Chairman’s introduction
 |
| John Botts |
2010 was a year in which, more than ever, governance considerations for companies listed in the UK focused on sustainability and the need to promote the long term success of companies. The Walker Review of corporate governance, while not directly applicable to UBM, laid the groundwork for the Financial Reporting Council ’s review of the Combined Code which places increased emphasis on the management of risk and on the role of the Board and its chairman in providing leadership and rigorous challenge.
As a Board, we are ultimately responsible for framing and executing UBM’s strategy and for overseeing risk management. We consider the practice of good governance to be integral to that role and we are committed to maintaining high standards of financial reporting, transparency and business integrity in all UBM’s undertakings. As UBM’s businesses evolve into new areas and expand into new geographical markets, the issues become more complex and the Board's role becomes ever more challenging. In order to ensure that we are fully equipped to perform our role effectively, in 2010 we concentrated our attention on the following areas:
- We undertook an ongoing and in-depth review of strategy, including assessment and consideration of risk management.
- We reviewed Board composition to ensure we have the appropriate mix of experience and personality around the boardroom table.
- We increased our non-executive directors’ access to and engagement with the businesses, through site visits (the Board visited two of our largest exhibitions in Brazil and India during the year), management presentations and the development of mentoring programmes.
- We reviewed talent management and succession planning to ensure we have the necessary management resource to continue to build on UBM’s success.
The following report describes in more detail how we seek to embed good governance in the Board’s activities.
John Botts
Chairman
United Business Media Limited
Compliance statement
The Board of UBM is responsible for the Group’s policy on corporate governance. As a company with a premium listing of equity shares on the London Stock Exchange, UBM is subject to the Listing Rules of the Financial Services Authority and the provisions of the UK Corporate Governance Code (previously known as the Combined Code on Corporate Governance (‘the Code’)). Prior to April 2010, UBM was not subject to the Code but complied voluntarily with its provisions.
The directors consider that throughout 2010 UBM complied with all provisions set out in Section 1 of the 2008 Combined Code except for the composition of the Audit Committee.
The Board has taken note of the changes to the Code introduced by the Financial Reporting Council, which take effect for accounting periods beginning on or after 29 June 2010. The Board will determine its response to these changes during the course of 2011 and will report on this in its annual report for 2011.
As a non-UK registered company, UBM is not subject to UK companies legislation. However, the Board considers it appropriate to provide shareholder safeguards which are similar to those that are consistent with the relevant provisions of the UK Companies Acts. Specifically, provisions such as pre-emption rights and shareholder information rights are contained in the Company’s Articles of Association.
The Board
A formal schedule of matters to be considered by the Board is in place and is reviewed annually.
Responsibilities reserved to the Board include:
- Approval of the annual budget (including capital expenditure) and Treasury policy.
- Approval of the interim and annual financial statements.
- Succession planning.
- Dividend policy.
- Major acquisitions and disposals and substantial property transactions.
- The Group’s system of internal controls.
Decisions on operational matters are delegated to the executive directors and to divisional boards under formally documented authorities.
The agenda for Board meetings includes standing items on strategy and governance as well the Group’s finances and operations. The Board also considers matters such as acquisitions, borrowing facilities and major capital projects as appropriate, and receives regular presentations from divisional management on the Group’s businesses.
During 2010 the Board’s activities included the following:
- In-depth review of strategy, having regard to the opportunities and challenges faced by the Group’s businesses. This included consideration of capital structure and liquidity, leadership talent development, and management structure below board level.
- Concluded the settlement of a longstanding tax dispute with HMRC.
- Approved the full year and interim financial results.
- Approved the Group’s budget for 2011.
- Approved the Group’s dividend policy.
- Approved the acquisition of Canon Communications Inc for $287m.
- Undertook a US$ bond issue to raise $375m.
- Reviewed pensions risk.
- Reviewed the Group’s risk mapping process.
- Received management presentations from eight divisional heads and visited the Food Ingredients Exhibition in São Paulo and the CPhI exhibition in Mumbai.
The approximate apportionment of Board time was as follows:
The Board has six scheduled meetings per annum and meetings may be convened at other times as and when necessary. Eight Board meetings were held during 2010, including two ad hoc meetings which were convened to consider specific acquisition opportunities. Board and committee meetings are generally held in Ireland, with at least one Board meeting per annum held overseas to enable Board members to visit the Group’s business locations. During 2010 two overseas Board meetings were held, in Brazil and India.
Details of individual attendance by directors at Board and committee meetings in 2010 are set out below.
|
Board
(scheduled) |
Board
(ad hoc) |
Audit
Committee |
Remuneration
Committee |
Nomination
Committee |
| Director |
|
(attendance is shown only for committee members) |
| John Botts |
6 |
2 |
1 (of 1) |
|
1* |
| David Levin |
6 |
2 |
|
|
|
| Robert Gray |
6 |
2 |
|
|
|
| Alan Gillespie |
6 |
1^ |
|
2** |
2 |
| Pradeep Kar |
6 |
2 |
|
3 |
|
| Greg Lock |
6 |
1^ |
2 (of 2) |
|
|
| Terry Neill |
5*** |
1^ |
3 |
|
|
| Jonathan Newcomb |
6 |
1^ |
3 |
3 |
2 |
| Karen Thomson |
6 |
1^ |
3 |
|
|
*John Botts did not attend the Nomination Committee meeting which dealt with his own contract.
**Alan Gillespie was unable to attend the July Remuneration Committee meeting owing to family illness.
***Terry Neill was unable to attend the September Board meeting as he had a prior commitment which predated his appointment to the UBM Board.
^A number of directors were unable to attend one of the ad hoc meetings which was convened at short notice.
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Board size and composition
The Board has placed particular emphasis over the last three years on progress towards achieving the optimum number of directors with an appropriate balance of skills and experience. The appointment of new non-executive directors in September 2009 and February 2010 brings the total number of directors to nine, with the Board now comprising the Chairman (part-time), two executive and six non-executive directors. The Board considers this to be an appropriate size to enable it to carry out its responsibilities effectively.
Non-executive directors
The Board believes that a strong presence of non-executive directors is a key aspect of effective corporate governance. Their role is to provide constructive input and challenge to management; in order to do so it is important that they have adequate access to the businesses to allow for a deeper insight into the opportunities and challenges for the businesses, which in turn informs the debate at Board meetings. Non-executive directors are encouraged to meet with divisional executives and to visit the Group’s operations around the world; during 2010 John Botts, Greg Lock, Karen Thomson and Pradeep Kar attended the Business Leadership Development programme and a separate initiative was introduced whereby individual non-executive directors offer mentoring on general management issues to selected business leaders across the Group. Examples of this include Jonathan Newcomb working with Ninan Chacko, CEO of PRNewswire, and Pradeep Kar working with Sanjeev Khaira, Managing Director of UBM India.
In reviewing the independence of its non-executive directors, the Board principally has regard to factors such as the character and personality of the individual concerned and the quality of his or her contribution at Board meetings. The Board also takes note of those matters listed in the Code as factors which may be relevant in determining independence. The Board considers all of its non-executive directors to be independent. Non-executive directors’ appointments are reviewed every three years.
Jonathan Newcomb has served as a non-executive director of the Company for nine years, and under the terms of the Code will cease to be independent following the next Annual General Meeting. The Board values his contribution and experience highly, and wishes to retain Mr Newcomb’s services; it considers this appropriate having regard to the number of independent non-executive directors on the Board and the varying length of tenure of those directors. Mr Newcomb will be proposed for re-election at the forthcoming Annual General Meeting and, annually thereafter.
The length of tenure of independent non-executive directors as at the date of this report is illustrated below.
Biographies of all the directors currently in office are set out in Board of Directors section and illustrate their range of experience.
Alan Gillespie is the Senior Independent Director.
Chairman and CEO
The roles of Chairman and Chief Executive are separate, and a summary of their respective responsibilities is set out in writing and has been approved by the Board.
The Chairman is responsible for overseeing the operation of the Board but takes no part in the day-to-day running of the business. John Botts is also a managing director of Allen & Company in London. During 2010 he joined the board of Songbird Estates plc.
Election of directors
Under the Company’s Articles of Association, at each Annual General Meeting any director then in office who has been appointed by the Board since the previous Annual General Meeting and any director who at the date of the notice convening the meeting had held office for more than 30 months since he was last appointed or re-appointed by the Company in general meeting shall retire from office but is eligible for re-appointment.
The Board has noted the new Code requirement for directors to submit themselves for annual re-election by shareholders, which applies for financial periods starting on or after 29 June 2010. The Board does not propose to adopt this requirement at its Annual General Meeting in 2011 but will keep the matter under review during the year, having regard to shareholder opinion and evolving best practice.
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Conflicts of interest
The Board has established a process to address possible conflicts of interest of directors. Any relevant conflicts and potential conflicts that arise are required to be disclosed at the next Board meeting for consideration and, if appropriate, approval by relevant Board members.
Board committees
The Board is assisted in fulfilling its responsibilities by three principal committees, the Audit, Remuneration and Nomination Committees. Details of the activities of the Audit Committee are given below, while those of the Remuneration Committee are set out in the Directors’ Remuneration Report.
The terms of reference for all committees may be viewed on the Company’s website at www.ubm.com and copies can be obtained from the Company Secretary, who acts as secretary to all three committees.
Nomination Committee
|
 |
 |
| John Botts |
Jonathan Newcomb |
Alan Gillespie |
The Nomination Committee is chaired by John Botts and its other members are Jonathan Newcomb and Alan Gillespie. The Company Secretary and Chief Executive customarily attend meetings and the Committee is also supported by the Group People and Culture Director.
The Committee met formally twice during 2010. The principal activity undertaken during the year was:
- To recommend the appointment of an additional non-executive director, Greg Lock , to the Board (Mr Lock having been identified via an external selection process conducted during 2009).
- To consider Board succession planning, specifically for the roles of Chairman and CEO.
The role of the Nomination Committee is to ensure an appropriate balance of experience and abilities on the Board, by reviewing the size and composition of the Board and recommending proposed changes. The Committee also reviews performance evaluations of individual non-executive directors and makes recommendations as to their proposed re-election to the Board following retirement in accordance with the Company’s Articles of Association.
The process of succession planning for the Chairman’s role was led by the Senior Independent Director, as described below under the section entitled Board Performance, and reviewed by the Committee.
Board performance
A formal review of Board and committee performance and effectiveness was conducted by means of an internal process in 2010. This was carried out by means of confidential questionnaires which were completed by all Board directors, followed by one-to-one interviews with the Group People and Culture Director, who then collated the results for discussion by the Board as a whole.
Areas covered by the review included the roles and processes of the Board and its main committees; Board composition and meetings; dynamics and culture; accountability; and risk management and control. The review concluded that, overall, the Board and its committees continue to operate effectively, with a positive and engaged climate within the Board, and that directors are generally content with the information provided to them, the quality of debate and the culture of transparency and constructive challenge. The review also identified a number of areas which will be given more detailed consideration during 2011, including structuring of meetings and prioritisation of agenda items, risk profile and management and ongoing professional development.
It is proposed to conduct an external review of Board and committee performance in 2011.
Separately, the Board considered the issue of the Chairman’s succession in light of the impending expiry of his contract in December 2010. The Chairman’s performance was evaluated by means of a questionnaire which was completed by all directors and the results collated by the Senior Independent Director. A meeting was then convened, led by the Senior Independent Director and attended only by independent non-executive directors and the Company Secretary, at which the results were discussed and it was agreed to recommend that the Chairman’s contract be extended for a further 18 months. This recommendation was formally confirmed by the Nomination Committee (which for this purpose met without John Botts in attendance and was chaired by Alan Gillespie).
Evaluation of the performance of individual non-executive directors is carried out by the Chairman with input from the Senior Independent Director and Chief Executive, and is reviewed by the Nomination Committee; the Chief Executive’s performance is evaluated by the Chairman and the Chief Financial Officer’s performance is evaluated by the Chief Executive.
During 2010 the Chairman and non-executive directors also met without executives present to discuss management succession.
Information and professional development
All directors have access to the advice and services of the Company Secretary, who has primary responsibility for keeping directors updated and informed of general developments which may be of relevance to their responsibilities. The Company Secretary is not a Board director.
All directors are offered the opportunity to further their professional development by means of attendance at seminars and briefings. A tailored induction process is established for all directors on appointment; this includes discussions with the Chairman and executive directors as well as one to one briefings and presentations from other directors and senior management at corporate and divisional level and, where possible, site visits.
A procedure exists to allow directors to seek independent professional advice if they consider it appropriate to do so in the furtherance of their duties. No use was made of that procedure in 2010.
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Relations with shareholders
Ownership of the Company’s shares is heavily concentrated in the hands of institutional investors, with less than 2.5% of issued equity held by individuals. The Company maintains an ongoing dialogue with its major institutional shareholders by means of a scheduled programme of meetings, which are generally undertaken by the Chief Executive and Chief Financial Officer. Separate meetings are arranged where appropriate with the Chairman or Senior Independent Director to discuss specific issues. During 2010 the Senior Independent Director (who also chairs the Remuneration Committee) met with several investors to discuss remuneration policy: the Chairman also met with investors to discuss the Group’s strategy. A report on investor relations, including feedback from investor meetings, is a standing agenda item for Board meetings, and analysts’ and brokers’ reports are circulated to all directors upon publication.
The Company does not formally offer shareholders the opportunity to meet with new non-executive directors or vice versa, but is willing to facilitate such engagement upon request from a director or shareholder. The Company welcomes the introduction of the UK Stewardship Code, which it considers will promote closer engagement between companies and their shareholders.
The Company’s shareholders as a whole are kept informed about the activities and progress of the Group primarily via its website, www.ubm.com, and by means of the annual and interim reports and interim management statements. During 2010 the format of the interim management statement was revised so as to include more quantitative financial information, intended to provide greater clarity and transparency on the Group’s financial position.
All shareholders are welcome at the Annual General Meeting where they are able to ask questions of all the directors, including the Chairman, as well as the chairmen of the Audit and Remuneration Committees.
Voting at the Annual General Meeting takes place by poll and the results are notified via a regulatory information service and displayed on the Company’s website as soon as practicable following the meeting. Votes were cast at the 2010 Annual General Meeting in respect of approximately 70 percent of issued equity, and voting was over 97% in favour of all resolutions.
Internal control
The Board is responsible for maintaining the effectiveness of the Group’s system of internal controls and for reviewing the effectiveness of such systems. The system is intended to enable the Group to identify and manage the risks inherent in its business and accordingly can provide only reasonable and not absolute assurance against material mis-statement or loss.
A formal process is in place for identifying, evaluating and managing the key financial, operating, compliance and other significant risks faced by the Group. This risk mapping process, which was in place throughout 2010 and continues in force, accords with the Turnbull guidance issued in September 1999 and is reviewed on an ongoing basis by the Board.
The process aims to identify and evaluate risks which are specific to each of the Group’s businesses. Each business prepares its own analysis of the major commercial, regulatory and financial risks which it faces and of the controls in place to mitigate those risks. The risk maps and associated action plans are compiled by the respective management teams, reviewed centrally by UBM executive management, and considered by the Audit Committee, which in turn reports to the Board.
The Group’s system of internal controls includes the following:
- All staff are required to comply with a formal system of delegated authorities which is in place for all divisions and head office.
- Further guidance on Group policies and procedures is set out in various manuals including the financial policies and procedures manual, Group policy manual and employee handbooks.
- An anti-malpractice policy is in place throughout the Group which provides a mechanism for confidential reporting by staff of possible concerns about financial or other matters.
- The Group has a comprehensive financial reporting system, with the annual budget being approved by the Board and monthly trading results, balance sheets and cashflow summaries recorded against corresponding figures for the budget and the previous year.
- Established procedures are in place for the evaluation of potential acquisitions and their integration into the Group. Monitoring of post-acquisition performance against detailed business plans is conducted on an ongoing basis by the internal audit department and reviewed regularly by the Audit Committee.
- Major IT and other projects are reviewed periodically by the internal audit department to assess their status and their reports are reviewed by the Audit Committee.
- The internal audit department undertakes periodic reviews of individual businesses to assess their control status and makes recommendations to the Audit Committee. The work of the internal audit department is prioritised to concentrate on the areas of greatest risk as identified through the Group risk management process. The Head of Internal Audit attends meetings of the Audit Committee, which oversees the role and structure of the internal audit department and makes recommendations to management.
A particular area of focus during the year was pensions risk; to assist in evaluating and managing this risk a working group was set up with representation from management, pension trustees and advisors, to formulate a risk management programme and to report to the Board on a regular basis.
The Board will continue to review and reinforce its procedures for identifying, managing and monitoring risk during 2011 and beyond.
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Audit Committee
|
 |
 |
 |
| Jonathan Newcomb |
Karen Thomson |
Terry Neil |
Greg Lock |
The Audit Committee is chaired by Jonathan Newcomb and its other members are Karen Thomson, Terry Neill and (since May 2010) Greg Lock. All committee members serving on the Committee as at 31 December 2010 are considered by the Company to be independent.
The Chairman of the Board, John Botts, was a member of the Committee until May 2010. This was not in compliance with Provision C.3 .1 of the Code as he is not considered to be independent. However, in view of his financial skills and experience and the fact that Terry Neill only joined the Committee in September 2009, it was considered appropriate that Mr Botts should remain a member of the Committee pending the outcome of the review which the Board had undertaken to carry out in early 2010. As a result of that review, Greg Lock joined the Committee and John Botts ceased to be a member of the Committee in May 2010.
The Board takes into account each Committee member’s qualifications and experience in their executive roles (details of which can be found in Board of Directors section) and is satisfied that all members have recent and relevant financial experience which is adequate to enable them to carry out their responsibilities.
The Committee met on three occasions during 2010 and details of individual attendance are set out in the table. The Chairman of the Audit Committee provides a verbal report to the Board following each Committee meeting and the minutes of Committee meetings are available to other Board members.
The Company Secretary is secretary to the Committee and others invited to attend Committee meetings include the Chief Financial Officer, Deputy CFO, Head of Internal Audit, Head of Taxation, Treasurer and external auditors. Although no longer a member of the Committee, John Botts also attends meetings by invitation. There is a standing agenda item at each Committee meeting for the external auditors to discuss matters with the Committee without management present.
The Committee operates within written terms of reference, which are reviewed periodically. These terms of reference may be viewed on the Company’s website.
The principal duties of the Audit Committee are:
Finance and Accounting:
- To monitor the integrity of the group's account, ensuring that they meet statutory and associated legal and regulatory requirements. This includes reviewing significant financial reporting judgements contained in them, reports on compliance with accounting standards, appropriate accounting policies and practices and any changes to these, accounting and reporting issues, going concern assumptions and anti-fraud programmes and controls.
- To monitor announcements relating to the groups' financial performance.
Internal controls
- To monitor the effectiveness of internal financial controls.
- To review the operation of the Group's risk management process.
- To monitor the control environment mitigating compliance and quality management systems risk.
Audit
- To monitor and review the effectiveness of the Group’s internal audit functions
- To monitor and review the external auditors' performance, the effectiveness of the audit process and their independence, approving their terms of engagements, remuneration and ability to supply non-audit services and recommending for shareholder approval the appointment, re-appointment or removal of the external auditors, as appropriate.
Whistleblowing
- To review the arrangements by which staff may raise complaints against the Group regarding financial reporting or other matters.
To assist in ensuring auditor objectivity and independence, the Audit Committee has established a formal policy governing the conduct of non-audit work by the external auditors. This prohibits the auditors from performing services which would result in the auditing of their own work, participating in activities normally undertaken by management, acting as advocate for the Group and creating a mutuality of interest between the auditors and the Group, for example being remunerated through a success fee structure. All services provided by the independent auditors during the year were pre-approved by an individual nominated by the Audit Committee, and reviewed by the Audit Committee at the first Audit Committee meeting subsequent to their approval. A financial threshold is set above which pre-approval is required by the Chairman of the Audit Committee, however no such pre-approvals were required in 2010.
The Audit Committee has a structured schedule of matters for consideration which is aligned with the Group’s financial calendar.
During 2010 the Committee’s work included the following:
- Reviewed the preliminary results announcement and considered in particular the requirement for an impairment charge to be made in the financial statements for 2009.
- Noted and considered proposed changes to the manner in which segmental reporting is carried out by the Group for the purpose of recording and allocating goodwill in the most appropriate manner among the Group’s businesses.
- Reviewed the Operating and Financial Review section of the 2009 annual report.
- Reviewed the half-yearly results announcement and considered reports from the external auditors identifying any significant financial reporting issues or matters of judgemental difference requiring its attention.
- Reviewed the Group’s risk mapping process and considered specific areas of risk identified through that process and the action plans proposed.
- Considered and approved audit plans from internal and external auditors.
- Reviewed the independence and objectivity of the external auditors and the effectiveness of the audit process.
- Reviewed the composition of the Committee and its own performance.
- Received reports from the internal audit department on the outcome of reviews conducted by it.
- Considered post-acquisition reviews conducted in respect of businesses acquired by the Group.
- Reviewed the performance of a number of major projects being implemented within the Group’s divisions.