Corporate Governance

The two principal standing Committees of the Board are the Audit and Remuneration Committees.

The Audit Committee comprises Simon Moore and Tim Rice, and is chaired by Christopher Powell. The Company’s Auditor is normally in attendance. The Audit Committee reviews the external audit activities, monitors compliance with statutory requirements for financial reporting and reviews the half year and annual financial statements before they are presented to the Board for approval. The Audit Committee also keeps under review the scope and results of the audit and its cost effectiveness, and the independence and objectivity of the Auditor and the effectiveness of the Group’s internal control systems.

The Remuneration Committee (‘Committee’) comprises Tim Rice and Christopher Powell, and is chaired by Simon Moore. Although not a member of the Committee, on occasions, and for matters not related to his own remuneration package, the Committee would normally consult the Chief Executive Officer on proposals relating to the remuneration of the other executive Directors and members of the Group’s senior management team, and they attend meetings of the Committee by invitation. The Committee, on behalf of the Board, determines all elements of the remuneration packages of the executive Directors and would also approve any compensation arrangements resulting from the termination by the Company of a Director’s service contract. The Committee also approves the grant of share options.

As an AIM listed company, Pennant International Group PLC is not required to comply with the Financial Reporting Council’s UK Corporate Governance Code (the “Code”). Nevertheless Pennant International Group Plc Board (the “Board”) recognises the importance of good corporate governance and embraces the principles set out in the Code.  The Board seeks to achieve compliance with the Code wherever appropriate and proportionate, having regard to the size of the Company and its subsidiaries (the “Group”) and the resources available to it.

Details of how the Company addresses key governance issues are set out in this section of the website by reference to the twelve principles of Corporate Governance developed by the Quoted Companies Alliance (QCA).

Application:
The board should express a shared view of the company’s vision and strategy, including details of:

• What the company is working to achieve
• The period in which its objectives are to be achieved
• What is required to achieve these objectives.

This view should be well communicated, both internally and externally.

Compliance:
The Company’s vision is to invest in and develop its operating divisions to deliver long term, sustainable growth in shareholder value by expanding customer relationships, developing new capabilities and pursuing opportunities in closely related business sectors.

Application:
The Board is responsible for putting in place and communicating a sound system to manage risk and implement internal control.

The management of risk is an essential business practice. Boards are expected to balance risk and return, threat and opportunity. Setting strategy includes determining the extent of exposure to the critical risks the company is willing and able to bear.

Compliance:
The Board has established Audit and Remuneration Committees, summaries of which are set out above; full details are contained in the Corporate Governance Statement (link).

The Company receives feedback from its external auditors on the state of its internal controls and has established robust risk management processes, led by the Head of Finance and reporting to the Chairman and Chief Executive Officer (CEO).

Application:
A healthy dialogue should exist between the board and all its shareholders to enable shareholders to come to informed decisions about the company.
Appropriate communication and reporting structures should exist between the board and all constituent parts of its shareholder body. This will assist:

• The communication of shareholders’ views to the board
• Shareholders’ understanding of the unique circumstances and constraints faced by that company.

Compliance:
The Board attaches great importance to providing shareholders with clear and transparent information on the Group’s activities, strategy and financial position. Details of shareholder communications are provided on the Group’s website.
The Board holds regular meetings with larger shareholders and regards the annual general meeting as a good opportunity to communicate directly with shareholders via an open question and answer session.

The Company lists contact details on its website and on all announcements released via Regulatory News Service (RNS), should shareholders wish to communicate with the Board.

The resolutions put to a vote at the next and past AGMs can be found in the Investor section of the Company’s website.

Application:
Directors should develop a good understanding of the needs and expectations of the company’s shareholders, as well as the motivations behind shareholder voting decisions.

No board ever wants to find itself in a position where it is voted down by shareholders. Accordingly, it is in the interests of the company to understand the view of shareholders before a potentially controversial or unusual proposal is put to them.
Companies with a dominant shareholder must be particularly aware of the need to hear the voices of and protect the interests of minority shareholders, and must therefore consider whether it is necessary to put in place contractual arrangements, such as a relationship agreement.

Compliance:
The Board is aware of the need to protect the interests of minority shareholders, and balancing these interests with those of any more substantial shareholders.
The Board comprises four Directors, three non-executive Directors (including the Chairman of the Board) and one executive (being the Chief Executive Officer). The roles of the Chairman and the Chief Executive are undertaken by separate individuals. Board meetings are held at least ten times a year.

Independent Non-Executive Director Appointment Terms
The Company has a policy of appointing non-executive Directors who can provide an independent view of the Company’s activities.
In exceptional cases, a non-executive may also be appointed to represent the interests of a major shareholder where the Board is satisfied that he or she has the requisite experience and is fully aware of his or her fiduciary duty to act in the wider interests of shareholders as a whole.
The Board do not consider that the Company currently has a dominant shareholder where special contractual arrangements would be necessary to protect the interests of minority shareholders.
At every AGM, a third of the Board must retire. Any director who wishes to continue in office on such retirement can only do so if they are re-elected at the AGM by a majority of voting shareholders.

A description of the roles of the Directors is included in the Corporate Governance Statement.

The Company publishes all relevant material, according to QCA definitions, on its website. This includes annual reports and shareholder circulars.

Application:
Good governance includes the board considering the company’s impact on society, the community and the environment.
Every company should consider its Corporate Social Responsibilities (CSR). Any CSR policy should include narrative on social and environmental issues and should show how these are integrated into the company’s strategy. Integrating CSR into strategy will help create long term value and reduce risk to shareholders and other stakeholders.
Compliance:
The Directors are aware of the impact the business activities have on the environment and these are continually assessed and refined.
The Group’s responsibilities to stakeholders, including staff, suppliers, customers and wider society are also recognised.
The environmental impact of the Group’s activities is carefully considered and the maintenance of high environmental standards is a key priority.

Application:
There is a direct cost of delivering effective corporate governance. It is therefore vital to adopt effective and proportionate governance arrangements. The company should benefit from clear and efficient decision making processes. There should be a clear understanding between the board and the shareholders of how value is enhanced and abuses prevented through effective corporate governance. Publishing relevant key performance indicators on these measures may assist.

Compliance:
Whilst the Group recognises the importance of high standards of Corporate Governance the Board has sought to address the matter in a proportionate way having regard to the size and resources of the Group. The principal risks faced by the Group are addressed by the appointment of an experienced executive Board supported by a group of experienced non-executive Directors and a team of appropriately qualified professional advisers. The executive Director is closely involved in the day to day operations of the Group and the operating divisions and reports to the Board in detail at least ten times a year. The reports include the status and trends of agreed Key Performance Indicators which are noted in the Group’s Annual Report and Accounts.

Application:
The company should determine governance structures and processes appropriate to it, based on:

• Corporate culture
• Size
• The capacity and appetite for risk and the tolerances of the company
• Business complexity.

There should be a clear statement as to how the company intends to fulfill its objectives.
The company’s governance structures should evolve in parallel with the company’s strategy and business.

Compliance:
Details of the Company’s corporate governance arrangements are provided here and in the Corporate Governance section of this website.
The Directors attendance at the ten Board meetings in the 12 months ended 31 December 2016 were as follows:

P. Walker – 10/10 meetings
S. Moore – 9/10 meetings
C. Powell – 8/10 meetings
T. Rice – 2/3 meetings (appointed Oct 2016).

Application:
Responsibility for corporate governance lies with the chairman.
The chairman must determine where responsibility lies within the company for the delivery of key outputs.
The board has a collective responsibility and legal obligation to promote the long-term success of the company.

Compliance:
This website page provides full disclosure on the Company’s corporate governance.
Descriptions of the roles of Directors are included above.

Application:
The board should not be dominated by one person or a group of people.
The board must not be so large as to prevent efficient operation but must not be too small to be ineffective.
The board should be balanced between executive and non-executive directors and should have at least two independent non-executive directors.

Compliance:
The Board is comprised of one executive Director, and three non-executive Directors.
Whilst the Company is guided by the provisions of the Combined Code in respect of the independence of Directors, it gives regard to the overall effectiveness and independence of the contribution made by directors to the Board in considering their independence, and does not consider a Directors’ period of service in isolation to determine their independence.
A description of the roles of the Directors is included in the Corporate Governance Statement.

Application:
The board must have an appropriate balance of functional and sector skills and experience.
The board should be supported by Committees (audit, remuneration, nomination and others) that have the necessary character, skills and knowledge to discharge their duties and responsibilities effectively.

Compliance:
Directors who have been appointed to the Company have been chosen because of the skills and experience they offer. Details of the Directors are available on the website.

As noted above, the Company has put in place Audit and Remuneration Committees.

Formal terms of reference have been agreed for all Board Committees. The responsibilities of each of these are available on the website.

Application:
The board should periodically review its performance, as well as the performance of its board committees and the performance of individual board members.
Performance appraisal may include external review and may also identify development needs.
The board should ensure that it possesses the skills and experience to meet present and future business needs. Ineffective directors (whether executive or non-executive) must be identified, supported to become effective and, if that is not possible, replaced. Review, development and mentoring of directors and the wider management team are very important.
It is healthy for membership of the board to be periodically refreshed, regardless of performance issues.
Succession planning is a vital task for boards. No member of the board should become indispensable. How well succession is managed (particularly of the chairman and the chief executive) represents a key measure of the effectiveness of a board.

Compliance:
The Company undertakes regular monitoring of personal and corporate performance using agreed key performance indicators and detailed financial reports. Responsibility for assessing and monitoring the performance of the executive Directors lies with the independent non-executive Directors.
Key performance indicators include, underlying pre-tax profit, cash generation and earnings per share. Agreed personal objectives and targets, including financial and non- financial metrics, are set each year for the executive directors and performance measured against these metrics.

The Board considers the need for the periodic refreshing its membership. One new non- executive Director has been appointed since 31^st December 2015.
Succession planning is considered by the Board.

Application:
The whole board and its committees should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.
Non-executive directors should be provided with access to all information they require and to external advice as necessary.

Compliance:

The Board is provided with detailed financial reports of the Group’s financial performance on a regular monthly basis with more frequent updates if required. Detailed written reports are provided one week prior to the Company’s regular Board meetings. Written recommendations from the executive Directors are delivered in a timely manner with supporting documentation, supplemented as required by reports from external professional advisers so that the Board can constructively challenge recommendations before making decisions.
Non-executive Directors have a contractual right to external advice, at the Company’s expense, when necessary.