The Board is responsible for the oversight, leadership and control of the Group and its long-term success. There is a formal schedule of matters reserved to the Board for decision. This includes approval of Group strategic plans, annual budgets, financial statements, significant contracts and capital expenditure items, major acquisitions and disposals, changes to capital structure, circulars, Board appointments, and the review of the Group’s corporate governance arrangements and system of internal control, and approval of policies including corporate responsibility and health and safety. The Board is also responsible for instilling the appropriate culture, values and behaviour throughout the Group. The Directors acknowledge that they are responsible for the proper stewardship of the Group’s affairs, both on an individual and collective basis. The matters and agenda reserved for Board consideration reflect this responsibility.
The roles of the Chairman and the Group Chief Executive Officer are separate with a clear division of responsibility between them, which is set out in writing and which has been approved by the Board. The Chairman has responsibility for the management of the Board, the performance of Directors and their induction, development and performance evaluation, relations with shareholders and the AGM. The Chief Executive is responsible, within the authority limits delegated by the Board, for business strategy and management, investment and financing, risk management and controls, timely reporting, making recommendations on remuneration policy and on the appointment of executive directors, and setting Group HR policies.
The Board delegates responsibility for the management of the Group through the Group Chief Executive Officer to executive management. The Board also delegates some of its responsibilities to Board Committees, details of which are set out below. The responsibilities of the Chairman are covered in detail below.
The Group Chief Executive Officer has full day-to-day operational and profit responsibility for the Group and is accountable to the Board for all authority delegated to executive management. His overall brief is to execute agreed strategy, to co-ordinate and maintain the continued profitability of the Group and to oversee senior management responsible for the day-to-day running of the business.
Non-executive Directors are expected to constructively challenge management proposals and to examine and review management performance in meeting agreed objectives and targets. In addition, they are expected to draw on their own specific experience and knowledge in respect of any challenges facing the Group and in relation to the development of proposals on strategy.
Individual Directors may seek independent professional advice at the Company’s expense, where they judge it necessary to discharge their responsibilities as Directors.
The Group has a policy in place which indemnifies the Directors in respect of certain legal actions taken against them.
Board Composition, Membership and Renewal
The Board considers that, between them, the Directors bring a range of skills, knowledge and experience so as to provide leadership, control and oversight of the Group and discharge their responsibility to all shareholders. The biographical details of the current directors are set out on this page. The Company’s Articles of Association require that the number of Directors shall be not less than two and not more than 14. The Board regards the number of non-executive Directors currently appointed to the Board as sufficient to ensure satisfactory oversight of the Group’s management and to enable its Committees to operate without undue reliance on individual non-executive Directors. As set out below the Board has an ongoing programme for Board refreshment and renewal, recognising the need for independence and diversity, including gender diversity, on the Board.
As at 28 February 2014, the Board was comprised of nine Directors, of whom three were executive and six were non-executive Directors (including the Chairman). With effect from 1 May 2014 Emer Finnan was appointed as a non-executive Director.
In line with the UK Code, it is Board policy that at least half the Board, excluding the Chairman, shall consist of independent non-executive Directors. The Board has reviewed the composition of the Board and has determined that of the Directors as at 28 February 2014, John Hogan, Richard Holroyd, Breege O’Donoghue, Stewart Gilliland and Anthony Smurfit, were independent and upon her appointment that Emer Finnan was independent.
The independence of Board members is considered annually. In determining the independence of non-executive Directors, the Board considered the principles relating to independence contained in the UK Code and the guidance provided by a number of shareholder voting agencies. Those principles and guidance address a number of factors that might appear to affect the independence of Directors, including former service as an executive of the Group, extended service to the Board and cross-directorships. However, they also make clear that a Director may be considered independent notwithstanding the presence of one or more of these factors. This reflects the Board’s view that independence is determined by a Director’s character and judgement. The Board considers that each of the non-executive Directors brings independent judgement to bear. In the case of Richard Holroyd, Breege O’Donoghue and John Hogan, the Board has considered their length of service but is satisfied that their independence is not compromised. As part of this assessment, the Board considers that, while each of them has served on the Board of the Company since 2004, none of them has served for more than nine years concurrently with the same executive Directors. The Board has also noted that Anthony Smurfit is a shareholder and director of Smurfit Kappa Group plc, which provides packaging materials to the Group on normal commercial terms, and is satisfied that his independence is not compromised. In the case of Sir Brian Stewart, the Board was satisfied that he was independent on his appointment as referred to below.
Sir Brian Stewart has been Chairman of the Group since August 2010. The Chairman is responsible for the efficient and effective working of the Board. He is responsible for ensuring that the Board considers the key strategic issues facing the Group and that the Directors receive accurate, timely, relevant and clear information. He also ensures that there is effective communication with shareholders and that the Board is apprised of the views of the Group’s shareholders. While the Board has determined that Sir Brian Stewart was independent on appointment to the Board, it recognises that previous working relationships with the Group’s senior executives is a consideration in determining independence as set out by the UK Code and by some shareholder voting agencies. Consequently, while the Board was satisfied as to Sir Brian’s independence, he stepped down from his position as a member of the Remuneration Committee on his appointment as Chairman. During the period under review there was no change in the other significant commitments of the Chairman.
Senior Independent Director
Richard Holroyd was appointed Senior Independent Director in July 2007. He is available to shareholders who have concerns for which contact through the normal channels of Chairman, Group Chief Executive Officer or Group Chief Financial Officer, has failed to resolve or for which such contact is inappropriate. He is also available to meet major shareholders on request.
Audit Committee Financial Expert
The Audit Committee has determined that John Hogan, who also chairs the Committee, is the Audit Committee financial expert. He is a qualified chartered accountant and was the managing partner of Ernst & Young in Ireland between 1994 and 2000. He was also a member of the Ernst & Young global board.
Paul Walker is the Company Secretary. All Directors have access to the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. The appointment and removal of the Company Secretary is a matter for the Board.
Appointment, Retirement and Re-election
The non-executive Directors are engaged under the terms of letters of appointment, details of which are set out in the Report of the Remuneration Committee on Directors’ Remuneration. Copies of the letters of appointment are available on request from the Company Secretary.
The Company’s Articles of Association require that at least one-third of the Directors subject to rotation shall retire by rotation at the Annual General Meeting in every year. Directors appointed by the Board must also submit themselves for election at the first annual general meeting following their appointment. However, in accordance with the recommendations of the UK Code, the Directors have resolved that they will all retire and submit themselves for re-election by the shareholders at the Annual General Meeting this year.
Induction and Development
A comprehensive tailored induction programme is arranged for each new Director. The aim of the programme is to provide the Director with a detailed insight into the Group. The programme involves meeting with the Chairman, Group Chief Executive Officer, Group Chief Financial Officer, Company Secretary and key senior executives. It covers areas such as strategy and development, organisation structure, succession planning, financing, corporate responsibility and compliance, investor relations and risk management. The Board receives regular updates from the external legal and other advisers in relation to regulatory and accounting developments. Throughout the year, Directors meet with key executives and meet with local management teams, and a site visit for all Board Directors to one of the Group’s production facilities is usually scheduled annually.
Newly-appointed members of the Audit Committee will meet with the key members of the external audit, internal audit and finance teams. New members of the Remuneration Committee will meet with the Committee’s remuneration consultants in the year of their appointment to the Committee.
External non-executive directorships
The Board recognises that there can be benefit if executive Directors accept a non-executive directorship with other companies to broaden their skills, knowledge and experience. Joris Brams is currently a non-executive director at Democo NV, a Belgian construction company. Apart from him, currently none of the executive Directors has such an appointment. The Remuneration Committee determines whether Directors should be permitted to retain any fees paid in respect of such appointments. The Remuneration Committee has determined that Joris Brams is permitted to retain fees from his appointment.
It is Board practice to schedule not less than nine meetings a year. The Board will also meet at other times as it considers appropriate. The Board usually makes at least one visit a year to one of the operating subsidiaries, and this year a meeting was held in Middlebury, Vermont, where the Board was able to meet with the team at Vermont Hard Cider Company and to visit the new cidery that is under construction. During the period under review there were ten scheduled meetings of the Board and a further short notice meeting. Details of Directors’ attendance at these meetings are set out in the table on this page. Several ad hoc meetings without notice were held during the year for share allotment and other administrative matters in accordance with the Board’s procedures. In addition, a meeting of members of the Board was held without the executive Directors present to provide an opportunity for non-executive Directors and the Chairman to assess their performance, and a further meeting of the non-executive Directors led by the Senior Independent Director was held without the Chairman being present to assess the Chairman’s performance.
The Chairman sets the agenda for each meeting in consultation with the Group Chief Executive Officer and the Company Secretary. The agenda and Board papers, which provide the Directors with relevant information to enable them to fully consider the agenda items in advance, are circulated prior to each meeting. Directors are encouraged to participate in debate and constructive challenge. While Directors are expected to attend all scheduled meetings, in the event a Director is unable to attend a meeting, his or her view on all agenda items is sought and conveyed to the Chairman in advance of the meeting. In addition, following the meeting, matters discussed and decisions made at the meeting are conveyed to the Director.
The Board recognises the importance of a formal and rigorous evaluation of the performance of the Board and its Committees. The Chairman conducts an annual review of corporate governance and the operation and performance of the Board and its Committees. In the year under review the Chairman has reviewed the performance of individual Directors and, within the remit of the Nomination Committee, succession planning, identifying in this process the experience and qualities required by the Group for the future implementation of its strategy.
The Chairman conducts one to one discussions each year with each Director to assess his or her individual performance. Performance is assessed against a number of criteria, including his or her contribution to Board and Committee meetings; time commitments; contribution to strategic developments; and relationships with other Directors and management.
The Senior Independent Director and the other non-executive Directors review the Chairman’s performance and the Board’s performance each year, the results being reported back to the Chairman with any recommendations.
The Board also recognises the desire for periodic external evaluation and the UK Code’s recommendation that such reviews be externally facilitated at least every three years. Informal processes of evaluation and improvement are already followed by the Group but it is intended that a more formalised structure should be implemented in the current year.
Details of remuneration paid to Directors (executive and non-executive) are set out in the Report of the Remuneration Committee on Directors’ Remuneration on this page.
Non-executive Directors are remunerated by way of a Director’s fee. Additional fees are also payable to the Chairman of the Audit Committee, Chairman of the Remuneration Committee and to the Senior Independent Director. Non-executive Directors’ fees and additional fees payable to Committee Chairman and the Senior Independent Director have not been increased since 2008.
It is Board policy that non-executive Director remuneration does not comprise any performance-related element and, therefore, non-executive Directors are not eligible to participate in the Group’s bonus schemes, option plans or share award schemes. Non-executive Directors’ fees are not pensionable and non-executive Directors are not eligible to join any Group pension plans. Executive Directors’ remuneration is inclusive of any Director’s fee.
The current limit under the Articles on Directors’ ordinary remuneration (i.e. directors’ fees, not including executive remuneration) is €1,000,000, pursuant to a resolution passed at the 2013 Annual General Meeting.
The report of the Remuneration Committee on Directors’ Remuneration will be presented to shareholders for the purposes of a non-binding advisory vote at the Annual General Meeting on 3 July 2014. The policy on Directors’ remuneration set out in the report will be put to a non-binding advisory vote at the Annual General Meeting on 3 July 2014 and thereafter at least once every three years. While there is no legal obligation for the Group to put such resolutions to a vote of shareholders at the Annual General Meeting, the Board recognises that such resolutions are now considered good governance practice.
Share ownership and dealing
The Company does not have formal guidelines on share ownership but all the executive Directors either have or intend to build significant shareholdings in the company thus aligning their interests with those of other shareholders. Further information including details of Directors’ shareholdings is set out on this page.
The Group has a policy on dealing in shares that applies to all Directors and senior management. This policy adopts the terms of the Model Code as set out in the Listing Rules published by the UK Listing Authority and the Irish Stock Exchange. Under this policy, Directors are required to obtain clearance from the Chairman (or in the case of the Chairman himself, from the Senior Independent Director) before dealing. Directors and senior management are prohibited from dealing in the Company’s shares during designated close periods and at any other time when the individual is in possession of Inside Information (as defined by the Market Abuse (Directive 2003/6/EC) Regulations 2005).