light of business changes and performance, challenging and confirming their alignment to the achievement of the Group’s strategic objectives. At each meeting, the Committee considered the ongoing overall assessment of each risk, their associated metrics and management actions and mitigations in place and planned. This review was supported through consideration of risk dashboards outlining both principal risks and any escalated or emerging risks resulting in the addition of new risk regarding COVID-19, and the reclassification of two risks, namely Sustainability and Brand and Reputation. Those changes to our risk profile were then approved by the Board.
In addition, the Committee reviewed reports issued by both Internal Audit and the External Auditor and held regular discussions with the Group Chief Financial Officer, the Head of Internal Audit and representatives of the External Auditor. During the course of these reviews, the Committee has not identified nor been advised of any failings or weaknesses which it has determined to be significant.
The Committee is responsible for monitoring and reviewing the operation and effectiveness of the Internal Audit function including its focus, work plan, activities and resources.
At the beginning of the financial year, the Committee reviewed and approved the Internal Audit plan for the year having considered the principal areas of risk in the business and the adequacy of staffing levels and expertise within the function. During the year, the Committee received regular verbal and written reports from the Head of Internal Audit summarising findings from the work of Internal Audit and the responses from management to deal with the findings.
The Committee monitors progress on the implementation of any action plans arising on significant findings to ensure these are completed satisfactorily and meets with the Head of Internal Audit in the absence of management.
It is the responsibility of the Committee to monitor the performance, objectivity and independence of EY, the External Auditor. In December 2019, we met with EY to agree the audit plan for the year end, highlighting the key financial statement and audit risks, to ensure that the audit was appropriately focused. In addition, EY’s letter of engagement and independence was reviewed by the Committee in advance of the audit.
In May 2020, in advance of the finalisation of the financial statements, we received a report from EY on their key audit findings, which included the key areas of risk and significant judgements referred to above, and discussed the issues with them in order for the Committee to form a judgement on the financial statements. In addition, we considered the Letter of Representation that the External Auditor requires from the Board.
The Committee meets with the External Auditor privately at least once a year to discuss any matters they may wish to raise without management being present.
For more information on External Audit, please see the Annual Report and Accounts 2020.
Confidential Reporting Programme
In line with best practice, the Group has an independent and confidential reporting programme in all of its operations whereby employees can, in confidence, report on matters where they feel a malpractice has taken or is taking place, or if health and safety standards have been or are being compromised. Additional areas that are addressed by this procedure include criminal activities, improper or unethical behaviour and risks to the environment.
The programme allows employees to raise their concerns with their line manager or, if that is inappropriate, to raise them on a confidential basis. An externally facilitated confidential helpline and confidential email facility are provided to protect the identity of employees in these circumstances. Any concerns are investigated on a confidential basis by the Human Resources Department and/or the Company Secretary and Group General Counsel and feedback is given to the person making the complaint as appropriate via the confidential email facility. An official written record is kept of each stage of the procedure and results are summarised for the Committee.
The Nomination Committee
Role and Responsibilities
The primary role of the Committee is to monitor and maintain an appropriate balance of skills, experience, independence and diversity on the Board while regularly reviewing its structure, size and composition. It is also responsible for ensuring there is a formal, rigorous and transparent process for the appointment of new Directors to the Board.
Succession planning is a fundamental aspect of the Committee’s work and encompasses a number of factors:
The Committee met on five occasions during the year ended 29 February 2020. All members of the Committee attended each meeting.
Meeting Frequency and Main Activities during the year
During the year ended 29 February 2020, the Committee:
Evaluation of the Committee
The evaluation of the Committee was completed as part of the FY2020 external Board evaluation process conducted by Independent Audit. An explanation of how this process was conducted, the conclusions arising from it and the outcome of that review can be found on pages 64 and 65.
The Remuneration Committee
The Remuneration Committee comprises solely of independent, non-executive Directors. The Chairman is Helen Pitcher.
The Remuneration Committee meets at least twice a year. During FY20 the Remuneration Committee met seven times.
The Remuneration Committee’s terms of reference, which are available on the C&C website, include:
The ESG Committee
The ESG Committee comprises both non-executive Directors and Executive Directors. The Chairman is Jim Thompson.
The Committee was constituted by the Board to: