Corporate Governance Directors' Report Remuneration Report Statement of Directors' Responsibilities             Quicklinks • Statement of Compliance • The Board • Table of the attendance • Chairman and Chief Executive • Non-Executive Directors • Appointments to the Board • Information and Professional Development • Performance Evaluation • Re-election • The level and make-up of Remuneration • Internal Control & Internal Audit • Accountability and Audit • Relations with Shareholders • Constructive Use of the Annual General Meeting • Risk Management     Corporate Governance The Company is required to comply with The Combined Code on Corporate Governance (“the Code”) which came into effect for reporting years beginning on or after 1 November 2003. For the Company, this was effective from 1 January 2004 and a revised code was introduced in June 2006. Statement of Compliance The Company believes that, as demonstrated by the information set out in this section and in the Remuneration Report, it has applied the principles, save as indicated below, and complied with the provisions of the Code throughout the year ended 31 December 2006. Mr N M S Rich was appointed Non-Executive Director on 1 July 2006 and Chairman on 1 October 2006 and on appointment was deemed independent as per the requirements of A.2.2. of the Code. Mr P D Orchard–Lisle resigned as Chairman on 1 October 2006 and was not deemed independent due to the length of his service with the Company but the Board agreed that he should remain as Chairman until his successor was appointed. back to top The Board The Board of Directors represents the shareholders’ interests in maintaining and growing a successful business including optimising consistent long-term financial returns. The Board is accountable for determining that the Company and its subsidiaries are managed in such a way to achieve this objective. The Board has a general responsibility to ensure that in good times as well as times of adversity the Executive is fulfilling its responsibilities. The Board’s responsibility is to monitor regularly the effectiveness of the Executive’s policies and decisions, including the implementation and execution of its strategies. In addition to meeting its obligations for improving shareholder value, the Board has a responsibility to the Group’s customers, employees and suppliers, and to the communities where it develops and invests. All these principles and responsibilities are founded upon the basis of maintaining the successful continuity of the business. The Board has a schedule of matters reserved to it and discusses and makes decisions relating to, but not limited to, strategy and management, structure and capital, financial reporting controls, internal controls, contracts, communication, Board membership and other appointments, remuneration, delegation of authority, corporate governance matters and policies, significant acquisition and disposals of assets and development approvals. The Board delegates authority to the Executive Committee in respect of certain transactions within defined, limited parameters. Managing corporate responsibility opportunities and risks are fully considered by the Board and overseen by a separate Executive Committee. There are the following Board Committees: • Audit • Remuneration • Nomination Membership of these committees is set out on pages 48 and 49. back to top Below is a table of the attendance: Table of the attendance       Name Board (11 meetings) Audit Committee (3 meetings) Remuneration Committee (5 meetings) Nomination Committee (1 meeting) N M S Rich4 5 - 1 - Lord Blackwell 11 3 5 1 I D Coull 11 - - - J A N Heawood 11 - - - W E R Hens1 - - - - S L Howard 11 3 5 1 R D Kingston2 11 - - - M D Lees6 6 - - - L A MacDonagh3 - - - - Rt Hon Lord MacGregor5 5 1 - - P D Orchard-Lisle7 7 3 2 1 A W Palmer 10 3 - 1 C A Peacock 10 - 5 1 D J R Sleath 11 - - - T W Wernink 11 3 - 1                 1 Mr W E R Hens was appointed to the Board on 1 January 2007. He was in attendance for 5 Board meetings during 2006 2 Mr R D Kingston retired from the Board on 31 December 2006 3 Mrs L A MacDonagh was appointed to the Board on 1 January 2007 4 Mr N M S Rich was appointed to the Board on 1 July 2006 5 Rt Hon Lord MacGregor resigned from the Board on 16 May 2006 6 Mr M D Lees is resident in the USA and therefore does not travel over for every Group Board meeting 7 Mr P D Orchard-Lisle resigned from the Board on 1 October 2006               Terms of Reference for each of the Board Committees are available on the Company’s website (www.segro.com) or on written request from the Company Secretary as are the terms of appointment for the Non-Executive Directors, Chairman and Chief Executive. back to top Chairman and Chief Executive Mr N M S Rich was appointed to the Board on 1 July 2006 and appointed Chairman on 1 October 2006 when Mr P D Orchard-Lisle resigned as Chairman. The Chairman has no other significant commitments and is not Chairman of any other FTSE 100 company. Mr I D Coull was appointed Chief Executive in 2003. The Board has approved written roles for the Chairman and the Chief Executive. back to top Non-Executive Directors In addition to the Chairman, there are five Executive Directors, (including Mr W E R Hens who was appointed to the Board on 1 January 2007), Lord Blackwell (Senior Independent Non-Executive) and six other Non-Executives. The Board considers that the following Non-Executives are independent in both character and judgement and there are no relationships or circumstances which are likely to affect or appear to affect the individual’s judgement. • Mr N M S Rich • Lord Blackwell • Mr S L Howard • Mr A W Palmer • Mr C A Peacock • Mr T W Wernink • Mrs L A MacDonagh Mr P D Orchard-Lisle (former Chairman) and Mr N M S Rich both held meetings during the year with the Non-Executive Directors without the Executive Directors being present. back to top Appointments to the Board The Nomination Committee comprises Mr N M S Rich, who chairs this committee, Mr S L Howard, Mr A W Palmer and Mr C A Peacock, all of whom are independent Non-Executive Directors and Mr I D Coull. The Committee has responsibility for making recommendations for new appointments to the Board. Outside consultants give advice to the Committee regarding searches for potential new Non-Executive Directors. The Committee evaluates the balance of skills, knowledge and experience on the Board and prepares a description of the role and capabilities required for a particular appointment. back to top Information and Professional Development Board meetings are held on a regular basis with some eleven meetings being programmed each year, with additional ad-hoc ones being arranged if necessary. The Board receives timely advice on all material information about the Company, its subsidiaries, its activities, performance and its projects, particularly including any significant variances from a planned course of progress. Directors are encouraged to continually update their professional skills and capabilities, together with knowledge of the Company’s business. On appointment, new directors are given a comprehensive introduction to the Group’s business including visits to the Group’s activities and meetings with senior management. All directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. Directors have the right to consult with the Company’s professional advisers and to seek independent professional advice at the Company’s reasonable expense. back to top Performance Evaluation The Board undertakes a formal evaluation of its own performance and that of its committees and individual Directors. The Chairman leads this process, assisted by the Company Secretary. The performance evaluation consists of each Director completing a wide ranging appraisal questionnaire which is based on the process and questions outlined in the Code. The responses to the questionnaire are reviewed by the Chairman and the Board. There were no major issues identified in the 2006 review. Some minor adjustments have been made to the operation of the Board. The Chairman has confirmed that the Non-Executive Directors standing for re-election at this year’s Annual General Meeting continue to perform effectively and demonstrate commitment to their roles. back to top Re-election All Directors are subject to periodic re-appointment by the shareholders at three yearly intervals. Non-Executive Directors are appointed and are then subject to periodic re-appointment. After two terms of three years there is a rigorous assessment prior to their being proposed. back to top The level and make-up of Remuneration The pay and benefits for Executive Directors, including the Chairman, is determined by the Remuneration Committee. The Committee comprises, Mr S L Howard (Chairman), Lord Blackwell, Mr N M S Rich and Mr C A Peacock. For Non-Executive Directors, their fees and remuneration is determined by the Board on the advice of the Chairman. The remuneration of Executive Directors and Non-Executive Directors will be the subject of continual monitoring of comparable companies and the assistance of independent external advisers will be sought from time to time. The Remuneration Report is on pages 59 to 67. back to top Accountability and Audit There is an Audit Committee comprising Mr A W Palmer (Chairman), Lord Blackwell, Mr S L Howard, Mr N M S Rich and Mr T W Wernink. The Terms of Reference of the Audit Committee are:           (a) considering the appointment of the external auditor and ensuring that key partners are rotated at appropriate intervals;     (b) assessing the independence of the external auditor;     (c) recommendation of the audit fee to the Board and pre-approve any fees in respect of non-audit services provided by the external auditor in excess of a fee of £25,000 per assignment and to ensure that the provision of non-audit services does not impair the external auditors’ independence or objectives. For the avoidance of doubt, the provision of normal taxation advice is to be regarded as being included within normal audit services;     (d) discussing with the external auditor, before the audit commences, the nature and scope of the audit and reviewing the auditors’ quality control procedures and the steps taken by the auditor to respond to changes in regulatory and other requirements;     (e) overseeing the process for selecting the external auditor and making appropriate recommendations through the Board to the shareholders to consider at the Annual General Meeting;     (f) reviewing the external auditor’s management letter and management’s response;     (g) reviewing the results of internal audits and management responses;     (h) considering management’s response to any major external audit or internal review recommendations;     (i) reviewing from time to time the Company’s procedures for handling allegations from whistleblowers;     (j) reviewing the assessment and management of risk, including financial, market, operational, legal, regulatory and reputational risks, and reviewing management, internal auditor’s reports and the comments of the external auditors;     (k) reviewing management’s and the internal auditor’s reports on the effectiveness of systems for internal financial control and reporting;     (l) reviewing, and challenging where necessary, the actions and judgements of management, in relation to the interim and annual financial statements before submission to the board, paying particular attention to:       1. critical accounting policies and practices, and any changes in them     2. decisions requiring a major element of judgement     3. the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed     4. the clarity of disclosures     5. significant adjustments resulting from the audit     6. the going concern assumption     7. compliance with accounting standards     8. compliance with stock exchange and other legal requirements     9. reviewing the Company’s statement on internal control systems prior to endorsement by the Board and to review the policies and process for identifying and assessing business risks and the management of those risks by the Company;     (m) reviewing significant litigation and legal risk (if not in the ordinary course of business);     (n) reviewing the internal audit programme;     (o) ensuring that such internal audit function is adequately resourced and has appropriate standing with the Company;     (p) approving the appointment or dismissal of the head of internal audit; and     (q) considering such other topics, as defined by the Board.               Financial Reporting The Board believes that it presents a balanced and understandable assessment of the Company’s position and prospects. Going concern After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts. back to top Internal Control & Internal Audit The Board is responsible for monitoring and maintaining a robust and effective internal controls framework across the Group and for identifying, evaluating and managing the Group’s significant risks, in compliance with principle C.2 of the Combined Code. This framework and system has been developed in compliance with the Turnbull guidance and is continuously reviewed by the Board, who confirm that it has been in place throughout the year and to the date of this report. The framework and internal controls system are designed to manage but not to eliminate the risk of failure of the Group to meet its business objectives and as such only provide reasonable but not absolute assurance against material misstatement or loss. The key features of the internal control framework include:               • the establishment of an organisational structure with clearly defined levels of authority and division of responsibilities;     • a comprehensive system of reporting, budgeting and planning against which performance is monitored;     • the formulation of policies and of approval procedures in a number of key areas such as treasury operations, capital expenditures and environmental matters. These are reviewed from time to time by the Board to confirm their adequacy and effective operation;     • the provision of a code of conduct for employees and the monitoring of the quality of personnel through an annual performance appraisal process;     • a regular and ongoing risk assessment process, undertaken at both Group and subsidiary levels which includes identification and evaluation of the likelihood of key risks materialising and assessment of the controls and other processes in place to manage such risks;     • a Group Risk Committee, with the responsibility to oversee the identification, assessment and management of all the risks faced by the Group;     • an internal audit function, introduced during 2006, with a risk-based programme of work aimed at improving processes and the controls; and     • an annual control self-assessment and certification exercise whereby managers throughout the business carry out an assessment of the controls in their area of the responsibility and certify whether such controls have been operating effectively throughout the year.           During the second half of the year an internal audit function was established using an external provider. The function is managed internally but the scope of work and findings are closely monitored by the Board and the Audit Committee. The Internal Audit function carries out a programme of risk-based reviews to ensure both operating effectiveness of internal controls, but also to assess the design effectiveness of the controls, promoting best practice and consistency across the Group. The Audit Committee on behalf of the Board has reviewed the effectiveness of the systems of internal control and risk management. The review covered all material areas of the business including financial, operational and compliance controls and risk management. In performing its review of effectiveness, the Audit Committee took into account the following reports and activities:               • Internal audit reports on reviews of business processes and activities, including action plans to address any identified control weaknesses.     • Management’s own assessments of the strengths and weaknesses of the overall control environment in their area, and the action plans to address the weaknesses.     • External auditor reports on any recommendations for improvements in controls or processes identified in the course of their work, including the follow-up of previous recommendations.     • Risk management reporting, including the status of actions to mitigate major risks.           The Board and the Audit Committee monitor management’s action plans designed to address weaknesses in internal controls which have been identified as a result of the above procedures. The Board confirms that it has not been advised of any failings of weaknesses which it regards to be significant. back to top Relations with Shareholders The Chairman, Chief Executive and designated Directors will be the Company’s principal spokesmen with investors, fund managers, the press and other interested parties. The Senior Independent Director will also make himself available to investors. The Board will be fully informed as to the information imparted to shareholders and their reactions. There are regular meetings with institutional shareholders held by the Chief Executive and Finance Director which are reported on to the Board. The Chairman and the Senior Independent Non-Executive Director have separate meetings with institutional shareholders and these are also reported on to the Board. back to top Constructive Use of the Annual General Meeting At the Annual General Meeting investors are given the opportunity to question the Board and to meet with them afterwards. They are encouraged to participate in the Meeting. Photographic displays and literature are available to illustrate the company’s developments. back to top Risk Management For more detailed information on risk management please refer to pages 18 to 20 in the Operating and Financial Review. back to top             SitemapClick here to download Annual Report in PDF format (5.5Mb)