Corporate governance
The directors continue to endorse and apply the principles of good corporate governance set out in the Combined Code. This statement describes how the principles of the 2008 FRC Combined Code on Corporate Governance have been applied by the Company.
The Board
The Board of the Company is responsible for the leadership, strategic direction and overall management of the Group. It sets the Company’s strategic aims, establishes the Company’s values and standards, and monitors compliance within a framework of effective controls.
The Board currently consists of 11 directors whose names and other details are as set out in The Board section of this Annual Report. Five of the directors are executives, and six including the Chairman are non-executive directors. Each of the executive directors has a combination of general business skills, and experience in the construction materials market. The non-executive directors represent a diverse business background complementing the executive director's skills.
All of the directors bring an objective judgement to bear on issues of strategy, resources and standards of performance.
The directors believe that the Board includes an appropriate balance of skills and ability to provide effective leadership and control to the Group.
The Board met formally 9 times during the year, as well as informally as and when required. Attendance at Board and committee meetings is set out in the table below. The Board reserves for itself a formal schedule of matters on which it takes the ultimate decision. These include adopting the Group’s rolling 5 year strategic plan and the annual budget, approving all major capital expenditure and material contracts, acquisitions and disposals of businesses and other assets, and appointment of senior executives and succession planning, reviewing management’s corporate and financial performance, and overall review of the Group’s internal controls. Certain other matters are delegated to the Board committees, the roles and responsibilities of which are set out below.
As part of the performance evaluation process the Chairman meets at least once annually with the non-executive directors without the executive directors being present to review the performance of the Board, the conduct of Board meetings and committee meetings, and the general corporate governance of the Group. In addition, the non-executive directors, led by the senior independent director, meet annually without the Chairman present to appraise the workings of the Board.
Board |
Audit |
Nomination |
Remuneration |
Acquisition |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
A |
B |
A |
B |
A |
B |
A |
B |
A |
B |
|
| Eugene Murtagh | 9 |
9 |
3 |
3 |
||||||
| Gene M. Murtagh | 9 |
9 |
3 |
3 |
||||||
| Dermot Mulvihill | 9 |
9 |
||||||||
| Russell Shiels | 9 |
7 |
||||||||
| Peter Wilson | 9 |
8 |
||||||||
| Noel Crowe | 9 |
9 |
||||||||
| Brendan Murtagh | 3 |
2 |
||||||||
| Tony McArdle | 9 |
9 |
4 |
4 |
3 |
3 |
||||
| David Byrne | 9 |
8 |
4 |
4 |
3 |
3 |
6 |
6 |
||
| Brian Hill | 9 |
8 |
4 |
4 |
6 |
6 |
||||
| Helen Kirkpatrick | 9 |
9 |
4 |
4 |
3 |
3 |
6 |
6 |
||
| Danny Kitchen | 9 |
9 |
4 |
4 |
6 |
6 |
||||
Column A - indicates the number of meetings held during the period the director was a member of the Board and/or Committee.
Column B - indicates the number of meetings attended during the period the director was a member of the Board and/or Committee. There was no meeting of the Acquisitions Committee during the year.
The Chairman and Chief Executive
There is a clear division of responsibility set out in writing between the non-executive Chairman, Eugene Murtagh, and the Chief Executive, Gene M Murtagh.
The Chairman’s primary responsibility is to lead the Board. He is responsible for the efficient and effective working of the Board, and ensures that all members of the Board, including in particular the non-executive directors, have an opportunity to contribute effectively. He is also responsible for ensuring that there is appropriate and timely communication with shareholders.
The Board has delegated executive responsibility for running the Company to the Chief Executive and the executive management team. The Chief Executive is responsible for the strategic direction and the overall performance of the Group, and is accountable to the Board for all authority so delegated.
Board balance and independence
The Board has determined the following non-executive directors to be independent: David Byrne, Brian Hill, Helen Kirkpatrick, Danny Kitchen and Tony McArdle. Tony McArdle is nominated as the senior independent director of the Company, and is available to shareholders who have concerns that cannot be addressed through the Chairman, Chief Executive or Chief Financial Officer. The directors consider that there is a strong independent representation on the Board, and are committed to refreshing and strengthening the independent representation on the Board on an on-going basis.
In determining the independence of Danny Kitchen, the Board considered whether his previous tenure as a non-executive director of the Company might appear to affect his independence. The Board concluded based on a number of factors, including his experience and knowledge from his other senior executive roles, the significant changes in the economic and commercial environment since his previous appointment to the Board, and the fact that throughout his previous tenure on the Board he always exercised a strongly independent judgment, that the independence of his character and judgement was not compromised.
Appointments to the Board
All appointments to the Board are made on the recommendation of the Nomination Committee. In addition the Nomination Committee reviews the various committees and makes recommendations to the Board on the appointment of the chairman and the membership of each. The standard terms of appointment of non-executive directors are available, on request, from the Company Secretary.
Information and professional development
All directors are supplied with appropriate and timely information for Board and committee meetings, and are given the opportunity to probe and question the executives and to seek such further information as they consider appropriate. The Group’s professional advisors are available for consultation with the Board and attend Board meetings as required. All directors have access to the advice and services of the Company Secretary who is responsible for ensuring that Board procedures are followed. He is also responsible for advising the Board, through the Chairman, on all governance matters. Individual directors may seek independent professional advice at the expense of the Company in furtherance of their duties as a director. The Group has arranged appropriate insurance cover in respect of legal action against its directors.
The Company has procedures whereby directors (including non-executive directors) receive formal induction and familiarisation about the Company’s business operations and systems, and continuing training relating to the discharge of their duties as directors and (as appropriate) management. This includes Board visits to the Group’s manufacturing facilities on a regular basis.
Performance evaluation
During the year the Chairman carried out a review of the performance of individual directors. The Senior Independent Director through discussions with other directors conducted a review of the Board, its committees and its corporate governance.
Re-election of directors
The Company’s Articles of Association provide that newly appointed directors are subject to election at the Annual General Meeting following their appointments. Excluding any such newly appointed directors, one third of the Board is subject to re-election at each Annual General Meeting. Non-executive directors are appointed to the Board for an initial term of three years, renewable with the Board’s agreement, but subject to re-election by the shareholders on the normal rotation basis. Any non-executive director who has served more than nine years from the time of first election is subject to annual re-election thereafter.
Board Committees
The Board has established the following committees: Acquisitions, Audit, Nominations and Remuneration committees. All committees of the Board have written terms of reference setting out their authorities and duties and these terms are available on the Company's website www.kingspan.com. The chairman and members of each committee are set out in The Board section of this Annual Report.
Acquisitions Committee
The Acquisitions Committee has been established by the Board to consider and appraise all acquisition proposals made by the Group within its authorised limits, and to approve any investments, joint ventures, and capital expenditure within those limits which it considers to promote the Group strategy. The committee also carries out a periodic review of investments made within the previous year to review actual performance against forecast targets.
Audit Committee
The Board has established an Audit Committee to monitor the integrity of the Company's financial statements, and the effectiveness of the Company’s internal financial controls. The members of the Audit Committee bring considerable financial and accounting experience to the committee’s work, and in particular the Board considers that the chairman of the Audit Committee, Helen Kirkpatrick B.A., F.C.A., has appropriate recent and relevant financial experience. The Board is satisfied that the combined qualifications and experience of the members give the committee collectively the financial expertise necessary to discharge its responsibilities. The report of the Audit Committee is set out in this Annual Report.
Nominations Committee
The Nominations Committee assists the Board in ensuring that the composition of the Board and its committees is appropriate for the needs of the Group. The committee meets at least once a year, and additionally if required, to consider the Board’s membership, to identify any additional skills or experience which might benefit the Board’s performance and recommend appointments to or, where necessary, removals from, the Board.
Remuneration Committee
The Remuneration Committee has responsibility for setting remuneration for all executive directors and for the Chairman, including pension contributions and any compensation payments. The committee also monitors the level and structure of remuneration for senior management. The report of the Remuneration Committee is set out in this Annual Report.
Communication with shareholders
The Company places great emphasis on maintaining regular and responsible dialogue with shareholders. This is achieved through meetings with institutional investors, presentations to brokers and analysts, and making relevant information available on the Company’s website, www.kingspan.com in a timely fashion. Twice a year, following publication of the annual and half-year results, the Chief Executive and the Finance Director meet with institutional investors during a formal results roadshow.
In addition, the Company encourages communication with all shareholders, and welcomes their participation at Annual General Meetings. All shareholders who attend the Company’s Annual General Meeting are given the opportunity to question the Chairman and other members of the Board, including the chairmen of the committees, on any aspect of the Group’s business.
Internal control and risk management systems
The Group’s internal control system are identified in the Report of the Audit Committee. The main features of the Group’s internal control and risk management systems that relate specifically to the Group’s financial reporting and accounts consolidation process are:
- the review of reporting packages for each entity as part of the year-end audit process;
- the reconciliation of reporting packages to monthly management packs as part of the audit process and as part of management review;
- the validation of consolidation journals as part of the management review process and as an integral component of the year-end audit process;
- the review and analysis of results by the Group Finance Director and the Auditors with the management of each division;
- the review of audit management letters by the Group Finance Director, Head of Internal Audit and the Audit Committee; and the follow up of any critical management letter points to ensure issues highlighted are addressed.
Statement of compliance
The directors confirm that the Company, except in the respects more fully described below, has throughout the accounting period ended 31 December 2009 complied with the provisions of the 2008 FRC Combined Code on Corporate Governance:
- During the year less than half the Board, excluding the Chairman, were independent non-executive directors. It is the view of the Board that the range and blend of skills match the needs of the business and facilitate a sound decision-making process and control environment. It is also their view that there is sufficient balance in the Board, including a strong and independent non-executive element, so that no individual or group of individuals can dominate decision making. The Board is committed to refreshing and strengthening the independent representation on the Board on an on-going basis.
- The Nominations Committee did not use external consultants or open advertising when appointing Danny Kitchen as a non-executive director to the Board. It utilised industry and professional contacts to identify suitable candidates and consulted with the IAIM regarding the appointment.
- The remuneration of the non-executive directors is set by the Remuneration Committee on advice from independent professional advisors, rather than by the Board as a whole, and is benchmarked against other Irish and European quoted companies of similar size.
