The following information is taken as an extract from the 2009 Annual Report, published in April 2010.
Application of the Principles of Good Governance
The Board has reviewed the requirements of the Combined Code 2008, as issued by the Financial Reporting Council. The ways in which the Company applies and complies with the principles of the Code are described below and, in respect of remuneration, in the 2009 Annual Report.
The Board
At 31 December 2009, the Board consisted of three Executive Directors and three Non-Executive Directors, including a Non-Executive Chairman. The names of the six current Directors and their respective responsibilities are shown on the Board of Directors.
The Board considers each of the three Non-Executive Directors to be independent in character and judgement and does not consider that there are any relationships or circumstances which affect, or could appear to affect, their independent judgement.
The Board operates both formally, through Board and Committee meetings, and informally, through regular contact amongst Directors. High level decisions on such matters as strategy, financial performance and reporting, dividends, risk management, major capital expenditure, acquisitions and disposals are reserved for the Board or Board Committees. For its regular formal meetings, the Board receives appropriate information in advance from the management. Other decisions outside of these areas are delegated to the Company's management, which reports to the Executive Directors.
The Chairman meets regularly with the Non-Executive Directors to consider their views. They constructively challenge and help develop proposals on strategy at meetings specifically set up for the purpose, which are attended by all Board members.
The Directors can obtain independent professional advice at the Company's own expense in the performance of their duties as Directors and have access to the Company Secretary.
The Board formally approves the appointment of all new Directors on the recommendation of the Nomination Committee (see below). All Directors are required to submit themselves for re-election at the first Annual General Meeting following their appointment and subsequent to this submit themselves for re-election at the Annual General Meeting on a rotational basis, which ensures that each Director is submitted for re-election approximately every three years.
Proposals to re-elect Directors and the Notice of the Annual General Meeting are contained in the 2009 Annual Report.
Board Committees
Remuneration Committee
The current composition of the Remuneration Committee is shown in the 2009 Annual Report and the statement of the remuneration policy developed by the Committee and details of each Director's remuneration are given within the Directors' Remuneration Report set out in the 2009 Annual Report.
The terms of reference of the Remuneration Committee are available here.
Audit Committee
The current composition of the Audit Committee is shown in the 2009 Annual Report. The Audit Committee operates under terms of reference agreed by the whole Board and meets with the external auditors to consider the Group's financial reporting in advance of its publication, and with the internal auditors to consider the internal audit programme, feedback and reports.
The terms of reference of the Audit Committee are available here
Nominations Committee
The current composition of the Nomination Committee is shown in the 2009 Annual Report. The Committee meets as required and operates under terms of reference agreed by the whole Board, and which are available here.
Board Evaluation
During the year the Board carried out a formal Board evaluation. Designed to provide a mechanism to assess individual Director and overall Board and Committee performance, the evaluation had two stages:
Stage One: Self Evaluation
A self assessment completed by each Director and reviewed by the Chairman (or in the case of the Chairman's self evaluation, by the Senior Independent Director, the other Non-Executive Director and the Executive Directors), who involves the other Non-Executive Directors as necessary. The reviewer determines follow-up action required including face-to-face meetings, training and development or the implementation of new processes or procedures. This may also generate items for discussion in Stage Two.
Stage Two: Board/Committee Evaluation and Communication
Conducted within a Board forum environment and prompted by key pre-determined questions (including any items generated from Stage One of the process), the Board examines separately the performance of the Board, the Board Committees and Board Communication. The forum is minuted and action points noted.
Shareholder Communications
The Board's assessment of the Group's position and prospects are set out in the Chief Executive's Statement and the Financial Review contained in the 2009 Annual Report.
The Executive Directors meet regularly with institutional shareholders to discuss the Group's performance and future prospects. The views of institutional shareholders are canvassed and subsequently reported back to the Board.
In addition, the Chairman offers annually to meet with major shareholders to review with them the performance and governance of the Group and the Senior Independent Director and the Non-Executive Director are kept informed of shareholder views by regularly receiving reports from the Group's brokers.
The Annual General Meeting is used as a forum for communication with private shareholders.
Compliance With The Combined Code
The Board considers that the Group has complied throughout the year ended 31 December 2009 with the Combined Code except in relation to the following matters:
- Provision A.4.1 - The Chief Executive was and still is the Chairman of the Nomination Committee, although the Committee did also consist of two Non-Executive Directors and the independent Non-Executive Chairman of the Board. Furthermore, whilst Chairman of the Committee the appointments have been very successful.
- Provision D1.1 - The Senior Independent Director did not attend meetings with major shareholders but was and still is kept informed of shareholder views by regularly receiving reports from the Group's brokers.
Internal Control
The Combined Code requires the Directors to review, on an ongoing basis, the effectiveness of the systems of internal control, including financial, operational, compliance and risk management. The Board acknowledges that it has overall responsibility for the Group's system of internal control and for monitoring its effectiveness.
Audit Committee
The Audit Committee comprises the two Non-Executive Directors, Charles Black (its Chairman), and Michael Mayer. Both members of the Committee have significant financial experience due to the senior positions they hold or have held in the past.
The Audit Committee reports to the Board on any matters on which it considers that action or improvement is needed, and makes recommendations as to the steps to be taken. In particular, the Committee is responsible for:
- ensuring that the financial performance of the Group is properly monitored and reported;
- monitoring the formal announcements relating to financial performance;
- meeting the external auditors and reviewing reports prepared by the external auditors and management relating to accounts and internal control systems;
- appointing internal auditors, agreeing the internal audit plan and meeting with them to review reports and consider future
- internal audit strategy; and
- making recommendations to the Board in respect of external auditor appointment and remuneration.
The effectiveness of the internal control systems for the period covered by the financial statements has been examined. The examination comprised a detailed review of internal controls with any significant findings or identified risks being closely examined so that appropriate action can be taken.
Since their appointment in December 2006, an experienced external provider of internal audit services, KPMG LLP, has worked with the Group to develop a risk-based internal audit programme for the Group. A representative of KPMG LLP regularly attended the Audit Committee meetings during the year and submitted their reports.
Key Controls and Procedures
The Board maintains full control and direction over appropriate strategic, financial, organisational and compliance issues, and has put in place an organisational structure with defined lines of responsibility and delegations of authority.
The annual budget and forecasts are reviewed by the Board prior to approval being given. This includes the identification and assessment of the business risks inherent in the Group and the publishing sector as a whole along with associated financial risks.
The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The key procedures include:
- detailed budgeting and forecasting programme with annual budget and forecast approved by the Board;
- regular review by the Board of actual results compared with budget and forecasts;
- regular review by the Board of year-end forecasts;
- established procedures for acquisition of books for future publication, capital expenditure and expenditure incurred in the ordinary course of business;
- detailed budgeting and monitoring of costs incurred on the development of reference databases;
- established procedures for credit evaluation of new and existing customers with credit insurance on material customer accounts;
- reporting to, and review by, the Board of changes in legislation and practices within the publishing sector and accounting and legal developments pertinent to the Group;
- appointing experienced and suitably qualified staff to take responsibility for key business functions to ensure maintenance of high standards of performance;
- preparation of monthly consolidated accounts by suitably qualified staff and review by senior management and the Board against budgets and forecast;
- an internal audit programme;
- qualified finance team, experienced Group Finance Director and senior finance managers, keeping up to date with International Financial Reporting requirements; and
- regular review of financial reporting and controls, and taking advice from internal audit.
Auditor Independence
The Audit Committee also undertakes a formal assessment of the external auditors' independence each year which includes:
- confirmation of the external auditors' objectivity and independence in the provision of non-audit services provided to the Group including the use of separate teams to provide such services;
- discussion with the external auditor of a written report detailing relationships with the Group and any other parties that could affect independence or the perception of independence;
- a review of the external auditors' own procedures for ensuring independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner;
- and
- obtaining written confirmation from the external auditors that, in their professional judgement, they are independent.
An analysis of the fees payable to the external audit firm in respect of both audit and non-audit services during the year is set out in note 2 to the accounts.
Internal Audit
To view the Company's Internal Audit Charter click here
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