Report on Corporate Governance
John Rennocks
Chairman
This section of the Annual Report & Accounts sets out how the Board and its Committees discharge their duties and how we apply the principles of good governance set out in the new UK Corporate Governance Code.
The Board has always been committed to the highest standards of corporate governance appropriate to a company of the size and complexity of Diploma PLC. The new Code, which is applicable to the Company from 1 October 2010, has introduced a number of new obligations on larger companies, some of which have not yet been adopted in Diploma, as permitted by the Code.
These obligations include the requirement that more than half the Board should comprise independent directors, that the directors should be subject to annual re-election and that the Board should have externally facilitated performance evaluations. As a smaller company, I have always considered that it was more important that the Board operated within the spirit of the principles of corporate governance, rather than necessarily following regimented rules.
I firmly believe that good governance comes from a robust and effective Board which provides strong leadership to the Company and engages well with both management and shareholders. Throughout my tenure as Chairman, the Board has been made up of a good balance of Executive and non-Executive Directors whose skills have been carefully balanced and which has fostered an environment whereby constructive challenge and open debate is actively encouraged at all meetings.
Over the ten years that I have been on the Board of Diploma, the Company has been very successful and has grown substantially to the point that the Company was recently promoted to the FTSE350. The Board recognises that with greater size comes greater accountability and I therefore intend with the support of the Board, to focus over the next eighteen months on developing the Board and its governance procedures so that it will be able to meet the higher standards set for large companies.
With both myself and John Matthews having served on the Board for a number of years now, this process will include the addition of two further non-Executive Directors to the Board. A key element of our approach to Board structure has been and will be to seek to have a broad spread of skills blending together, so that we have a Board for which the overall strength is greater than "the sum of the parts". We will ensure that the process takes account of the findings of the Davies Report on Boardroom diversity and recent amendments to the Code by the FRC.
Meanwhile I remain satisfied that the Board is well suited to our business and that the Board will continue to have the appropriate balance of skills, experience, independence and knowledge of the Company to enable the Directors to discharge their duties and responsibilities effectively.
Finally, I would like to encourage all shareholders to find the time to join us at our AGM on 18 January 2012 as it provides an excellent opportunity to meet all members of the Board.
John Rennocks
Chairman
Compliance Statement
The Governance report in the 2011 Annual Report is designed to provide shareholders with a clear summary of the Group's governance arrangements by reference to the UK Corporate Governance Code("the Code"), published in June 2010 as it applied to the Company in 2011. Throughout the accounting period to which this report relates, the Directors believe that the Company has complied with all of the relevant Provisions set out in Sections A to E of the Code.