The Board has Audit, Nomination and Remuneration Committees. Each Committee has formal, written terms of reference which are available. All Committees have at least three independent non-executive directors within their composition. The Company Secretary advises and acts as secretary to the Committees.
During the course of the year, the Board also established a Disclosure Committee to ensure that Rotork complies with its obligations in relation to the control and disclosure of inside information under the EU Market Abuse Regulation which was introduced in July 2016. Membership of the Disclosure Committee currently comprises the Chief Executive, the Finance Director and the Company Secretary and operates under formal, written terms of reference.
The Committees have authority to take external, independent professional advice at Rotork‘s expense for matters relating to the discharge of their duties.
Chair: LM Bell
Members: SA James, GB Bullard, JE Nicholas
Activities of the Audit Committee during the year
The Audit Committee maintains an annual schedule of work which is kept under review and forms the basis of its principal meetings throughout the year. The annual schedule is supplemented by consideration of specific issues as and when they arise. The Audit Committee met five times during the year. Meetings of the Audit Committee are arranged to co-ordinate with the Group‘s financial reporting timetable to ensure appropriate scrutiny by the Audit Committee of such announcements, including, in particular, review of year end and interim financial reports, in addition to other trading updates made during the year. A summary of its principal activities is set out opposite.
During 2016, in addition to its usual schedule of work, the Audit Committee focused on two key elements:
- The effectiveness of the Group‘s internal audit processes; and
- A review of the effectiveness of changes made to the Group‘s risk management and internal controls during 2015.
The membership of the Audit Committee was unchanged during the year ended 31 December 2016, but John Nicholas retired from the Audit Committee on his retirement from the Board on 24 February 2017 and Lucinda Bell replaced Sally James as Chair of the Audit Committee on 27 February 2017.
All Audit Committee members are independent non-executive directors. Lucinda Bell and John Nicholas hold professional accounting qualifications and the Board considers both to have recent and relevant financial experience. Biographies of each member of the Audit Committee can be found on pages 60 to 61 of the Annual Report. The Head of Risk and Internal Audit, the Risk and Audit Manager, the Chairman, the Chief Executive, the Finance Director, the Group Financial Controller, and representatives of the external auditor (including the principal audit partner) also regularly attend meetings by invitation.
The Audit Committee operates under formal terms of reference which are reviewed annually.
Principal responsibilities are to review and report to the Board on:
- The integrity of financial reporting;
- Significant accounting policies and judgments;
- Internal control and risk management systems including monitoring the effectiveness of internal audit;
- The appointment, independence and effectiveness of the external auditor, including the policy relating to non-audit work and policy relating to employment of former staff of the external auditor;
- The external auditor‘s remuneration; and
- Whistleblowing and other Group policies as relevant.
Chair: MJ Lamb
Members: LM Bell, GB Bullard, PI France, SA James, JE Nicholas
The Nomination Committee is responsible for leading the process for Board appointments and making recommendations to the Board; ensuring succession planning is in place; regularly reviewing the structure, size and composition of the Board, including its balance of skills, knowledge and experience, and making recommendations as appropriate.
The membership of the Nomination Committee was unchanged during the year ended 31 December 2016, but John Nicholas retired from the Nomination Committee on his retirement from the Board on 24 February 2017.
Succession planning, and its interaction with the Board‘s continuing focus on strategy and culture, was a focus for the Nomination Committee during the course of the year. These discussions were informed by consideration of the FRC‘s feedback paper on board succession planning, and attendance by the Chair at external seminars on the future role of the Nomination Committee.
Chair: GB Bullard
Members: LM Bell, SA James, JE Nicholas
The work of the Remuneration Committee is described in the Remuneration Report on page 76 to 93 of the Annual Report.
The Directors’ Remuneration Report is split into two parts:
- The Policy Report, which sets out the Company‘s policy on directors’ remuneration for the three year period (2017-2019); and
- The Annual Report on Remuneration which discloses the payments and awards made to the directors under the previously approved policy, shows the link between remuneration and the Group‘s performance, and sets out how the remuneration policy will be applied for the forthcoming year.
The Policy Report will be subject to shareholder approval in a binding vote at the forthcoming annual general meeting (AGM). The Annual Report on Remuneration, together with this introductory statement, will be subject to an advisory shareholder vote at the AGM.