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 Audit 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 Audit Committee reviews the effectiveness of the Group’s internal financial control and internal control 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 Audit 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.
The Audit Committee’s Terms of Reference reflect this requirement and can be found in Group’s website. A copy may be obtained from the Company Secretary.
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, Emer Finnan is 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 50 and 51 of the 2019Annual Report and Accounts.
The Audit 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 to 28 February 2019, Sir Brian Stewart, as a non executive Director (and in his capacity as Chairman until 5 July 2018), Stewart Gilliland, as a non-executive Director (and in his capacity as Chairman from 5 July 2018), Stephen Glancey, Group Chief Executive Officer, Jonathan Solesbury, Group Chief Financial Officer, Richard Holroyd and Jim Clerkin, non-executive Directors, the Head of Internal Audit, Group Finance Director, Group Strategy and 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 Audit 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 major risks. 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 FY2019, 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 Audit Committee to monitor the performance, objectivity and independence of EY, the External Auditor. In December 2018, the Committee 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 2019, in advance of the finalisation of the financial statements, the Audit Committee 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, the Committee 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.
Assessment of Effectiveness of External Audit
The Committee obtained feedback on the effectiveness and efficiency of the external audit process from completion of a short questionnaire by each member of the Committee, the Group Chief Financial Officer, the Director of Group Finance, the Group Strategy and Finance Director and applicable senior finance executives across the business. The results were reviewed by the Committee and the Committee concluded that the external audit process had been effective, with areas identified for improvement communicated to EY for action.
The Group has a policy in place governing the provision of non-audit services by the External Auditor in order to ensure that the External Auditor’s objectivity and independence is safeguarded.
Under this policy the auditor is prohibited from providing non-audit services if the auditor:
Other than above, the Company does not impose an automatic ban on the External Auditor providing non-audit services. However, the External Auditor is only permitted to provide non-audit services that are not, or are not perceived to be, in conflict with auditor independence and objectivity, if it has the skill, competence and integrity to carry out the work and it is considered by the Audit Committee to be the most appropriate to undertake such work in the best interests of the Group. The engagement of the External Auditor to provide non-audit services must be approved in advance by the Audit Committee or entered into pursuant to pre-approved policies and procedures established by the Audit Committee and approved by the Board.
The nature, extent and scope of non-audit services provided to the Group by the External Auditor and the economic importance of the Group to the External Auditor are also monitored to ensure that the external auditor’s independence and objectivity is not impaired. The Audit Committee has adopted a policy that, except in exceptional circumstances with the prior approval of the Audit Committee, non-audit fees paid to the Group’s auditor should not exceed 100% of audit fees in any one financial year.
Details of the amounts paid to Ernst & Young during the year for audit and other services are set out in note 2 to the financial statements in the 2019 Annual Report and Accounts.
The Group has a whistleblowing 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 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 Audit Committee is also responsible for ensuring that arrangements are in place for the proportionate independent investigation and appropriate follow up of any concerns which might be raised. In FY2019, no incidences of concern were uncovered.
The Nomination Committee
Role and Responsibilities
The Committee has defined Terms of Reference which can be found in the Investor Centre section of the Group’s website at www. candcgroupplc.com.
Membership and Meeting Attendance
All members of the Committee are and were, throughout the year under review, considered by the Board to be independent.
No member of the Committee nor any other Director participates in discussions concerning or votes on his or her own re-election or evaluation of his own performance. Details of the skills and experience of the Directors are contained in the Directors’ biographies on pages 50 and 51. Their remuneration is set out in the Remuneration Report.
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, Stephen Glancey (Chief Executive) and Vincent Crowley, non-executive Director were invited to attend meetings.
The Company Secretary is Secretary to the Committee.
Meeting Frequency and Main Activities during the year
Board Composition/Succession Planning
The Board plans for its own succession, with the support of the Committee. The Committee remains focused, on behalf of the Board, on Board succession planning for both Executive and nonexecutive Directors.
The Committee aims to ensure that:
On at least an annual basis each Director’s intentions are discussed with regard to continued service on the Board and their succession is considered in the context of the composition of the overall Board and the corporate governance guidance on non-executive tenure. This transparency allows for an open discussion about succession for each individual, both for short term emergency absences as well as longer terms plans.
Summary of Board Changes
Non-Executive Director Search
Skills Balance and Director’s Performance Evaluation
During the year, the Committee also considered the composition of the Board and each of its Committees. The Committee continues to actively review the long term succession planning process for Directors to ensure the structure, size and composition (including the balance of skills, experience, independence, knowledge and diversity (including gender, ethnic and social backgrounds)) of the Board and its Committees continues to be effective, thus ensuring appropriate levels of corporate governance and best practice and support for the Company as it pursues its strategy.
As part of its review, the Committee considered the performance and independence of Stewart Gilliland, Jim Clerkin, Vincent Crowley and Emer Finnan, each of them having confirmed their willingness to stand for re-election at the forthcoming AGM.
Having undertaken a performance evaluation, the Committee considered that the performance of each of the non-executive Directors proposed for re-election, being Stewart Gilliland, Jim Clerkin, Vincent Crowley and Emer Finnan, was effective and that they had each demonstrated a strong commitment to their role. The Committee had also undertaken a review of each of Business & Strategy Corporate Governance Financial Statements 61 the non-executive Directors’ other interests and external time commitments, such review being particularly rigorous in the case of Stewart Gilliland as he has served seven years on the Board, and has concluded that each of them is independent in character and judgement and that there are no relationships or circumstances likely to affect (or which appear to affect) his or her judgement. The Committee is also satisfied that each of them continues to be able to devote sufficient time to their role. Stewart Gilliland and Emer Finnan did not participate in the evaluation of his/her own performance or time commitments.
The Committee were satisfied that each of the Directors proposed for re-election had the appropriate balance of skills, experience, independence and knowledge of the Company to enable him or her to discharge the duties and responsibilities of a Director effectively. Accordingly, the Committee recommended to the Board that they each be proposed for re-election as a Director at the forthcoming AGM.
The Board recognises the benefits of diversity. Our Directors come from different backgrounds, nationalities, a wide range of professions and each brings unique capabilities and perspectives to our Board discussions.
We are committed to maintaining a diverse Board. Appointments to the Board and throughout the Company will continue to be made on merit and overall suitability for the role against objective criteria with due regard to the benefits of diversity (including, but not limited to, ethnicity, experience, gender, nationality, age and educational and social backgrounds as well as individual characteristics such as broad life experience).
When recruiting, we require any search agency to have signed up to the “Voluntary Code of Conduct for Executive Search Firms” developed in response to the Davies Report covering Board appointments.
Any future appointments will continue to be made to the Board on merit and with the aim of recruiting Directors who offer the right skills and who can complement the rest of the Board with a view to achieve effective diversity, in its widest sense.
The Committee and the Board further realise that diversity extends beyond the Board and in this regard seeks to ensure that all recruitment decisions are fair and non-discriminatory and that all employees get an equal opportunity to achieve their full potential.
Statistical gender diversity employment data for the Company can be found in the Corporate Social Responsibility Report on page 42 of the 2019 Annual Report and Accounts.
The Board additionally undertook an annual review of the Committee’s performance and effectiveness and concluded that the Committee operated effectively.
The Remuneration Committee
The Remuneration Committee comprises solely of independent, non-executive Directors. The Chairman is Stewart Gilliland.
The Remuneration Committee meets at least twice a year. During the period under review the Remuneration Committee met six times.
The Remuneration Committee’s terms of reference, which are available on the C&C website, include: