Home > Investors >  Corporate Governance 

Corporate Governance

Introduction

The Board is committed to achieving high standards of corporate governance, integrity and business ethics. Under the rules of AIM, the Group is not required to comply with the provisions of the Combined Code on Corporate Governance issued by the Financial Reporting Council in July 2003 ("the Combined Code"). However, the Group has taken steps to comply with the Combined Code in so far as it can be applied practically, given the size of the Group and the nature of its operations, except where explicitly set out below.

The Board and its committees

Board composition and independence

The Board of Directors comprises five Executive Directors and two independent Non-Executive Directors. Their biographies demonstrate a range of experience which is vital to the success of the Group.

The roles of Executive Chairman and Chief Executive are distinct, as set out in writing and agreed by the Board. The Executive Chairman is responsible for the effectiveness of the Board, directing strategy and ensuring communication with shareholders. The Chief Executive is responsible for the day-to-day management of the Group.

The Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. The Board does not consider the Non-Executive Directors' shareholdings to impinge on their independence. The Non-Executive Directors provide a strong independent element to the Board and bring experience at a senior level of business operations and strategy.

John Redpath is the Senior Independent Non-Executive Director.

A nominations committee has not been appointed, hence paragraph A.4.1 of the Combined Code (which states there should be a nomination committee to lead the process for board appointments) is not complied with. The Board handles nomination issues and considers that given the size and nature of the Group's activities, such non-compliance with the Combined Code is not unreasonable and does not compromise the overall principles of corporate governance, which the Board strongly supports.

All Directors have access to the Company Secretary,who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. Any Director, on appointment and throughout their service, is entitled to receive any training they consider necessary to fulfil their responsibilities effectively.

The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs. This forum provides the principal format for directing the business of the Group.

Operation of the Board

The Board is responsible to shareholders for the proper management of the Group and has a formal schedule of matters specifically reserved to it for decision. These include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business and approval of budgets and financial statements. Other matters are delegated to management, supported by policies for reporting to the Board. The Company maintains appropriate insurance cover in respect of legal action against the Company's Directors, but no cover exists in the event that the Director is found to have acted fraudulently or dishonestly.

The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, usually a week in advance of each Board meeting.

Board committees

The Board has delegated authority to two Committees. The Chairman of each Committee provides a report of any meeting of that Committee at the next Board meeting. The Chairman of each Committee is present at the Annual General Meeting to answer questions from shareholders.

Audit committee

The Audit Committee is chaired by Michael Kershaw and also comprises John Redpath. Michael Kershaw replaced John Redpath as Chairman of the Committee on 29 July 2008. Following a review of the composition of the Board's sub-committees, it was determined that Ian Mattioli could not be regarded as independent due to his position as Chief Executive and significant shareholder in the Company, and he resigned from the Committee with effect from 29 June 2009. Following these changes, the Committee is now made up exclusively of non-executive directors.

The Committee meets together with the Finance Director, Nathan Imlach, not less than twice a year. It is responsible for ensuring that the financial performance of the Group is properly reported on and monitored. The Committee considers the appointment of, and fees payable to, the external auditors and discusses with them the scope of the annual audit. The Committee also reviews the external auditors' management letter and detailed presentations are made to the Committee by the Company's auditors.

The Committee reviews the interim report and annual financial statements for compliance with accounting standards, statutory obligations and the requirements of the AIM Rules and the Combined Code. The Committee also reviews the effectiveness of the internal controls of the Group.The presence of other senior executives from the Group may be requested.

Remuneration committee

The Remuneration Committee is chaired by John Redpath and also comprises Michael Kershaw, who replaced Bob Woods as a member of the Committee with effect from 29 June 2009. The Combined Code provides that the Committee should consist exclusively of independent non-executive directors and should comprise at least two such directors.

Following a review of the composition of the Board's sub-committees, it was determined that Bob Woods could not be regarded as independent due to his position as Executive Chairman and significant shareholder in the Company, and he resigned from the Committee with effect from 29 June 2009. Following these changes, the Committee is now made up exclusively of non-executive directors.

The Committee meets not less than twice a year. It is responsible for determining and reviewing the Group's policy on executive remuneration and other benefits and terms of employment, including performance related bonuses and share options.

The Committee administers the operation of the share option and share incentive schemes established by the Company.

The members of the Remuneration Committee have no personal interest in the outcome of their decisions and seek to serve the interests of shareholders to ensure the continuing success of the Company.

The remuneration of the Non-Executive Directors is determined by the Executive Directors and confirmed by the full Board, excluding the Non-Executive Director concerned.

Meetings and attendance

All Directors are encouraged to attend all Board meetings and meetings of Committees of which they are members. Directors' attendance at Board and Committee meetings during the year (including the AGM) was as follows:

	Board Meetings	Remuneration committee	Audit committee
Number of meetings in year	16	2	2
Bob Woods	16	2	-
Ian Mattioli	14	-	1
Nathan Imlach	15	-	2
Murray Smith	14	-	1
Mark Smith (since appointment on 3 June 2008)	15	-	-
John Redpath	14	2	1
Michael Kershaw	15	-	2

Note
1. Murray Smith attended one Audit Committee meeting as an alternate attendee for Ian Mattioli.

Induction, training and performance evaluation

New Directors receive an induction on their appointment covering the activities of the Group, its key business and financial risks, the terms of reference of the Board and its Committees and the latest financial information.

The Chairman ensures Directors update their skills, knowledge and familiarity with the Group required to fulfil their roles on the Board and its Committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes to the AIM Rules, requirements under the Companies Acts and other regulatory matters. All Directors have access to independent professional advice at the Company's expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chairman or two other directors, one of whom is a non-executive.

Evaluation of the Board's performance

The evaluation of individual Directors' performance is carried out by the Remuneration Committee. Executive Directors' performance is evaluated using an approach which combines business and personal performance objectives with financial and non-financial measures of achievement against those objectives. The annual review cycle starts with objective setting in July, interim reviews in December and performance evaluation in May. The results of interim and annual evaluations are communicated to the Remuneration Committee.

The evaluation of Non-Executive Directors' performance uses self-appraisal and interview with the Chairman to consider aspects of performance including attendance and participation at board meetings, quality of involvement in Committees, commitment and effectiveness of their contribution to Board activities (including the AGM and shareholder communications), the adequacy of training and director independence.

The performance of the Chairman is reviewed annually by the Non-Executive Directors. This review takes into account the views of Executive Directors who were interviewed by the Non-Executive Directors.

Retirement and re-election

All Directors are subject to election by shareholders after their appointment and to re-election thereafter at intervals of no more than three years.

Non-Executive Directors are appointed for specified terms, initially 12 months with the opportunity for renewal by the Company thereafter. The terms and conditions of appointment of the Non-Executive Directors are available for inspection at MW House during normal business hours and prior to the AGM.

Communications with shareholders

The Board is committed to ongoing dialogue with the Company's shareholders. The principal methods of communication with private investors remain the Annual Report and financial statements, the Interim Report, the AGM and the Group's web site (www.mattioli-woods.com).

Internal control and risk management

The Board is ultimately responsible for the Group's system of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can only provide reasonable not absolute assurance against material misstatement or loss.

In accordance with the guidance of the Turnbull Committee on internal control, an ongoing process has been established for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of approval of the Annual Report and financial statements.

The Board routinely reviews the effectiveness of the system of internal control and risk management to ensure controls react to changes in the nature of the Group's operations.

The Group maintains appropriate insurance cover and reviews the adequacy of the cover regularly, in conjunction with the Group's insurance broker.

There are clearly defined procedures for reviewing and approving all bids, acquisitions and capital expenditure within the Group.