The Board of Savills is committed to maintaining the highest standards of corporate governance. The UK Corporate Governance Code 2014 (the ‘Code’) remains the standard against which we measure ourselves. The Board fully supports the principles set out in the Code and confirms that the Company applies the main Principles and complies with the relevant Provisions of the Code. The Code is published by the Financial Reporting Council and is publicly available at www.frc.org.uk. For the year ended 31 December 2015, information on how the main Principles have been applied can be found here.
Board composition and balance
The Board comprises a Non-Executive Chairman, four Independent Non-Executive Directors and two Executive Directors.
The posts of Chairman and Group Chief Executive are separated. The Chairman is responsible for the workings and leadership of the Board and for the balance of its membership. The Group Chief Executive is responsible for leading and managing the business within the authorities delegated by the Board.
The Executive Director Board members are Jeremy Helsby, Group Chief Executive, Simon Shaw, Group Chief Financial Officer. The independent Non-Executive Directors members are, Tim Freshwater, Charles McVeigh, Liz Hewitt and Rupert Robson. The Board considers that the Non-Executive Directors are independent of management and have no business or other relationship which could interfere materially with the exercise of their judgment.
Tim Freshwater is the Senior Independent Director.
The posts of Chairman and Group Chief Executive are distinct and separate.
The Chairman leads the Board and ensures the effective engagement and contribution of all Executive and Non-Executive Directors. The Group Chief Executive has responsibility for all Group businesses and acts in accordance with the authority delegated by the Board. There are a number of areas where the Board has delegated specific responsibility to management, including responsibility for the operational management of the Group’s businesses as well as reviewing strategic issues and risk matters in advance of these being considered by the Board and/or its Committees.
The Group's corporate governance framework is set out below.
Functioning of the Board
Role of the Board
The primary responsibility of the Board is to provide entrepreneurial leadership and to oversee the overall strategic development of the Group. In addition, the Board sets the Group's values and standards and ensures that the Group's businesses act ethically and that its obligations to its shareholders are understood and met. The Board delegates the management of the day to day operation of the business to the Group Chief Executive, supported by the Group Executive Board referred to on page 42, subject to appropriate risk parameters.
Matters reserved to the Board
The Board has adopted a formal schedule of matters specifically reserved to it for decision making. A full schedule of matters reserved for the Board’s decision along with the Terms of Reference of the Board’s principal Committees can be found on the Company’s website at ir.savills.com/en/company-information/corporate-governance.aspx.
The principal matters reserved for the Board are set out below:
|Strategy and objectives
||Reviewing and approving the Group’s strategy, objectives, business plans and budgets with a view to maintaining the Group’s established entrepreneurial driven business culture. Following implementation, the Board continuously monitors and analyses actual performance against desired outcomes and,
where necessary, agrees adjustments or changes to the strategic plan to ensure the Group achieves its short, medium and long-term objectives.
Considering, testing and approving significant capital investment projects in line with strategy and taking a measured approach with the aim of: maintaining
our position as a market leader; strengthening our presence in an existing market; or establishing the Savills brand in new markets through acquisitions or partnerships with well established high calibre local businesses with the skills to complement our existing capabilities and the ability to sit comfortably
within the Savills business model. Where necessary, reviewing and approving divesting initiatives.
||Establishing, monitoring and regulating the levels of risk which the Group is willing to accept in return for economic success and implementing systems of internal control, governance and approval authorities to safeguard shareholder investments.
Regularly analysing the impact of the Group’s adopted risk appetite against expected outcomes to ensure that the level of risk adopted by the Board is appropriate such that it can be effectively managed by the Group’s businesses and neither constrains growth nor has a negative impact on the Group’s reputation or finances. In response to actual outcomes and/or changes in the internal and external environments, regulating acceptable risk levels to reflect the evolution of strategy.
||Overseeing the performance of the Board and its principal Committees and that of individual Directors to ensure that they continue to be effective in support of Group strategy, policy and practice.
Planning to refresh or replace retiring or outgoing Directors so as to ensure that the different skills, experience and knowledge of the Directors is such that the Group remains capable of adapting to the changing environment as a consequence of it being directed by a set of competent, well rounded individuals who have the ability to formulate sensible and practical ideas capable of being translated into strategies which deliver results.
In line with the Board’s commitment to operate the Group’s businesses on an ethically, morally and legally sound basis from the top down, overseeing the development and approval of the Group’s governance structure and policies such as the Group’s Code of Conduct, standards of ethics and policy in relation to business practice, health, safety, environment, social and community responsibilities to ensure that the Group continues to do the ‘right thing’ and remains compliant with regulatory and legal requirements in each of the jurisdictions in which it operates.
||Reviewing the performance of the Group’s businesses’ profits and cash management initiatives, assessed against the Group’s strategy, objectives, business plans and budgets to ensure that the financial resources generated by the businesses work to create additional value, costs are controlled and/or eliminated and that resource can be made available at the appropriate time to exploit business opportunities.
Reviewing changes to the Group’s capital structure and the issue of any securities in the context of achieving efficiencies or reducing the cost of capital to the Group.
Approving annual and half year results and trading updates, and accounting policies so as to ensure that communication with the Group’s shareholders is fair, balanced and understandable; and, subject to shareholder approval, the appointment and the remuneration of the External Auditors.
Approving the dividend policy and interim and supplemental dividends and recommending final dividends which are appropriate to the Group’s strategy, reflect the performance of the Group and give Group the ability to continue to attract inward investment.
As well as planned briefings, Board members are also expected to take responsibility for identifying their own individual needs and to take appropriate steps to ensure that they are properly informed about the Group and their responsibilities as Directors.
The Board and Committee meetings are structured to allow open discussion. All Directors receive detailed papers in advance of Board meetings. When unable to be present in person, Directors may attend by audio or video conference. When Directors are not able to attend Board or Committee meetings, their comments on the papers to be considered at that meeting are relayed in advance to the Chairman of that meeting.
The Non-Executive Directors meet separately at least once each year without the presence of the Executive Directors and also meet at least once a year without the Chairman, at which time the Chairman’s performance is appraised.
The Group Legal Director & Company Secretary, whose appointment is a matter reserved for the Board, is responsible for advising and supporting the Chairman and the Board on company law and corporate governance matters and for ensuring that Board procedures are followed, as well as ensuring that there is a smooth flow of information to enable effective decision making. All the Directors have access to the advice and services of the Group Legal Director & Company Secretary and through him have access to independent professional advice in respect of their duties at the Company’s expense.
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The Board has delegated certain authorities to committees. The principal committees of the Board are as follows:
The Nomination Committee comprises the Independent Non-Executive Directors, together with the Chairman and the Group Chief Executive. The Committee Chairman is Group Chairman, Nick Ferguson (save in circumstances where the Chairman’s succession is considered). Any other Director, Group Legal Director & Company Secretary or an external adviser may be invited by the Committee to attend the meetings from time to time, as appropriate. The Committee meets at least twice a year. The primary objective of the Committee is to review the size and composition of the Board and its key Committees and to plan for its progressive refreshing, with regard to balance and structure. The Committee has standing items that it considers regularly under its Terms of Reference, for example the Committee considers and approves the Directors’ potential Conflicts of Interest and reviews its own Terms of Reference (which are reviewed at least annually or as required, eg to reflect changes to the UK Corporate Governance Code or as a result of changes in regulations or best practice).
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The Audit Committee is chaired by Liz Hewitt; she is supported by two independent Non-Executive Directors Tim Freshwater and Rupert Robson. Members of the Committee are appointed by the Board following recommendations by the Nomination Committee. All members of the Committee receive an appropriate induction which includes an overview of the business, its financial dynamics and risks. Committee members are expected to have an understanding of the principles of, and recent developments in, financial reporting and their application as well as the roles of the internal and external audit functions.
Committee meetings are attended by Committee members and, by invitation, the Non-Executive Chairman, Group Chief Executive, Group Chief Financial Officer, Group Financial Controller, Group Risk Director of Risk & Internal Audit and Group Legal Director & Company Secretary.
The Chairman of the Committee meets informally and is in regular contact with the Group Chief Financial Officer, Group Risk Director and Group Legal Director & Company Secretary and senior members of the external audit team. This group generally meets ahead of each full Committee meeting to prepare and identify key areas for consideration by the Committee. At least once a year, the Committee meets separately with the external auditors and with management without the other being present. The Chairman of the Committee also attends the AGM to respond to shareholder questions that might be raised on its activities.
The Committee’s role is to assist the Board in discharging its duties and responsibilities for financial reporting, internal control and in making recommendations to the Board on the appointment of the independent External Auditors. The Committee is responsible for the scope and results of the audit work, its cost effectiveness and the independence and objectivity of the external auditors. The Committee is authorised to investigate any matter within its Terms of Reference and has access to the services of the Group Legal Director & Company Secretary and, where necessary, the authority to obtain external legal or other independent professional advice in the fulfilment of its duties. The Committee has responsibility for reviewing the Group’s whistle-blowing arrangements and ensuring that appropriate arrangements are in place for employees to be able to raise, in confidence, matters of alleged impropriety, and for ensuring that appropriate follow-up actions are taken.
The external auditors are PricewaterhouseCoopers LLP. The external auditors are responsible for the annual audit and have also provided certain non-audit services to the Company, principally advice on taxation matters. The approval of the Committee is required prior to awarding contracts to the external auditors for non-audit services with a value in excess of £100,000. Below this level the Chairman of the Audit Committee is kept appraised of new instructions given to the external auditors of the delivery of non-audit services. The Audit Committee is satisfied that such work was best undertaken by PricewaterhouseCoopers LLP and the objectivity of the external auditors has not been impaired by reason of this further work.
The provision of Internal Audit services is delivered by the Group’s Internal Audit team with support from external advisers EY.
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The Committee comprises the Independent Non-Executive Directors and the Non-Executive Chairman.
The principal role of the Remuneration Committee is to support the Group to achieve its strategic objectives by designing a remuneration policy consistent with the Group’s business model such that we have the ability to attract, recruit, retain and motivate the high calibre individuals needed to deliver the Group’s strategy. The Committee is responsible for the broad policy governing senior staff pay and remuneration. It sets the actual levels of all elements of the remuneration of the Executive Directors and reviews that of GEB members. The Policy remains under periodic review to ensure that it remains consistent with the Company’s scale and scope of operations, supports business strategy and growth plans and helps drive the creation of shareholder value. The Committee also oversees the operation of Savills employee share schemes.
In determining Executive Director remuneration, the Committee has access to detailed external information and research on market trends and peer practice provided by its independent external adviser.
The Committee is advised by Deloitte LLP and the Group Legal Director & Company Secretary. The Committee does not deal with the fees paid to the Non-Executive Directors, which are decided by the Executive Directors and the Chairman (except when the Chairman’s fee is being discussed).
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Group executive board ('GEB')
The GEB comprises the Group Chief Executive, the Group Chief Financial Officer, the Heads of the Principal Businesses and the Group Legal Director & Company Secretary. Under the leadership of the Group Chief Executive, the GEB is responsible for overseeing the development and implementation of strategy, the operational performance of the Group and other specific matters delegated to it by the Board.
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Board performance and evaluation
In accordance with the provisions of the Code it is our intention to conduct an external independent evaluation of Board effectiveness and performance and that of its principal Committees at least every three years.
This year the annual Board evaluation was led by the Chairman and supported by the Group Legal Director & Company Secretary. Next year the Board will engage an independent external facilitator to undertake the evaluation. The 2015 internal evaluation covered the performance of the Board as a whole as well as that of its Committees and involved each Board member completing a questionnaire and then using this as the background for a confidential interview. The evaluation covered six core themes: Board effectiveness, Board structure, working practices, succession planning, relationships with shareholders and future priorities in relation to Board performance. The feedback obtained was collated into a report which was presented to the Board.
The evaluation showed that the Board and its Committees continued to operate effectively without any significant areas
of concern. In an effort to continue to improve, however, recommendations arising from the evaluation included: the need to further enhance succession plans in place covering both the executive and Non-Executive Directors, the need to maintain the culture of the Board and maintain continuity through a period of significant change in the membership of the Board, the need to have both updated and tested crisis management plans in place to allow the Board to respond to serious unexpected events and the need to keep the Group’s strategy and development plans under constant review to ensure that these remain appropriate in the light of the current market uncertainty.
Overall, the Board considers the performance of each Director to be effective and concluded that both the Board and its Committees continue to provide effective leadership and exert the required levels of governance and control. The shareholders should therefore support their re-election or re-appointment (as applicable) to the Board at the AGM in May. The Board will continue to review its procedures, effectiveness and development.
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Relations with shareholders
Dialogue with shareholders
The Group recognises the importance of maintaining regular dialogue with its shareholders. The Group Chief Executive and Group Chief Financial Officer lead a regular programme of meetings and presentations with analysts and investors, including presentations following the publication of the Company’s full and half year results. This programme maintains a continuous two-way dialogue between the Company and shareholders, and helps to ensure that the Board is aware of shareholders’ views on a timely basis. The Board also normally receives feedback twice each year from its corporate brokers on investors’ and the market’s perceptions of the Company. The Chairman and the Senior Independent Director are also available to meet shareholders if so required. The Company has enjoyed and is appreciative of the significant shareholder support that it has enjoyed in recent years in relation to the Group’s remuneration policy, The Company continues to welcome shareholder views with regard to the Group’s Remuneration Policy and the Remuneration Committee gives due consideration to such views when raised. Details of the Company’s response to any shareholder views raised would be included in the relevant year’s Remuneration Report.
Constructive use of the Annual General Meeting
The AGM provides the Board with a valuable opportunity to communicate with private shareholders and is generally attended by all of the Directors. Shareholders are given the opportunity to ask questions before and during the meeting and to meet Directors following the conclusion of the formal part of the meeting. In accordance with the Code, the level and manner of voting of proxies lodged on each resolution at the AGM is declared at the meeting and published on the Company’s website. The Directors aim to give as much notice of the AGM and other general meetings as possible, which is at least 20 working days before the AGM and at least 14 working days before other general meetings in accordance with the UK Corporate Governance Code.
The Company has taken advantage of the provisions within the Companies Act 2006 (‘CA 2006’) which allow communications with shareholders to be made electronically where shareholders have not requested hard copy documentation.
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