Corporate Governance

The Board is collectively responsible to our shareholders for the success of the Company. The Board currently comprises two executive directors and four non-executive directors, only one of whom was independent. The Code requires that smaller companies should have at least two independent non-executive directors and the Company no longer complies with this requirement given that Julian Waldron has served more than 9 years as a director since 2018.

The Company complied with the requirement to separate the roles of Chairman and Chief Executive until 31 December 2016. Following the successful disposal of the remaining Kurt Salmon business in November 2016 and the return of capital to shareholders in December 2016, it was considered that the size of the business no longer warranted a separate Chairman and Nick Stagg was appointed to the role as well as retaining his position as Chief Executive. The main operating business, Proudfoot, has its own Chief Executive, who is responsible for delivering the Group strategy for that business and the roles of the Board and management are clearly defined.

Following a review of directors’ independence, the Board has concluded that Ms Czerniawska, is considered to be independent. Ms Czerniawska is a director of Source Information Services Limited. Mr Waldron is no longer considered to be independent, solely by virtue of having served more than nine years as a director.

The roles of the Board and management are clearly defined. The roles of Chairman and Chief Executive, and Senior Independent Director were separated and clearly defined in writing.

All directors are authorised to obtain, at the Company's expense and subject to the Chairman's approval, independent legal or other professional advice where they consider it necessary. All directors have access to the Company Secretary who oversees their ongoing training and development needs.

On appointment, directors are provided with formal details of their responsibilities under legislation applicable to a company listed in the UK. Changes to such legislation and other relevant factors affecting the Group are communicated to all directors. Newly appointed directors are also required to participate in an induction programme in order to familiarise themselves with the Group's businesses.  Regular presentations are made to the Board by senior management in order to refresh and expand this knowledge.

The Board annually evaluates the performance of individual directors, the Board as a whole and its Committees.

The Company's Articles of Association contain detailed rules for the appointment and retirement of directors. There is a formal procedure in place to select and appoint new directors to the Board. These directors are required to retire at the next Annual General Meeting, but can offer themselves for re-election by shareholders. Under the Articles, all directors are required to submit themselves for re-election at intervals not exceeding three years. However, the Board agreed that, with effect from the 2011 Annual General Meeting, directors should stand for re-election every year.

The Board annually evaluates the performance of individual directors, the Board as a whole and its Committees. This review comprises structured interviews with each director followed by the presentation of the results of this process to the Board and individual discussions with the Executive Chairman. The results of the evaluation were approved by the Executive Chairman and an agreed plan of action produced. The results are specifically taken into account when considering the re-appointment of directors.

The Board meets regularly. There is a core of scheduled meetings each year with further ad hoc meetings scheduled when necessary. Seven scheduled meetings were held during 2018 and there were eight additional meetings to consider the disposal of the Brazilian business, the placing and open offer and the Kurt Salmon escrow funding and bank facilities.

An agenda and accompanying detailed papers are circulated to the Board well in advance of each Board meeting. These include reports from the Executive directors and other members of senior management. The Chairman ensures that the Board reviews a wide range of topics, related to both short-term performance and more strategic matters related to the long-term development of the Company.

The Audit and Risk Committee oversees the Group's financial reporting and internal controls and provides the link between the Board and the external auditors.

Membership

The current membership of the Committee is:

Ms Fiona Czerniawska (Member since 10 March 2017)

Structure

The UK Corporate Governance Code (the "Code") recommends that audit committees should comprise at least two members and that all members should be independent non-executive directors. The Committee comprises two independent non-executive directors.

The Code provides that at least one member of the Committee should have recent and relevant financial experience. Mr Waldron is the chief operating officer of a US/French listed group and the former chief financial officer of a French listed company and is considered to have such experience.

Role of the Committee

The role of the Committee is, in summary:

to monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance, reviewing significant financial reporting judgements contained in them;

to assist the Board in ensuring the annual report and accounts, taken as a whole, is fair balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy;

to review the Group's internal financial controls and to review the Group's internal control and risk management systems;

to monitor and review the need for an internal audit function;

to make recommendations to the Board in relation to the appointment, reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;

to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process; and

to develop and implement policy on the engagement of the external auditor to supply non-audit services, and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and recommending the steps to be taken.

The Committee's terms of reference are reviewed each year and were last updated in 2017 to conform with current best practice and the revised Code and guidance from the Financial Reporting Council on audit committees. A pdf copy of the terms of reference is attached below.

Operation of the Committee

The Committee works with a structured annual agenda of matters tied in to the key events in the Company's financial reporting cycle, together with various standing items the Committee is required to consider.

The Chairman and Chief Executive, Finance Director, Group Head of Finance, other financial managers and external auditors are invited to attend Audit Committee meetings. The external auditor and the Committee meet privately at least once a year.

The Chairman of the Committee reports to the Board on the Committee's activities after each meeting, identifying relevant matters requiring communication to the Board and recommendations on the steps to be taken. The performance of the Committee is considered as part of the Board performance evaluation process. In addition, each year the Committee members complete a detailed self-assessment as an aid to maintaining the Committee's effectiveness.

The Committee discharges its responsibilities as follows:

Financial statements

The Committee reviews the interim financial statements and the annual report and accounts. Following discussion with both management and the external auditor, the Committee determines and takes steps to ensure the key risks of misstatement are addressed.

Presentations are made by management and the external auditor about the key technical and judgemental matters relevant to the financial statements. The Committee seeks to satisfy itself that it is appropriate for the Board to approve the financial statements.

Internal financial control and risk management systems

The Committee reviews the register of Group risks prepared by management and recommendations made by the external auditor. The Committee seeks to satisfy itself that it is appropriate for the Board to make the statements regarding internal controls included in the Corporate Governance Statement.

Internal audit function

The Committee has determined that, given the current size and nature of the Group's operations, a separate internal audit function is no longer required. This decision will be regularly reviewed in the future.

External auditor

The Committee oversees the relationship with the external auditor and ensures that the external auditor continues to be independent, objective and effective in its work, as well as considering the reappointment of the auditor each year in light of this.

Independence

The Committee undertakes a structured annual review of the independence and objectivity of the external auditor and, with the external auditor, has in place procedures to ensure this is not compromised. The procedures include:

• Audit partner rotation - The Committee consider this is a key control in ensuring continued independence and objectivity by reducing the risk of familiarity.  The current audit partner was appointed with effect from the audit of the 2012 annual report and accounts and will rotate off the audit following the audit of the 2016 annual report and accounts.
• Restrictions on the nature and amount of non-audit work - In accordance with the Code, the Committee has established policies that the auditor shall not provide any services that would potentially result in them auditing the result of their own work or which are prohibited under the US Sarbanes Oxley Act and procedures to ensure compliance with the policies. The Committee reviews annually its policy and procedures on this area to ensure they remain appropriate in the context of regulatory changes and changes in the nature of the Group's activities. Under the procedures in force in the year, the Committee pre-approves any permitted non-audit engagements with fees of more than £25,000 or which would cause the cumulative fees of such engagements for the year to exceed £100,000. At each Committee meeting a report is presented on non-audit activities and fees payable to the external auditor in order to ensure that the non-audit work is appropriate and relationship between non-audit fees and audit fees is not inappropriate. The policies have been revised to reflect the updated FRC Guidance on Audit Committees and to take into account the FRC's revised Ethical Standard 2016 applicable to auditors
• The relationship of the auditor with senior management - The Committee reviews the relationship to ensure it has not become compromised due to familiarity or other factors.

Audit effectiveness

The Committee reviews the external audit plan proposed by the auditor and participated in the review of the quality of the service that they provide. The Committee's consideration includes:

• a review of the external audit plan;
• the auditor's assessment of Group accounting and business risks;
• the auditor's own quality control procedure;
• the auditor's assessment of the key risks of misstatement;
• consideration of the audit strategy and its communication;
• whether the staffing of the external audit has continuity whilst maintaining independence; and
• communication of the findings to the Committee and the quality and key features of its work.

Audit tendering
Deloitte LLP has been the Group's auditor since 2001 when it was appointed under a tender process. Under the transitional arrangements for mandatory audit rotation, the Company will be required to rotate the audit by the financial year ended 2024 and plans to complete a competitive tender process by this time. Notwithstanding these requirements and current plans, the Committee will continue to consider the tender of the audit annually depending on the current auditor's performance and its assessment of the current auditor's independence

Reappointment
There are no contractual obligations that act to restrict the Committee's choice of external auditor. The Committee considers the results of the procedures outlined above, and recommends to the Board whether the external auditor may be reappointed.

Audit Committee terms of reference

The Group has adopted a code of ethical conduct applicable to the Board and all members of the finance function. In addition, it has a whistleblowing policy whereby procedures exist that allow employees to report any financial wrongdoing that they believe may have occurred.

The Board has also defined which services can be purchased from the Group's auditors and has adopted procedures in respect of the purchase of these services to minimise the risk of an actual or perceived conflict of interest. For similar reasons, the Board has adopted a policy in respect of hiring staff from the auditor who have been involved in the Group's audit.

The Nominations Committee's purpose is to consider future appointments to the Board and the succession policy for key management positions.

Membership

The current membership of the Committee is:

Mr Marco Capello

(Member since 2010)

Ms Fiona Czerniawska

(Member since 10 March 2017)

Structure

The UK Corporate Governance Code recommends that a majority of the members of a nominations committee should be independent non-executive directors and the Committee complies with this recommendation.

The Nominations Committee adopted formal terms of reference dated 14 March 2003. These were updated on 2 March 2007.

The Committee meets on an ad hoc basis as required. The Committee has ongoing succession plans particularly in respect of non-executive directors approaching retirement due to their length of service.

The Remuneration Committee has responsibility for setting the framework for the remuneration of the Chairman, executive directors and other senior executives in the Group and the remuneration packages of those individuals.

Membership
The current membership of the Committee is:

Mr Marco Capello
(Chairman, member since 2010)

Ms Fiona Czerniawska
(Member since 10 March 2017)

Structure

The UK Corporate Governance Code recommends that the Committee should comprise at least two independent non-executive directors. The Committee comprises two independent and one non-independent non-executive directors and therefore complies with the Code.

The terms of reference for the Committee were last updated in December 2010. They were last reviewed in 2013 and no changes were deemed necessary. A pdf copy is attached below.

Operation of the Committee 
In determining the directors' remuneration for the year, the Committee consults the Chairman save in relation to his own remuneration. No director is involved in deciding their own remuneration. The Committee makes use of published reports on directors' remuneration packages and advice from independent external advisers is obtained when required. New Bridge Street is the independent adviser to the Remuneration Committee.

New Bridge Street provides advice to the Remuneration Committee on the operation of the Company's incentive schemes and the remuneration of executive and non-executive directors as well as employee remuneration and may also advise the Committee on other matters within the Committee's terms of reference.

The Board carries out an annual review of its operations, including the functioning of its Committees.

Remuneration Committee terms of reference

The Annual General Meeting gives all shareholders the opportunity to communicate directly with the Board.

• During the year, the directors are available to respond to enquiries from investors on the Group's operations.
• Effective communication with fund managers, institutional investors and analysts is actively pursued and this encompasses issues such as performance, policy and strategy.
• During the year, the executive directors hold discussions with major shareholders.
• The Chairman is available to shareholders if there are matters that they wish to discuss with him directly.
• Announcements are made to the London Stock Exchange and the business media concerning trading and business developments to provide wider dissemination of information.

The Board has overall responsibility for the Company's system of internal control and reviewing its effectiveness, whilst the role of management is to implement Board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives. In pursuing these objectives, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss. There is a continuous process for identifying, evaluating and managing the significant risks faced by the Company which is in accordance with the guidance set out in The Turnbull Committee Report and has been in place for the year under review and up to the date of approval of the annual report and accounts.

This process, which is regularly reviewed by the Board, is as follows:

• the Group's management operates a risk management process which identifies the key risks facing the business and reports to the Audit and Risk Committee and the Board on how those risks are being managed. This is based on a risk register produced by executive management which identifies those key risks, the probability of those risks occurring, their impact if they do occur and the actions being taken to manage those risks to the desired level. This risk register is discussed at the Audit and Risk Committee and Board meetings on a regular basis and regular monitoring reports are presented to the Board. The management of these risks is monitored by the internal audit function;
• large acquisitions and capital projects require Board approval; and
• there is regular communication between management and the Board on matters relating to risk and control.

The Board has established a strong control framework within which the Group operates. This contains the following key elements:

• organisational structure with clearly defined lines of responsibility, delegation of authority and reporting requirements;
• defined expenditure and contract authorisation levels;
• on-site, video and teleconferencing reviews of operations, covering all aspects of each business, are conducted by Group executive management on a regular basis throughout the year;
• the financial reporting and information systems which comprise: a comprehensive annual budget which is approved by the Board; weekly reports of key operating information; cash flow and capital expenditure reporting; monthly results and forward performance indicators which are measured against the annual budget and the prior year's results. Significant variances are reviewed by the Board and executive management and action is taken as appropriate. The forecast for the year is revised when necessary;
• Group tax and treasury functions are coordinated centrally.
• There is weekly cash and treasury reporting to Group management and periodic reporting to the Board on the Group's tax and treasury positions; and
• internal audits are performed by Group's internal audit function.