Corporate Governance
The Board
The Board comprises three non-Executive Directors, including the Chairman, and three Executive Directors, providing a wide range of skills and experience. The biographical details of the Board members the Board page. The Board has six scheduled meetings each year and meets more frequently as required. It met on six occasions during the year under review.
The following table sets out the number of meetings of the Board and its Standing Committees during the year and individual attendance by Board members at these meetings:
| Board | Audit Committee | Remuneration Committee | Nomination Committee | |
| Number of meetings during the year | 6 | 5 | 3 | 1 |
| Non-Executive Directors: | ||||
| JL Rennocks (Chairman) | 6 | 5 | 3 | 1 |
| J Matthews | 6 | 5 | 3 | 1 |
| IM Grice | 6 | 5 | 3 | 1 |
| Executive Directors*: | ||||
| BM Thompson | 6 | |||
| I Henderson | 6 | |||
| NP Lingwood | 6 |
*The Executive Directors attend all the meetings of the Audit Committee; BM Thompson also attended the meetings of the Nomination and Remuneration Committees during the year.
The duties of the Board and its Committees are set out clearly in formal terms of reference which are reviewed regularly and state the items specifically reserved for decision by the Board. The Board establishes overall Group strategy, including acquisitions and withdrawal from existing activities. It approves the Group’s strategy and the operating budget and reviews performance through monthly reports and management accounts.
The approval of acquisitions, for the most part, is a matter reserved for the Board, save that it delegates to the Chief Executive Officer the responsibility for such activities to a specified level of authority. Similarly, there are authority levels covering capital expenditure which can be exercised by the Chief Executive Officer. Beyond these levels of authority, projects are referred to the Board for approval.
The Board establishes the remuneration of non-Executive Directors and the Company’s framework of executive remuneration and its cost in the light of recommendations made by the Remuneration Committee.
Other matters reserved to the Board include treasury policies, internal control, risk management and the appointment or removal of the Company Secretary. The Company maintains appropriate insurance cover in respect of legal action against its Directors.
Chairman and Chief Executive
The roles of the Chairman, who is non-Executive, and the Chief Executive Officer are separate and clearly defined. The Chairman is also Chairman of Nestor Healthcare plc and Intelligent Energy plc and has a number of other Board appointments. The Board is satisfied that the Chairman’s other Board appointments and commitments do not place constraints on his ability properly to fulfil his role as Chairman of Diploma PLC.
Board Balance and Independence
The non-Executive Directors are appointed for specified terms, the details of their respective appointments being as set out in the Remuneration Report. Non-Executive Directors are required to inform the Board of any changes to their other appointments.
The non-Executive Directors are determined by the Board to be independent in character and judgement and there are no relationships or circumstances which could affect, or appear to affect, a Director’s judgement. JW Matthews is the senior independent Director.
There are three standing Committees of the Board to which various matters are delegated. Membership of the Committees is set out Annual Report and terms of reference are available on request and are set out on the Company’s website. In order to ensure that undue reliance is not placed on particular individuals, the Board has decided that all its independent non-Executive Directors should serve on all Committees. The Board regularly reviews the chairmanship of its Committees.
During the year the Chairman has had meetings with the non- Executive Directors, without the Executive Directors present.
Appointments to the Board
The Board has established a Nomination Committee which leads the process for Board appointments and makes recommendations to the Board. The members of the Nomination Committee are JL Rennocks, who is the Chairman, and the two non-Executive Directors.
The Committee would be chaired by the senior independent Director on any matter concerning the chairmanship of the Company. The Company Secretary is the Secretary to the Committee.
The Nomination Committee has written terms of reference which were reviewed and updated during 2005, covering the authority delegated to it by the Board. These include the following duties:
- To be responsible for identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise.
- Before making an appointment, the Committee will evaluate the balance of skills, knowledge and experience on the Board and in the light of this evaluation, prepare a description of the role and capabilities required for a particular appointment.
- In identifying suitable candidates, the Committee shall consider candidates on merit and against objective criteria and will take care that appointees have enough time available to devote to the position.
- The Committee will consider candidates from a range of backgrounds, both internally and externally and may use the services of external advisors to facilitate the search.
On appointment, Directors undertake an informal induction process which is designed to develop knowledge and understanding of the Company’s business, and includes visits to various Group operating sites.
The Nomination Committee met once during the year under review.
Information and Professional Development
The main Board papers comprising an agenda and formal Board reports, together with briefing papers on specific matters, are sent to the Directors in advance of each Board meeting.
The training needs of the Directors are periodically discussed at meetings with briefings as necessary on various elements of corporate governance and regulatory issues.
The Company Secretary acts as an advisor to the Board on matters concerning governance and regulatory issues and he ensures Board procedures are complied with. All Directors have access to his advice and a procedure also exists for Directors to take independent professional advice at the Company’s expense. No such advice was sought during the year. The appointment and removal of the Company Secretary and his remuneration are matters for the Board as a whole.
The Board has decided that because of the relative small size of the Company and to limit its costs, the role of the Company Secretary should be combined with that of the Group Finance Director. This matter is regularly reviewed by the Board.
Performance Evaluation
During the year the Board completed the process of evaluating its own performance, together with that of its Committees and individual Directors, including the Chairman. The results of the evaluation process are summarised for presentation to the Board and areas for improvement are identified and action taken where necessary.
Re-election
All Directors must stand for election at the first Annual General Meeting after they are appointed. The Articles provide that all Directors will stand for re-election at least every three years.