Introduction from the Chairman
As the business continues to grow it needs a strong, effective and engaged Board, with the right skills and experience to oversee the strategy, governance, risk and financial frameworks across the business.
Effective governance drives the Company in balance with the interests of shareholders and wider stakeholders; employees, customers, suppliers and the communities in which the Company does business. At Treatt our commitment to high standards of corporate governance throughout the Group is reflected in our principles, policies and practices. I am clear that effective governance right across the business, ultimately produces a better Company and optimum long-term performance.
As Chairman, it is my task to ensure that the Board upholds high standards of corporate governance and that it operates effectively in accordance with the principles of the UK Corporate Governance Code. A new Corporate Governance Code has been published in 2018, which comes into effect on 1 January 2019; references to the Corporate Governance Code in this section and throughout this annual report are to the 2016 Code, unless otherwise stated.
This year saw us increase the number of formal Board meetings to ensure that we had sufficient time to fully discuss the additional matters of the equity fundraise and the sale of Earthoil Plantations, both important strategic decisions. I am in regular contact with the executive team and the rest of the Board as I aim to ensure that there is an appropriate level of support, oversight and challenge, a focus on entrepreneurship as much as on risks, a commitment to transparency and a culture of continuous improvement.
Our annual Board meeting at Treatt USA took place in March, enabling colleagues and me to meet with the Project Manager of the site expansion at commencement of the works and to see first-hand the scale of the project, which will bring much needed additional capacity. This visit also provided the Board with an opportunity to engage with our US-based employees and to chat to them about the business. Similarly, there have been opportunities to meet with employees in the UK, enabling the Board to get a view of how well the strategy has embedded in the business.
There were no changes to the composition of the Board during the year and I have met with the Non-executive Directors without the presence of the Executives. The Nomination Committee continues to review the Board’s composition to ensure that it maintains appropriate skills, experience, independence and diversity. The culture of the Board is based on accountability and is open and collegiate whilst allowing for constructive debate and challenge.
The evaluation of the Board and the Directors has taken place with the assistance of the Company Secretary, with all Directors undergoing a 360 evaluation on their individual performance.
Roles and Responsibilities
The Board consists of Non-executive Chairman, Tim Jones, and four further Non-executive Directors. Daemmon Reeve is CEO.
There is a clear division of responsibility between the CEO, who is required to develop and lead business strategies and processes to enable the Group’s business to meet the requirements of its shareholders, and the Chairman who is responsible for leadership of the Board and ensuring that appropriate conditions are created to enable the Board to be effective in providing entrepreneurial leadership to the Group. The key functions of the Chairman are to ensure the Board and its committees are effective and operate under the highest standards of corporate governance; to set the Board agenda and ensure that adequate time is allowed for discussion, in particular, of strategic, complex or contentious issues in anticipation of which accurate, timely and clear information has been circulated in good time; to ensure appropriate delegation of authority from the Board to executive management and constructive, open relations between them; to act at the same time as a sounding board, counsel and mentor to the CEO; to ensure that the Company maintains a dialogue with its principal shareholders about strategy, direction, Directors’ and senior managers’ remuneration and is aware of shareholders issues or concerns; to ensuring that the performance of individual Directors and the whole Board and its committees is evaluated at least annually and that Directors are continually encouraged to update their skills and the knowledge and familiarity with the Company as required to fulfil their role.
The Chairman has regular contact with the Non-executive Directors without the presence of the Executive Directors. Concerns relating to the executive management of the Group or the performance of the other Non-executive Directors may be raised with David Johnston, who is the Senior Independent Director (“SID”). The role of the SID is also to provide a sounding board for the Chairman, to serve as an intermediary for the other Directors and to lead the performance evaluation process for the Chairman.
Compliance with the Corporate Governance Code
Throughout the year ended 30 September 2018 the Group has complied with the provisions set out in the 2016 Corporate Governance Code (a copy of which can be found at www.frc.org.uk) except for provision D2.2, as explained in the Directors’ Remuneration Report. The remuneration of Group senior managers was determined by the Executive Directors, with an oversight review of the proposals by the Remuneration Committee reporting back to the full Board. The bonus and LTIP awards of all senior managers in the Group were approved by the Remuneration Committee. With effect from 2019, the salaries and benefits of all senior managers will be determined by the Remuneration Committee, in accordance with the 2018 Corporate Governance Code and the terms of reference of the Remuneration Committee have been amended to reflect this change. Furthermore, the Group already complies with a number of the new provisions of the 2018 Code. In accordance with provision 5, myself and David Johnston are designated as the Non-executive Directors responsible for workforce engagement and all staff are aware. Additionally, all Directors will stand for re-election at the Annual General Meeting in January 2019 in accordance with provision 18.
Matters Reserved for the Board
Day-to-day management of the Group is delegated to the Executive Directors. However, the Board has a schedule of matters reserved to it for decision and the requirement for Board approval on these matters is communicated widely throughout the senior management of the Group. These matters, which are reviewed periodically, include:
- material capital commitments.
- commencing or settling major litigation.
- business acquisitions and disposals.
- appointments to subsidiary company boards.
- dividend policy.
- annual and half year results.
The Board has been regularly refreshed since 2011 to ensure that it has an appropriate balance of skills and experience with financial, technical, industry-specific and general business disciplines being represented. The structure of the Board ensures that no one Director is dominant in the decision-making process and that open debate and discussion is encouraged. There is a suitable balance between the number of Executive and Non-executive Directors.
The importance of Board diversity, which has been the subject of recent debate in respect of Board composition, is recognised and supported by the Directors of Treatt. Our policy is to recruit the best possible candidate for each individual role having regard to qualifications, experience and personality, without prejudice to a candidate’s characteristics.
The Board considers that, with the exception of Anita Haines, all the Non-executive Directors are independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. Anita Haines is not regarded as independent, as defined by the 2016 UK Corporate Governance Code, having recently served as an Executive Director. Accordingly, Anita Haines does not serve on either the Audit or Remuneration Committees. All Non-executive Directors receive a fixed fee for their services. However, in exceptional circumstances, where significant additional time commitment is required, a Non-executive Director may, if approved by the Board or Remuneration Committee, be paid an additional fee in accordance with the Remuneration Policy. The Board is satisfied that the Chairman’s other commitments do not detract from the extent or the quality of the time which he is able to devote to the Group.
Appointments to the Board
Directors are provided with access to appropriate external training and to advice from the Group’s solicitors in respect of their role and duties as a public company director. All new Directors receive an induction to acquaint them with the Group. This takes the form of site tours, meetings with other Board members and senior management and the provision of an induction pack, which contains general information about the Group, its structure and key personnel, together with copies of relevant policies and procedures, financial information and briefings on Directors’ responsibilities and corporate governance.
The Board typically meets between seven and ten times each year and more frequently where business needs require; attendance is required in person or by video conference at each meeting. In addition, regular contact is maintained by email and telephone with written updates provided in respect of ongoing issues, enabling regular input from all Board members. The Board recognises the importance of holding a meeting at Treatt USA at least annually in light of the increasing contribution to Group profits generated there.
The Chairman is responsible for ensuring that all Non-executive Directors receive ongoing training and development. During the year all of the Board became members of the Institute of Directors, and registered with the IoD Academy, providing a range of learning and development programmes to expand and update directors’ knowledge and skills. Directors are able to access appropriate CPD content from a variety of sources in addition to attendance at seminars and workshops. Our Directors understand the need to keep themselves properly briefed and informed about current issues. Regular updates on regulatory and legislative developments are provided to the Board by the Company Secretary.
Information and Support
To enable the Board to function effectively and Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board meetings, this consists of a comprehensive set of papers, including regular business progress reports and discussion documents regarding specific matters. Board meetings are of sufficient duration to enable debate and discussion, ensuring adequate analysis of issues during the decision-making process. Further opportunity for more informal and extended discussion is provided at lunches which take place after every Board meeting and provide the Board with an opportunity to meet members of staff, who are invited to attend.
If necessary, there is an agreed procedure for Directors to take independent professional advice at the Group’s expense. This is in addition to the access which every Director has to the Company Secretary. The Secretary is charged by the Chairman with ensuring that Board procedures are followed and that there are good information flows within the Board and its committees and between senior management and Non-executive Directors.
The Board, committees and the Directors individually have been evaluated during the year.
Any Director appointed during the year is required, under the provisions of the Articles of Association, to retire and seek election by shareholders at the next Annual General Meeting. The Articles also require that one third of the Directors retire by rotation each year and seek re-election at the Annual General Meeting provided always that all Directors must be subject to re-election at intervals of no more than three years. Any Non-executive Director having been in post for nine years or more is subject to annual re-election. The Directors required to retire are those in office longest since their previous re-election, however in anticipation of the 2018 Corporate Governance Code, all Directors will offer themselves for re- election at the 2019 Annual General Meeting.
This report was approved by the Board on 26 November 2018.