The Group continues to be committed to the principles of corporate governance contained in the Combined Code (the Code) for which the Board is accountable.
The Group has complied throughout the year with the provisions of Section 1 of the Combined Code except in respect of the independence of the Board.
Independence of the Board (A.3.2) – Following the appointment of Eric Walters (a Non-Executive Director of The Capita Group Plc since January 2001) as Non-Executive Chairman on 1st August 2006, the Board, excluding The Chairman, consists of four Executive and three Non-Executive Directors and as such does not fully comply with the Code regarding the balance of the Board. However, the Board believes that the current composition is in line with the principles of the Code as it is led by a Non-Executive Chairman and its composition remains suitable for the nature and size of the Group. We believe that the collective skills, experience and approach to running the business are appropriate for driving the Group forward and achieving the Group’s goals. We constantly review the composition of the Board to ensure that it continues to meet the needs of the Group.
The Board’s Non-Executive Directors, Peter Cawdron, Eric Walters, Martina King and Bill Grimsey are regarded as independent and free from any business or other relationship that could materially interfere with their judgement.
The Code states that after nine years on the Board, non-executive directors cease to be independent. Although he has served for over 10 years, the Board is satisfied that Peter Cawdron remains independent with strong financial skills and a good knowledge of the business and its sectors and continues to enhance the overall balance of the Board. Peter Cawdron will retire as Senior Non-Executive Director on 30 September 2008.
Board responsibilities and effectiveness
The Board is collectively responsible to shareholders for setting the direction of the business and monitoring the Group’s ongoing affairs. It is also responsible for ensuring an effective internal control environment that identifies and manages appropriately the risks associated with the business.
The Board demonstrates its commitment to the strategic direction and control of the Group by scheduling a series of meetings in the year. It can meet as necessary outside of this schedule to consider any urgent matters that may arise. It sets the strategic objectives of the Group, ensuring sufficient financial and human resources are in place to meet those aims. The Board sets the Group’s values and standards and ensures that its obligations to clients, employees, suppliers, the community and other key stakeholders are understood and met. The Board has a formal schedule of matters that can only be decided by the Board including the Group’s business strategy, annual budget, annual and half-yearly financial results, dividends and major corporate activities. The Board also considers regular reports from the Chief Executive, Group Finance Director and Joint Chief Operating Officers. The Board is provided with complete, timely and relevant information to ensure that informed judgements are made in pursuit of the Group’s objectives.
The Board also reviews the performance of management in meeting business objectives, plans the succession of key executives, and determines appropriate remuneration levels through the Remuneration Committee, a committee of the Board. The operational management of the Group is delegated to the Divisional Executive Board, which is comprised of the Group Executive Directors and five Divisional Executive Directors and meets on a monthly basis.
The Non-Executive Directors have a particular responsibility to challenge constructively and independently the business development plans that are proposed by executive management and monitor the performance of the management teams in the delivery of agreed business objectives and targets. The Non-Executive Chairman encourages and engages in an open dialogue With Non-Executive Directors in particular, who are at liberty to meet with him as a group or individually as they feel fit, without the presence of Executive Directors. Directors and officer’s liability insurance is maintained. The Non-Executive Directors meet once a year without the Executive Directors present.