Corporate governance
There is a commitment to high standards of corporate governance throughout the Group. The Board confirms that the Company and the Group have complied during the year ended 31 January 2009 with the principles set out in Section 1 of the Combined Code on Corporate Governance issued in July 2003, as revised in June 2006 (the ‘Combined Code’), except as detailed below.
The Board notes that the Chairman has been a Director for more than nine years but considers that Peter Lewis makes a significant contribution to the Company and that his period of office does not impair his independence. In accordance with Code provision A.7.2, Peter Lewis will stand for re-election at the forthcoming Annual General Meeting.
The Board is accountable to the Company’s shareholders for good governance and the statements set out below describe how the principles identified in the Combined Code are applied by the Group.
Directors
The Board consists of a Non Executive Chairman, Peter Lewis, four other Non Executive Directors and three Executive Directors, of which Lisa Morgan is Group Chief Executive. All of the Non Executive Directors are considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. There is a clear division of responsibility between the Chairman and the Chief Executive.
Biographies of Board members appear here. These indicate the seniority and range of business experience, which are essential to manage effectively a business of the size and complexity of the Group.
The full Board meets at least six times each year and more frequently where business needs require. The Board has a schedule of matters reserved for its decision, including inter alia statutory matters; approval of financial statements and dividends; appointments and terminations of Directors, officers and auditors; appointments of committees and setting of terms of reference; review and approval of Group performance against budgets; approving risk management strategy and material contracts; and determining of authority levels within which management is required to operate.
There is an agreed procedure for Directors to take independent professional advice at the Company’s expense. This is in addition to the access which every Director has to the Company Secretary. The Company Secretary is charged by the Board with ensuring that Board procedures are followed. The minutes of all meetings of the Board and each committee are taken by the Company Secretary who ensures that any unresolved concerns of the Directors are recorded in the minutes.
Appropriate Directors’ and Officers’ insurance cover is arranged and maintained via the Company’s insurance broker, Aon Group, and its terms are reviewed annually.
When new members are appointed to the Board, they are provided with advice from the Company Secretary in respect of their role and duties as a public company director.
Christopher Bell is the Senior Non Executive Director. Concerns relating to the executive management of the Company or the performance of the other Non Executive Directors may be raised with the Senior Non Executive Director. The Senior Non Executive Director is also available to shareholders if they have concerns which contact through the normal channels of Chairman, Chief Executive or Finance Director have failed to resolve or for which such contact is inappropriate. The Senior Non Executive Director also makes himself available to listen to the concerns of employees.
To enable the Board to function effectively and the Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board meetings, this consists of a comprehensive set of papers, including regular business progress reports and discussion documents regarding specific matters.
Appointments to the Board
The Board ensures that plans are in place for the orderly succession of appointments to the Board and to senior management; taking into account the need to maintain an appropriate balance of skills. Appointments to the Board of both Executive and Non Executive Directors are considered by the Nomination Committee. The recommendations of the Nomination Committee are ultimately made to the full Board, which considers them before any appointment is made. The Remuneration Committee considers any remuneration package before it is offered to a potential appointee. The members of each committee can be viewed here.
Any Director appointed during the year is required, under the provisions of the Company’s Articles of Association, to retire and seek election by shareholders at the next Annual General Meeting. The Articles also require that one-third of the Directors retire by rotation each year and seek re-election at the Annual General Meeting. The Directors required to retire are those in office longest since their previous re-election, and each Director retires at least once every three years.
Full details of Directors’ remuneration and a statement of the Company’s remuneration policy are set out in the Directors’ Remuneration Report appearing in the Annual Report, with full details of the members of the Remuneration Committee and the principal terms of reference of the Committee.
Meetings with Non executive Directors
The Chairman holds meetings as required with the Non Executive Directors without the Executive Directors being present.
Board performance evaluation
In accordance with the requirements of the Combined Code, during the year the Board undertook a formal internal evaluation of its own performance and that of its committees and individual Directors. This review was led by the Senior Non Executive Director and included an evaluation of the Chairman’s performance. A further review will be conducted during the current financial year.
Audit committee
The Audit Committee comprises Ishbel Macpherson as Chairman, together with Christopher Bell, Jean-Paul Giraud and Dennis Woodside.
The terms of reference of the Audit Committee are available on request and are published here.
The Audit Committee’s main objectives are, inter alia, to monitor the integrity of the Company’s financial statements and any other formal announcements relating to the Company’s financial performance; review significant financial reporting judgements contained in such statements or announcements, before submission to, and approval by, the Board, and before clearance by the external auditors; review the Company’s internal financial controls and risk management systems; monitor and review the effectiveness of the Company’s internal audit function; and review the arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.
The Committee also reviews any matters raised by the auditors. The Chief Executive and the Finance Director are invited to attend part of each meeting of this Committee, as are the auditors. The auditors have unrestricted access to the members of the Audit Committee, and the Committee ensures that meetings are used as an open avenue of communication between the external auditors and the Board.
Following a recommendation from the Audit Committee, the Board has adopted a policy in relation to the provision of non-audit services by the auditors, with the objective of ensuring that the provision of such services does not impair the external auditor’s independence or objectivity. This includes, inter alia, assessing all relationships with the audit firm, including their partners and staff; assessing the nature and level of fees for non-audit services in relation to the audit fee; obtaining confirmation of independence from the auditors; and ensuring the appropriateness of the firm as providers for non-audit services.
The split between audit and non-audit fees for the year under review is disclosed in note 4 to the financial statements. The non-audit fees were principally paid in respect of tax compliance services and are considered by the Audit Committee not to affect the auditors’ independence or objectivity.
Remuneration committee
The Remuneration Committee comprises Jean-Paul Giraud as Chairman, together with Christopher Bell, Ishbel Macpherson and Dennis Woodside. The work of the Remuneration Committee is covered further in the Directors’ Remuneration Report.
Copies of Executive Directors’ service contracts and the terms and conditions of appointment of the Non Executive Directors are available for inspection at the Company’s office during normal business hours.
The terms of reference of the Remuneration Committee are available on request and are also published here
Nomination committee
The Nomination Committee comprises Peter Lewis as Chairman, together with Christopher Bell, Jean-Paul Giraud and Ishbel Macpherson.
It meets as required and makes recommendations to the Board on all Board and Committee appointments, including the selection of Non Executive Directors. The terms of reference of the Nomination Committee are available on request and are also published here
Audit and internal control
The respective responsibilities of the Directors and the auditors in connection with the Annual Report and Accounts are explained in the Annual Report, along with the statement of the Directors on going concern.
Following the publication of guidance for Directors, Internal Control: Guidance for Directors on the Combined Code, the Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the Group. This process has been in place during the 53 weeks ended 31 January 2009 and up to the date of approval of the accompanying Report and Accounts by the Board. The process is regularly reviewed by the Board and accords with the Turnbull Guidance on Internal Control.
The Board of Directors acknowledges its responsibility for the Company’s system of internal control and for reviewing its effectiveness over financial, operating and risk management controls. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable (but not absolute) assurance against material misstatements or loss.
The Board has reviewed the effectiveness of the system of internal control during the year by reference to budgets, management accounts, cashflow projections and reports from the internal and external auditors, and covers financial, operational and compliance controls and risk management systems.
The risks facing the Group in each country of operation have been identified and the appropriateness of the associated direct controls and indirect controls have been assessed. This risk matrix is reviewed and updated on a regular basis.
The key procedures that the Directors have established to ensure that internal controls are effective are commensurate with a group of this size, a key control procedure being the day-to-day supervision of the business by the Directors. Other internal control procedures and reviews for effectiveness by the Board include the following:
• preparation, maintenance and review of a Group risk register;
• review of financial, operational and compliance reports from management; and
• review of any significant issues arising from the internal and external audits.
The Group has an internal audit function which focuses primarily on the control of cash and stock losses. The Audit Committee consider the focus of the function to be appropriate for the business and operations of the Group.
The Audit Committee keeps the scope and cost-effectiveness of the external audit under review. The independence and objectivity of the external auditors is also considered on a regular basis, with particular regard to the level of non-audit fees. The split between audit and non-audit fees for the year under review appears in note 4. The non-audit fees were principally paid in respect of tax compliance services and are considered by the Committee not to affect the auditors’ independence or objectivity.
Communication with shareholders
The Company attaches importance to the effectiveness of its communications with shareholders. It publishes regular trading statements as well as a full Annual Report. The Company maintains a regular dialogue with institutional shareholders and the financial community. This includes presentations of the preliminary and interim results, regular meetings with major shareholders, participation in stockbrokers’ seminars and site visits. The Group holds a variety of investor and analyst meetings in order to improve the financial community’s understanding of the Group and to introduce investors to a broader range of management. All shareholders can gain access to these and other presentations, as well as to the Annual Report and other information about the Group, on the Group’s website at www.gamegroup.plc.uk. Holders of ordinary shares may attend the Company’s AGM at which the Company highlights key business developments during the year and at which shareholders have an opportunity to ask questions. The chairmen of the Audit, Remuneration and Nomination Committees are available to answer any questions from shareholders on the work of their committees.
The Company confirms that it sends the AGM notice and relevant documentation to all shareholders at least 20 working days before the date of the AGM. Responsibility for maintaining regular communications with shareholders rests with the executive management team led by the Chief Executive. However, the Board is informed on a regular basis of key shareholder issues, including share price performance, the composition of the shareholder register and City expectations. Independent research is commissioned annually into institutional shareholder perceptions of the Group. The Chairman, the Senior Independent Director and the Non Executive Directors make themselves available to meet with shareholders as required.
Going concern
The Directors have reviewed the financial position of the Group and of the Company and have concluded that there is a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.
