OverviewCompliance with the Combined CodeThe Board is committed to maintaining the highest standards of Corporate Governance. The Board is accountable to the Company’s shareholders and this statement describes how it applies the principles of good governance set out in the 2006 FRC Combined Code on Corporate Governance which is appended to the Listing Rules of the Irish and London Stock Exchanges. The BoardAs at 31 December 2007, the Board of Directors was made up of nine members comprising the Executive Chairman, three other executive Directors and five non-executive Directors. Mr. Anthony Collins, Deputy Chairman, is Senior Independent Director. Directors biographical details are set out on page 17 of the 2007 Annual Report. The Board believes that the overall Board has the skills, knowledge and experience required by the scale, geographic spread and complexity of the Group’s operations. The Board routinely meets seven times a year and additionally as required by time critical business needs. There is also contact with the Board between meetings as required in order to progress the Group’s business. The Board takes the major decisions while allowing management sufficient scope to run the business within a centralised reporting framework. The Board has a formal schedule of matters specifically reserved for its decision. This covers the key areas of the Group’s business including financial statements, budgets, acquisitions, major items of capital expenditure and the strategic development of the Group. The Board’s responsibilities also include ensuring that appropriate management, development and succession plans are in place; reviewing the environmental and health and safety performance of the Group; approving the appointment of Directors and the Company Secretary; approving policies relating to Directors’ remuneration and severance and ensuring that satisfactory dialogue takes place with shareholders. The Directors have access to the advice and services of the Company Secretary who is responsible for advising the Board through the Chairman on all governance matters. The Company’s Articles of Association and Schedule of Matters reserved for the Board for decision provide that the appointment or removal of the Company Secretary is a matter for the full Board. Directors have full and timely access to all relevant information in a form appropriate to enable them to discharge their duties. Reports and papers are circulated to Directors in preparation for Board and committee meetings. The non-executive Directors, together with the executive Directors, also receive monthly management accounts, various reports and other information to enable them to review the performance of the Group on an ongoing basis. All Directors have access to independent professional advice at the Group’s expense where they consider that advice is necessary to enable them to discharge their responsibilities as Directors. The Board periodically holds meetings at Group locations and periodically meets senior management of the individual businesses in order to help Directors gain a deeper understanding of the Group’s operations and markets. The Board continues to hold the view that there are compelling commercial benefits to the Group and its shareholders in combining the roles of Chairman and Chief Executive and the holding of the combined roles by Mr. Michael Chadwick. The combination of the roles is balanced from a governance point of view by the strong input of the five independent nonexecutive Directors on the Board and the Board’s committee structure. Directors’ Independence and Board BalanceIt is Board policy that the Board should include a balance of executive and non-executive Directors such that no individual or small group of individuals can dominate the Board’s decision making. Five non-executive Directors, Mr. Anthony E. Collins, Ms. Gillian Bowler, Mr. Richard W. Jewson, Mr. Roderick Ryan and Mr. Peter S. Wood are considered by the Board to be independent of management and free from any relationship which could materially interfere with the exercise of their independent judgement. The Board has therefore determined all five Directors to be independent. Mr. Collins was appointed to the Board in 1988 and both Ms. Bowler and Mr. Jewson were appointed to the Board in 1995. The length of their service on the Board exceeds nine years and the 2006 FRC Combined Code provides that an explanation be made to shareholders concerning their continued independence. The Board considers that the integrity and independence of these Directors is beyond doubt. All three Directors are financially independent of the Company and have other significant commercial and professional commitments. Over the past fourteen years Grafton Group plc has grown from its small mainly Irish base to being the market leader in the Irish merchanting and DIY markets and the fourth largest builders merchanting business in the UK market. Mr. Collins, Ms. Bowler and Mr. Jewson have made a valuable contribution to the Board during this period of growth. Each of these non-executive Directors brings her/his own senior level experience gained in their own field of international business and professional practice. Their experience and long-term perspective on the Group’s business provides the Board with stability and an invaluable resource to support its continued growth and development. The Company’s Articles of Association provide that one third of the Directors retire by rotation each year and that each Director seek re-election at the Annual General Meeting every three years. New Directors are subject to election by shareholders at the next Annual General Meeting following their appointment. It is Board Policy that non-executive Directors are normally appointed for an initial period of three years, which is then reviewed. It is also Board Policy that a non-executive Director who has served on the Board for more than nine years will retire annually and will offer himself/ herself for re-election in any case where it is proposed to exceed nine years. Mr. Collins, Ms. Bowler, Mr. Jewson, Mr. Chadwick, Mr. Ó Nualláin and Mr. Malone retire from the Board and offer themselves for re-election at the AGM on 8 May 2008 in accordance with Board Policy and rules governing retirement by rotation as applicable. The overall composition and balance of the Board is kept under review. Mr. Roderick Ryan and Mr. Peter S. Wood were appointed to the Board during 2006. The Board plans to manage the orderly succession of non-executive Directors over the coming years without compromising the effectiveness and continuity of the Board and its committees. Induction and TrainingIt is the policy of the Board that formal induction is offered to all Directors appointed to the Board. This includes on-site visits and meetings with Senior Management in the Group’s businesses and briefings from executive Directors and the Company Secretary. Induction covers matters such as the operations of the Group, the role of the Board and matters reserved for its decision, powers delegated to Board committees, corporate governance policies and the latest financial information about the Group. Directors are advised on appointment of their legal and other duties and of their obligations as Directors of a listed company. Evaluation of BoardThe Board has put in place procedures which involve the conduct of an annual evaluation process to periodically assess its performance, the performance of Board committees and the performance of individual Directors. This process also seeks to identify areas in which the effectiveness of the Board may be improved. Evaluation of the Board is achieved through annual discussion between each Director and the Senior Independent Director. The Independent non-executive Directors met during the year both with and without the Chairman present to evaluate his performance.The results of the evaluation process are presented to the Board for consideration of issues identified. Succession PlanningThe Board plans for succession with the assistance of the Nomination Committee. The Board believes that it is necessary to have appropriate executive Director representation on the Board and sufficient non-executive Director representation, to provide Board balance and to provide the Board with the breadth of experience required by the scale, geographic spread and complexity of the Group’s operations. Communication with ShareholdersThe Company recognises the importance of communication with shareholders. Presentations are made to both existing and prospective institutional shareholders principally after the release of interim and annual results. In addition to the annual and interim results, the Group issues trading and development updates twice yearly and a trading update is issued at the Annual General Meeting. Commencing in 2008, trading updates will be replaced by Interim Management Statements in compliance with the EU Transparency Directive Regulations 2007. Major acquisitions are also notified to the market and the Company’s website www.graftonplc.com presents information about the Group including interim and annual results and announcements. The Chairman and Finance Director give feedback to the Board on issues raised by investors during the course of presentations following the annual and interim results and Analysts’ reports on the Group are circulated to all Directors. Non-executive Directors are offered an opportunity to attend meetings with major shareholders. The Annual General Meeting is normally attended by all Directors and shareholders are invited to ask questions during the meeting and to meet with Directors after the formal proceedings have ended. The Senior Independent Director is available to meet with shareholders if they have concerns which have not been resolved through the normal channels of Chairman or Finance Director or where such contacts are not appropriate. Board CommitteesThe number of Board meetings and committee meetings attended by each Director was as follows:
Column A-refers to the number of meetings held during the period the Director was a member of the Board and/or Committee Mr. C. Rinn, Secretary and Group Financial Controller attended 57 meetings of the Finance Committee during the year. The Board is assisted by committees of Board members which focus on specific aspects of its responsibilities. The terms of reference of the Audit Committee, Remuneration Committee and Nomination Committee were approved by the Board and comply with the 2006 FRC Combined Code and are available from the Company and can also be found on the Group’s website at www.graftonplc.com. Membership of the various committees is shown on page 17 of the 2007 Annual Report. The Company Secretary is secretary of the Audit, Remuneration and Nomination Committees. To read the |
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