We are reporting against the UK Corporate Governance Code (2018 version) (the “Code”) for this report, which was published by the Financial Reporting Council (“FRC”) and is available to view at www.frc.org.uk. This will be the first year of reporting against the revised version of the Code and we look forward to sharing how we have applied the spirit of the principles and provisions.

This report has been prepared and approved by the Board and, on behalf of the Board I confirm that during the 2020 financial year, the Company applied the principles of, and was compliant with the provisions of the Code other than where stated on pages 53 to 54 of this report. In this report, we provide not only the regulatory and statutory assurances required from us, but we also try to provide a deeper understanding of the workings of our Board.

Stakeholder Engagement

With the introduction of the requirement for larger companies to include a Section 172(1) Companies Act 2006 statement (the “s.172(1) Statement”) within their Annual Reports, and the increased focus on such engagement within the revised Code, this was, and continues to be, a key focus area for the Board. The s.172(1) Statement of the Group can be found on pages 32 to 37. This explains who has been identified as key stakeholders, the main priorities of those stakeholders, and how we engage with them. 

Board Composition

Since the last report, Matthew Pratt, having joined the Board on 1 April 2019 as Chief Operating Officer, became Group Chief Executive on 1 July 2020 and Nicky Dulieu joined the Board on 6 November 2019 as a Non-Executive Director and became a Member of the Audit, Remuneration and Nomination Committees from the same date. It is also intended that John Tutte, currently Executive Chairman, will step back to a Non-Executive Chairman role at the 2020 AGM on 6 November 2020, and will retire from the Board ahead of the 2021 AGM, being succeeded by an Independent Non-Executive Chairman. Additionally, Vanda Murray has informed the Board of her intention to retire from the Board following the 2020 AGM due to other work commitments. Further details of these changes can be found in the Nomination Committee Report on pages 71 to 74.

Board Effectiveness

We also discuss in this report how the Board monitors its effectiveness in order to ensure that it has the strength and capability to lead the Company to continued success. Last year, an externally facilitated evaluation of the Board and each of its Committees was carried out by Independent Audit. In 2020, a formal internal evaluation of the Board and Committees was undertaken to build upon the progress made in the previous year. Having considered the output of this year’s evaluation, the Board considers that it continues to function effectively and its relationship with its Committees continue to be sound. Details of the evaluation can be found on page 61.

Strategy, Culture and Values

The revised version of the Code has an increased focus on the role of the Board in setting and monitoring the Group’s purpose, strategy and values and ensuring that these are aligned with culture. This is an area which is consistently required to be at the top of the Board’s agenda and details of the work undertaken by the Board in this regard can be found on pages 55 to 56.

Our 2020 Annual General Meeting will be held on Friday, 6 November 2020 and the Notice of Annual General Meeting together with Explanatory Notes will be sent to you separately.

GRAHAM COPE

Company Secretary

15 September 2020

Introduction

This report sets out the Company’s compliance with the Code issued by the Financial Reporting Council and describes how the governance framework is applied by the Company.

Governance Structure

Governance is a key priority of the Board and the governance structure is set out in the diagram opposite. Each component within the structure is governed by a particular set of rules, whether it is the Redrow handbook, the Code of Conduct, the policies and procedures manual and/or the terms of reference. Each of these are regularly reviewed and are updated in line with best practice and legislative or regulatory changes.

New Governance Reporting for 2020

There were a number of key developments introduced in 2018, to be reported upon for the Company’s 52 weeks ended 28 June 2020. The following were flagged in last year’s Annual Report as items identified by the Board as key developments and this report demonstrates how these have been implemented:

1. Section 172 reporting – this Annual Report explains how the Directors have carried out their statutory duty within s.172(1) of the Companies Act 2006 (the “Act”). This explanation can be found on pages 32 to 37.
2. CEO pay ratio – the disclosure of the CEO pay ratio (CEO pay calculated against the 25th, median and 75th percentile of UK employees’ pay) can be found on page 97.
3. Culture – a description of the work undertaken by the Board to ensure the alignment of culture with values and strategy can be found on pages 55 to 56.
4. Board level workforce representation – as disclosed in last year’s Annual Report, Vanda Murray was appointed as the designated Non-Executive Director responsible for facilitating workforce engagement. Following her retirement from the Board on 6 November 2020 after the AGM, Vanda Murray will be succeeded by Nicky Dulieu as the designated Non-Executive Director for workforce engagement. A further explanation of this can be found on page 106.

Compliance with the UK Corporation Governance Code

The Directors have considered the contents and requirements of the Code and confirm that throughout the 52 weeks ended 28 June 2020 the Company has been compliant with the provisions of the Code, as explained further in this report, other than as set out in the table below.

Reporting on the UK Corporate Governance Code 2018

The format of this report now reflects the new layout of the Code, with a view to make it easier for shareholders to be able to evaluate how the Code has been applied throughout the year, in line with the requirements of the Listing Rules:

1. Board Leadership and Company Purpose – pages 54 to 58;

2. Division of Responsibilities – pages 58 to 60;

3. Composition, Succession and Evaluation – pages 60 to 62;

4. Audit, Risk and Internal Control – pages 62; and

5. Remuneration – page 63.

1. Board Leadership and Company Purpose

role of the board

The Board is responsible for putting in place the strategic plans for the Group and providing the leadership required in order to achieve its vision and goals.

There are matters which the Board delegate to Committees, the Executive Management Team and other relevant management bodies in order to ensure that the Group is operating efficiently and effectively.

In order to ensure that the Board fulfil their statutory duties as Directors, there is a formal schedule of matters reserved specifically for the Board’s decisions. The matters reserved include:

• approval of any significant changes in accounting policies or practices;
• any changes relating to capital structure and approval of treasury policies;
• ensuring the maintenance of a sound system of internal control and risk management;
• authorising conflicts of interest where permitted by the Company’s Articles of Association;
• assessing the prospects and viability of the Group, including measurement of key performance indicators;
• assessing and monitoring culture in alignment with purpose, values and strategy;
• approval of corporate acquisitions or disposals, significant land purchases or contracts;
• changes to the size, structure and composition of the Board;
• approval of significant policies, including the Group’s Health, Safety and Environmental policy;
• review of overall corporate governance arrangements;
• ensuring a satisfactory dialogue with key stakeholders; and
• appointment and removal of the Company Secretary.

Long-term performance and shareholder value relies on high quality corporate governance and the Board is responsible for maintaining strong governance practices and regularly reviewing the Group’s governance structure as illustrated on page 52.

BOARD MEETINGS

The Board meets regularly and frequently, not less than six times during the year and maintains a close dialogue, as appropriate, between meetings. Board meetings are held at the Company’s Head Office or Divisional offices when visits are frequently made to a selection of developments accompanied by the local Management Team. Board papers are distributed sufficiently in advance of the meetings to allow adequate time for review to enable informed debate and challenge at meetings and include key strategic, operational and financial information.

Where a Director is unable to attend a meeting, they are encouraged to discuss any issues arising with the Executive Chairman or Group Chief Executive as appropriate. If a Director has a concern about the running of the business, the minutes should accurately reflect this. Should any Director resign from their position as a result of unresolved concerns in the Company, they are requested to submit a written statement to the Executive Chairman outlining their concerns for circulation to the Board. There were no statements received of this nature during the year.

Attendance by individual Directors at Board meetings is set out on page 59.

PROFESSIONAL DEVELOPMENT

The Board recognises that a structured appraisal process and good training are important requirements across the Group. The Board receives regular presentations and briefings from those responsible for key Group disciplines. In addition, the Board maintains close working relationships with the Executive Management Team and the divisional Management Teams.

The Company Secretary assists the Executive Chairman in the co-ordination of the comprehensive induction programme of all Directors following their first appointment.

The programme for the Non-Executive Directors is specifically designed to encompass the full breadth of the business and includes visits to operating businesses. The programme is tailored accordingly to:

• provide an understanding of their role within the Company;
• build an understanding of how the Board operates within the structure of the Group;
• introduce key Group personnel and external advisors;
• enhance their knowledge of the Group’s culture and business; and
• if applicable, prepare the Director for Committee memberships by additionally providing induction material relevant to the specific committee.

Ongoing training continues after appointment and the Executive Chairman endeavours to review the training and development needs of the Directors at least annually. The aim is to ensure the further enrichment of their skills and experience so that they continue to fulfil their role effectively on the Board and its Committees.

During the year, formal appraisals of the Group Chief Executive and the Group Finance Director were undertaken by the Executive Chairman. The Executive Chairman and all Non-Executive Directors had an annual appraisal conducted by the Senior Independent Director.

KPI ASSESSMENT AND RISK MANAGEMENT

The Board have the overall responsibility for setting the key performance indicators and selecting the appropriate form of measurement to allow an objective assessment of the Group’s performance. The Board also sets appropriate targets against each indicator and ensures timely and accurate measurements against each identified performance indicators. See page 5 for further details of the key performance indicators of the Group.

The ultimate responsibility for the effective management of the risks faced by the Group in order to achieve its strategic and financial objectives lies with the Board. It is vital to the long-term sustainability of the Group that strong risk management mechanisms are in place. Details of the Group’s risk management processes, including the Board’s robust assessment of the Group’s emerging and principal risks, key controls and mitigating strategies can be found on pages 38 to 45.

STRATEGY, PURPOSE, VALUES AND CULTURE

Setting and monitoring the Group’s purpose, values and strategy and ensuring that these are aligned with culture is a key role of the Board.

Engagement with stakeholders, and understanding the key matters which are of priority to them, has formed the basis of the Group’s business strategy and purpose and can be seen in the three themes of Developing Thriving Communities, Building Responsibly and Valuing People.  

Our purpose, to operate to create a better way for people to live, is supported by our strategy of creating long-term sustainable value for all of our stakeholders by developing thriving communities with high quality homes that provide a better way to live. The messaging regarding the Group’s purpose and strategy is consistent, clear and at the forefront of everything we do. 

The Redrow culture is the unconscious landscape through which our people think, behave and act, regardless of whether they are working in the boardroom, Division, Group or on site. Our culture is embedded through our values of: hard work; attention to detail; innovation; passion; and pursuit of excellence. We expect our people to apply these values in their daily working life.

There are a number of measures adopted by the Board to assist with monitoring, assessing and embedding culture:

1. The Board monitors the opinions of employees via the annual INsight survey to assist with measuring how far Redrow values are incorporated into the culture and evaluates the level of consistency in employee’s views of culture.
2. Consistent language is used in communications with our people via our intranet, Engage, which seeks to embed cultural norms by reinforcing the strategy and values and reiterating the behaviours and actions which are to be encouraged.
3. Policies are regularly reviewed and updated to ensure that they are in alignment with the Company’s purpose, values and strategy.
4. Brand guidelines are communicated internally and employees are expected to adhere to these guidelines in their daily working lives. The guidelines reinforce what Redrow stands for, why we do what we do and how we are expected to behave.
5. Site and Divisional visits are carried out by the Board, which allows them to engage directly with the workforce and obtain their views on culture within the business. Vanda Murray, as designated Non-Executive Director for workforce engagement, also has an important role in obtaining views of employees in this regard, particularly at these visits.

The Board is proud to have a business that is customer focused with employees taking pride in creating a better way to live through their contribution to providing a high quality product and service to our customers.

WHISTLEBLOWING

The Group has a widely publicised Whistleblowing Policy which enables employees and other stakeholders to raise concerns in confidence. The Board receives reports on all occasions when such issues are raised under this policy.

The Whistleblowing Policy allows concerns to be raised anonymously and includes a non-retaliation policy whereby all concerns raised in good faith will be protected, as will those against whom claims are made which turn out to be unfounded.

The policy contains the contact details of the Company Secretary and Senior Independent Director and additionally includes an independent reporting hotline where independent and confidential advice can be provided on whistleblowing matters.

During the year, there were no alleged or suspected wrongdoings reported through the whistleblowing procedure.

The Whistleblowing Policy is formally reviewed and approved each year by the Board. During the year, there were no changes made to the policy.

CONFLICTS OF INTEREST

Transparency in our business dealings is paramount and the Board is ultimately responsible for ensuring that there are procedures in place to ensure that conflicts of interests, or potential conflicts of interests, are managed effectively.  

In line with the Group’s Code of Conduct, employees must immediately inform their line manager if there is any possibility of there being an actual or potential conflict of interest. If conflicts can be mitigated, authorisation by way of a Divisional board meeting must be obtained and the Company Secretary must be informed.

Directors must disclose any actual or potential conflicts of interests immediately to the Company Secretary and seek formal approval from the Board.

Additionally, each Head of Department must make an annual Related Party Transaction Disclosure confirming any instances where employees had an actual or potential conflict of interest.

The Board is satisfied that the procedures in place to deal with conflicts of interest are sufficient and were operated effectively during the year.

BOARD ACTION FOLLOWING SIGNIFICANT VOTES RECEIVED AGAINST SHAREHOLDER RESOLUTION

At the Company’s AGM held on 6 November 2019, all resolutions put to the meeting were passed. However, a number of shareholders voted against resolution 3 (the appointment of John Tutte as Executive Chairman), for which 68.62% of votes cast were in favour, and resolution 11 (approval of the directors' remuneration report), for which 69.61% of votes cast were in favour.

In line with Provision 4 of the Code, the Board consulted with major shareholders to understand their concerns and implemented changes following the feedback received. An update statement in respect of the action taken following consultation with major shareholders can be found on Company’s website at http://investors.redrowplc.co.uk/corporate-governance.

Below is a final summary in respect of both resolutions 3 and 11 setting out the impact of shareholder feedback on the Board’s decisions and any resultant proposed actions.

Resolution 3

Having consulted with major shareholders and proxy advisory bodies, and understanding their concerns regarding independence, the Nomination Committee proposed a number of changes to the Board structure. In January 2020, the Board held a further consultation with major shareholders regarding the proposed Board changes in order to obtain their feedback. The following changes were proposed and well received by the shareholders engaged and were subsequently approved and announced by the Board via RNS announcement:

• John Tutte (currently Executive Chairman) to step-down to Non-Executive Chairman at the 2020 AGM and retire ahead of the AGM in 2021;
• an independent Non-Executive Chairman to be appointed following the retirement of John Tutte ahead of the AGM in 2021, in line with the Code; and
• Matthew Pratt (then Chief Operating Officer) appointed as Group Chief Executive with effect from 1 July 2020.

It was initially intended that John Tutte would step-down to Non-Executive Chairman from 30 June 2020. However, due to the unprecedented impact of COVID-19 on the business and the housebuilding industry, the Board asked John Tutte to remain as Executive Chairman until the Company’s AGM in 2020 to support the senior management team get the business back to full operation and John Tutte agreed to this request. It remains John Tutte’s intention to retire from the Board ahead of the AGM in 2021 and Matthew Pratt took up the position of Group Chief Executive with effect from 1 July 2020.

Resolution 11

Having consulted with major shareholders and proxy advisory bodies, the Board understood that the 2020 LTIP award (with targets below those set for the 2019 award) and the LTIP payment made to Steve Morgan were the key contributing factors to the votes against this resolution. 

For the reasons outlined in the Result of AGM RNS announcement, released on 6 November 2019, the Board was, and remains, satisfied that the targets set for the 2020 LTIP were appropriate taking into account the challenges the business faced and struck the right balance between ambition and deliverability.

As outlined in the update statement, available on the Company’s website, Steve Morgan’s LTIP which vested in 2019 was pro-rated to reflect his length of service until his departure at the end of March 2019, rather than the shorter period of time he was in service as an executive (having transitioned to non-executive in October 2017). Under the rules of the scheme, Steve Morgan's transition in October 2017 was not a leaving event and, as such, when he retired in March 2019 he was treated as a 'good leaver' under the scheme. This approach was consistent with the LTIP rules, voting guidelines effective for 2019 and the treatment for the award made to Steve Morgan that vested in September 2018, when 99.35% of votes cast were in favour of the resolution approving the Directors’ remuneration report.

We do however note the feedback from investors, and as a result, once John Tutte has retired from the Board ahead of the AGM in 2021, his outstanding LTIP awards will be pro-rated to reflect the period he is in post as an executive, rather than his time as an office holder.

The Board appreciates and thanks shareholders for the constructive feedback received and looks forward to continuing its dialogue with them.

SHAREHOLDER ENGAGEMENT

The Company announces its financial results half-yearly, and, immediately following their publication, undertakes formal presentations to equity analysts. These presentations are available on the Company’s website. There is a dedicated investor related section of the Company website, providing easy access to RNS announcements, key financial dates, dividend details, reports and publications.

During the 52 weeks ended 28 June 2020, the Executive Chairman, the Group Chief Executive and the Group Finance Director, together with the Senior Independent Director and the Chair of Remuneration Committee, also held a number of meetings with significant shareholders and subsequently briefed the Board on issues discussed at these meetings. There were a number of items discussed at these meetings, and there was a particular focus on the composition of the Board and remuneration matters, following feedback received from the 2019 AGM. The impact of these discussions on decisions taken by the Board can be seen above.

During the year, a comprehensive consultation exercise was carried out with significant shareholders of the Company and proxy advisory firms. The consultation involved matters relating to remuneration practices, Board composition and the impact of COVID-19 on remuneration and remuneration policy renewal.

Following the full year and half-yearly results’ announcement in September 2019 and February 2020, the Executive Directors met current and potential significant shareholders. Feedback from these meetings was independently collated and disseminated to the Board.

Last year the Annual General Meeting took place at the offices of Instinctif Partners in London. All Directors attended the AGM on 6 November 2019, which allowed them to engage directly with shareholders and their representatives and answer any questions. The Board answered questions from shareholders and engaged with them following the meeting.

Formal notification of the 2020 Annual General Meeting will be sent to Shareholders at least 21 working days in advance.

The Company’s website, redrowplc.co.uk, gives access to current financial and corporate information.

WORKFORCE ENGAGEMENT

The Board believes that quality engagement with the workforce is essential to preserving long-term value and a description of the engagement mechanisms of the Company with employees can be found in the Directors Report on pages 106 to 107.

SECTION 172(1) STATEMENT – STAKEHOLDER ENGAGEMENT

The Section 172(1) Statement of the Group, explaining how the Directors have carried out their statutory duty within s.172(1) of the Act, can be found on pages 32 to 37 of the Strategic Report.

DIRECTORS’ AND OFFICERS’ INSURANCE

The Company has directors’ and officers’ insurance in place which insures Directors against certain liabilities, including legal costs.

2. Division of Responsibilities

THE BOARD

The Board comprises an Executive Chairman, two Executive Directors and four Independent Non-Executive Directors, one of which acts as the Senior Independent Director.

Executive Chairman and Group Chief Executive - Division of Responsibilities

The Company has separate roles for the Executive Chairman and Group Chief Executive, ensuring that there is a clear division of responsibilities at the head of the Company between the running of the Board and the operational responsibility for the running of the Company’s business, as required by the Code.

The division of responsibility and accountability between the roles is well defined and using such a balanced approach ensures that no one individual has unfettered powers of decision.

Executive Chairman

John Tutte, as Executive Chairman, is primarily responsible for:

• leading the Board to ensure optimum effectiveness;
• encouraging a culture of openness and debate;
• facilitating constructive board relations and effective contributions from all Non-Executive Directors;
• ensuring that all Directors receive accurate, timely and clear information;
• taking a leading role in determining the Board’s composition and structure;
• ensuring that effective communications are maintained with shareholders; and
• meeting with the Non-Executive Directors without the presence of the Executive Management Team.

John Tutte was not independent upon appointment when assessed against Provision 10 of the Code, as he was previously the Group Chief Executive of the Company. The Board recognises that this is outside the provisions of the Code, however as detailed on page 72, it was considered in the best interests of the Company for John Tutte to replace Steve Morgan as Chairman. This appointment was intended to be on an interim basis, with John Tutte easing back to a Non-Executive Chairman role at the 2020 AGM before retiring from the Board ahead of the 2021 AGM. It is intended that John Tutte will be succeeded by a Non-Executive Chairman who shall be independent when assessed against the circumstances outlined in the Code.

From the date of his first appointment, John Tutte has remained in post beyond nine years, which is not compliant with Provision 19 of the Code. This appointment was intended to be for a limited time, and it is intended that an independent Non-Executive Chairman will succeed John Tutte as Chairman following his retirement ahead of the AGM in 2021.

In 2019 and 2020, the Board engaged with major shareholders in respect of Board composition, particularly regarding the Chairmanship role, and the proposed succession plans were well-received by the shareholders consulted.

Group Chief Executive

Matthew Pratt, as Group Chief Executive, is responsible for:

• operational management of the Group;
• implementing strategic plans with the assistance of the Executive Management Team;
• ensuring that the visions and values of the Company are properly communicated across the Group; and
• reporting on these to the Board.

Senior Independent Director

In line with Provision 12 of the Code, Nick Hewson was appointed as the Senior Independent Director on 7 November 2018, having succeeded Debbie Hewitt in this position.

Nick Hewson has a wealth of experience as a Non-Executive Director and, having been on the Board since 2012, has a good understanding of the business.

The following additional responsibilities fall within the remit of the Senior Independent Director:

• acting as a sounding board for the Executive Chairman and supporting him in ensuring the Board is effective and that constructive relations are maintained;
• being available to shareholders in order to understand their issues and concerns in order to relay to the Board; and
• leading the evaluation of the performance of the Executive Chairman and obtaining views from other Directors.

Non-Executive Directors

The role of the Non-Executive Directors within the Company is essential in order to view the Group objectively and provide constructive challenge to the Executive Directors and scrutinise performance. They have a good understanding of the business and bring a range of skills and experience to the discussions of the boardroom, including offering of specialist advice and strategic guidance. The diversity and skills brought into the Company by the Non-Executive Directors is crucial to developing the strategy of the Group.

The Non-Executive Directors play a vital role in occupying seats on the Board’s Committees and they are positioned in such way that the Committees benefit from their expertise and background.

The Non-Executive Directors play a vital role in appointing and removing Executive Directors, and ensuring that there are succession plans in place for key roles. The work of the Nomination Committee, comprising all Non-Executive Directors, can be seen on pages 71 to 74.

Company Secretary

The Company Secretary acts as secretary to the Board and its Committees and his appointment and removal is a matter for the Board as a whole. He is responsible for advising the Board on all governance matters. The Company Secretary is a Member of the Executive Management Team and all Directors have access to his advice and services. He is responsible for governance structures and mechanisms, corporate conduct and is the primary source of advice on the conduct of the business.

In certain circumstances, Board Committees and individual Directors may wish to take independent professional advice in connection with their responsibilities and duties, and, in this regard, the Company will meet the reasonable costs and expenses incurred and the Company Secretary will assist in arranging such advice.

Board Balance and Independence

The Board considers that it is of a size and has a balance of skills, knowledge and experience that is appropriate for its business. The Executive Management Team provides the Board with an appropriate view of the detail of the business, which, together with the benefit of their significant collective experience of the UK house building industry, enables the Board to discharge its duties and responsibilities effectively. The Non-Executive Directors bring a wealth of experience and understanding from outside the Company which enables them to challenge and help develop proposals on the Company’s strategy.

The details of the Directors’ respective experience are set out in their biographical profiles on pages 50 to 51.

In considering the independence of each Non-Executive Director, the Board has taken into consideration the guidance provided by the Code. The Board considers that all Non-Executive Directors holding office during the year to be independent in accordance with Provision 10 of the Code, as they each:

1. have not been employed by the Company or Group;
2. have no material business relationship with the Company;
3. do not participate in the Company’s employee share plans or pension scheme;
4. have not received additional remuneration beyond the director’s fee displayed on page 91 of this Annual Report;
5. have no close family ties with any of the Company’s Directors, Executive Management Team or advisers;
6. have no significant links with other Directors through involvement in other companies;
7. do not represent a significant shareholder; and
8. have not served on the Board for more than nine years from the date of their first appointment.

The Board believes that presently the balance of Non-Executive and Executive Directors is effective and contains the appropriate mix of skills and experience for the Board to continue successfully. The composition is compliant with Provision 11 of the Code as the ratio of Independent Non-Executive Directors to Executive Directors, excluding the Chairman, is 4:2 (66.67%). Following the retirement of Vanda Murray after the 2020 AGM, the Board composition will remain compliant with this provision, with the ratio of Independent Non-Executive Directors to Executive Directors, excluding the Chairman, being 3:2 (60%).

Appointments to External Boards

Prior to Executive Directors and Non-Executive Directors taking on any additional responsibility outside of the Group, and before making new appointments to the Board, an assessment is undertaken to determine whether this will compromise their ability to commit sufficient time to the Company to properly discharge their responsibilities or create any potential conflicts.

In making the assessment, the Board considers the mandates attributable to such positions, in line with the scoring mechanism used by Institutional Shareholder Services, to determine whether a person is overboarded. The Board does not consider that any of its Directors are overboarded and is satisfied that sufficient time and energy is devoted to the Company by each Director.

In line with Provision 15 of the Code, the Executive Directors do not hold more than one significant Non-Executive Directorship position.

Committees

The Board is supported by Audit, Nomination, Remuneration and Placemaking and Sustainability Committees and their memberships, roles and activities are set out in separate reports, the reports can be found on the following pages:

1. Audit Committee report - pages 64 to 70;
2. Nomination Committee report - pages 71 to 74;
3. Placemaking and Sustainability Committee report - pages 75 to 77; and
4. Remuneration Committee report - pages 78 to 100.
   
   

Each Committee has Terms of Reference, governing their responsibilities and powers, approved by the Board. The minutes of the Committee meetings are circulated to the Board and the Committee Chairmen provide reports to the Board on the work undertaken by the Committees.

The Audit Committee and the Nomination Committee are chaired by Nick Hewson, the Remuneration Committee is chaired by Vanda Murray and the Placemaking and Sustainability Committee is chaired by Sir Michael Lyons. Nicky Dulieu shall succeed Vanda Murray as Chair of the Remuneration Committee following the retirement of Vanda Murray on 6 November 2020.

The Board completed a performance evaluation of each of its Committees during the 2020 financial year. The evaluation reports were discussed at a meeting of the Committees and it was concluded that they were contributing and functioning effectively and were complying with their Terms of Reference.

Board Meeting Attendance

* Nicky Dulieu was appointed as Non-Executive Director on 6 November 2019 and attended all meetings which were held from 6 November 2019 to the end of the 2020 financial year.

3. Composition, Succession and Evaluation

Nomination Practices

To assist with the assessment of the Company’s application of the Code, the following table sets out where key information relating to the Company’s nomination related practices can be found within the Annual Report:

THE NOMINATION COMMITTEE

The Nomination Committee is responsible for leading the process for appointments to the Board and ensuring that succession plans allow for the development of a diverse pipeline for the Board and Executive Management Team positions.

All members of the Nomination Committee are independent Non-Executive Directors and the Committee is chaired by Nick Hewson, the Senior Independent Director.

Further details of the role of the Nomination Committee and work undertaken throughout the year can be found on pages 71 to 74.

APPOINTMENTS AND RE-ELECTIONS TO THE BOARD

The appointments of the Non-Executive Directors are generally made for three-year terms and all Directors are subject to annual re-election. Following the assessment on the effectiveness of the Directors, the Nomination Committee will make recommendations to the Board on reappointments.

The Nomination Committee has recommended the re­appointment of each of the Executive Directors and Non-Executive Directors.

The Board is mindful of the principles and provisions of the Code on election and re-election, including that there should be a formal, rigorous and transparent procedure for the appointment of new directors to the Board, and that annual re-election is subject to continued satisfactory performance. The Board has decided that all Directors will be submitting themselves for re-election at the 2020 Annual General Meeting, save for Vanda Murray who has informed the Board of her intention to retire from the Board following the 2020 AGM due to other work commitments. Vanda Murray’s appointment term was extended on 1 August 2020 to 6 November 2020, being the date of the 2020 Annual General Meeting, following which she shall retire from the Board.

The Board has satisfied itself that all Directors who will be submitting themselves for re-election continue to perform satisfactorily. Details of appropriate Annual General Meeting Resolutions will be found in the Notice of Annual General Meeting which will be sent to shareholders separately.

Board Performance Evaluation

In line with the Code, each year a formal performance evaluation of the Board and its Committees is undertaken.

Last year, an externally facilitated evaluation of the Board and Committees was carried out by Independent Audit. In 2020, a formal internal evaluation of the Board and Committees was undertaken to build upon the progress made in the previous year. After reviewing the evaluation report prepared by Independent Audit last year, a questionnaire was created and tailored, taking into consideration comments made in the previous years’ assessment as well as the current market.

The questionnaires were completed by all members of the Board and each member of the Committees. Members of the Executive Management Team and key external advisors were also invited to participate in the relevant questionnaires. The purpose of widening the participant pool was to gain a deeper understanding of the perception of the Board from non-Board members, which was a useful feedback tool.

Following completion of the questionnaires, an anonymised effectiveness report was compiled and presented at the relevant Board and Committee meetings held in June and July 2020. Having considered the output of this year’s evaluation, the Board considers that it continues to function effectively and its relationship with its Committees continue to be sound. The main observations from the evaluation were:

• the Board works on a basis of trust and openness;
• the right people were brought together around the table to allow for meaningful discussions and meeting arrangements were rated highly;
• there was unanimous agreement that the organisation has a good focus on compliance and the Board have good oversight of the Group’s financial heath, organisational controls and cyber risks;
• there was clarity on the Board’s objectives with a good balance between short-term performance and long-term consequences;
• the quality of chairmanship was highly regarded in promoting inclusive discussions; and
• the response to the COVID-19 pandemic was highly rated, recognising the strength of the Board, Executive Management Team and wider leadership team in dealing with the situation with safety, transparency and efficiency.

The evaluation also identified the following areas for improvement, which will continue to be addressed over the coming year:

• considering the importance of the Board in setting and reviewing the strategy, it was identified that there was potential scope for a further session dedicated specifically to strategy to allow for blue sky thinking;
• there could be further challenge on how far and how quickly we are progressing towards our strategic objectives and milestones; and
• there may be scope for increasing focus on developing the next generation of leaders to ensure the leadership team remain effective.

As a result, the Board considers that it continues to operate effectively with meetings to facilitate and debate decision making.

2019 Evaluation

Diversity

The principle of boardroom diversity is strongly supported by the Board. It is the Board’s policy that appointments to the Board will always be based on merit, so that the Board has the right individuals in place, and recognises that diversity is an important consideration as part of the selection criteria used to assess candidates to achieve a balanced Board. A more detailed explanation of the approach to diversity can be found on page 107.

In line with Provision 23 of the Code, the gender split of the Company can be found on page 74 within the Nomination Committee Report.

4. Audit, Risk and Internal Control

AUDIT, RISK AND CONTROL PRACTICES

To assist with the assessment of the Company’s application of the Code, the following table sets out where key information relating to the Company’s audit, risk and control practices can be found within the Annual Report:

Audit Committee

The Board has established an Audit Committee comprising all four independent Non-Executive Directors. The Executive Chairman is not a member of the Audit Committee.

The Board is satisfied that, with the financial backgrounds of Nick Hewson (being a Fellow of the Institute of Chartered Accountants in England and Wales) and Nicky Dulieu (having held various strategic and financial roles within a FTSE 250 company over a 23 year period), there is sufficient recent and relevant financial experience to ensure that the Committee is able to function effectively with the appropriate degree of challenge.

Further details of the role of the Audit Committee and work undertaken throughout the year can be found on pages 64 to 70.

5. Remuneration

Remuneration practices

To assist with the assessment of the Company’s application of the Code, the following table sets out where key information relating to the Company’s remuneration practices can be found within the Annual Report:

REMUNERATION COMMITTEE

The Board has established a Remuneration Committee comprising all four independent Non-Executive Directors. In line with Provision 32 of the Code, the Executive Chairman is not a member of the Remuneration Committee as he was not independent upon appointment.

Vanda Murray is currently the Chair of the Remuneration Committee, having served on the Committee for over 12 months before taking over this role from her successor, Debbie Hewitt. Vanda Murray shall retire from the Board following the Annual General Meeting of the Company on 6 November 2020 and shall be succeeded as Chair of the Remuneration Committee by Nicky Dulieu. Nicky Dulieu has served as a member of the Remuneration Committee since her appointment to the Board on 6 November 2019 and has significant remuneration experience. She is currently appointed as the Chair of the Remuneration Committees of Adnams plc and Marshall Motor Holdings plc, therefore the Board is satisfied that Nicky Dulieu has sufficient remuneration experience to successfully lead the Remuneration Committee.

The Board has delegated the responsibility to the Remuneration Committee for determining the remuneration policy and setting the remuneration for the Chairman, Executive Directors and members of the Executive Management Team, taking into consideration the remuneration of the workforce.

Further details of the role of the Remuneration Committee and work undertaken throughout the year can be found on pages 78 to 100.

DIRECTORS’ EMOLUMENTS WAIVER

On 27 March 2020, the Directors and senior directors in the business announced internally they had volunteered to take a 20% cut in salary for the duration of the crisis. Following this, the wider directorate in the business also volunteered to take a salary cut of 20%. Save for the Executive Chairman, salaries for the Directors, senior directors and wider directorate returned to their usual levels with effect from 18 May 2020 to coincide with the phased return to construction.

Following the volunteered offering from the Executive Chairman, the Remuneration Committee agreed that the salary of the Executive Chairman would remain at the reduced rate of 80% until the 2020 AGM, to be held on 6 November 2020, at which date his revised salary for his Non-Executive Chairmanship role would take effect. See page 89 of the Directors’ Remuneration Report for further details.

GRAHAM COPE

Company Secretary

15 September 2020