The following information is taken as an extract from the 2010 Annual Report, published in July 2011.
The Board of Bloomsbury Publishing Plc (the "Board") is committed to achieving the highest standards of corporate governance. The Listing Rules of the Financial Services Authority require a statement of how a UK company listed on the London Stock Exchange has applied the Main Principles set out in the Combined Code on Corporate Governance revised June 2008 (the "Code") and whether the Company has complied with all relevant provisions set out in the Code throughout the accounting period up to the date of signing of the Directors' Report.
Confirmation of Compliance with the Code
The Board confirms that it has applied the principles and complied fully with all provisions of the Code in respect of the period ending 28 February 2011 except for provisions:
- A.4.1 which requires that the Chairman of the Board or an independent non-executive director should chair the Nomination Committee. The Nomination Committee is formed of three independent non-executive directors, including the Chairman of the Board, and the Chief Executive who continued to chair the Committee. The Board considers that provision A.4.1 is complied with fully in all other respects and that the principle A.4 is applied effectively in that there is a formal, rigorous and transparent procedure for the appointment of new directors to the board. In particular, the Committee engages external recruitment consultants and during the period the Company replaced two long standing non-executive directors with two new independent nonexecutive directors. Directors are appointed to the Board on merit and one third of the Board are women.
- A.7.2 which requires that Non-Executive Directors should be appointed for a specified period. The current letter of appointment of Jeremy Wilson dated 31 October 2007 does not specify a fixed date before requiring the renewal of his appointment and instead specifies a fixed notice period of 3 months by either party. The Board considers that provision A.7.2 has been complied with fully in all other respects and that principle A.7 is applied effectively in that all directors are submitted for re-election at regular intervals, subject to continued satisfactory performance. Further, the board ensures planned and progressive refreshing of the board.
The Board
The directors are responsible to the shareholders for ensuring that the Company is appropriately managed and that it achieves its objectives.
The Board has met ten times during the period for main Board meetings to review the Group's strategic direction, operating and financial performance and to oversee that the Company is adequately resourced and effectively controlled. The Board comprises the independent non-executive Chairman, Senior Independent Director, a further independent non-executive director, Chief Executive, Finance Director and a further executive director.
The Board has approved the matters specifically reserved for consideration by the Board. The Board determines the responsibilities and authority of its sub-committees, individual directors and the level of authorities delegated to the management of the business.
The Audit Committee, Nomination Committee and Remuneration Committee have terms of reference approved by the Board that can be found on the Company's website, www.bloomsbury-ir.co.uk. Matters considered at Board meetings during the period have typically included:
- Review and setting of strategy for the Group's operations.
- Review of the management accounts, key performance indicators and full period forecasts produced quarterly.
- Approval of the annual and interim results and Interim Management Statements.
- Review and approval of annual budgets.
- Regular reports by the Chief Executive, proposals and updates on developing business operations, significant investments, major initiatives, other organisational changes and health and safety.
- Reports of the Chairman of sub-committees and minutes following sub-committee meetings.
- Review and approval of decisions, transactions and sensitive policies that are significant to the group such as dividends; the organisational, legal and capital structure of the group; acquisitions of significant literary titles, businesses and companies; and major contracts.
- Evaluation of the effectiveness of the Board and its subcommittees and approval of sub-committee terms of reference.
There is a clear division of responsibilities at the head of the Company, with the Chairman responsible for the effective operation of the Board, encouraging the active participation of all directors, and the Chief Executive responsible for the strategic running of the Company's businesses. The Board has approved formal statements describing the role and remit of both the Chairman and Chief Executive, which further emphasise this division of responsibilities. The executive directors regularly hold formal meetings with senior managers as a management team to assist the Chief Executive in fulfilling his operational objectives. This management team makes recommendations to the Board and seeks approval from the Board where required. The Non-Executive Directors constructively challenge and help develop proposals on strategy at meetings specifically set up for the purpose, which are attended by all Board members.
All directors and Board sub-committees have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures are followed and advising the Board, through the Chairman, on governance matters. They also have access to independent professional advice, if required, at the Company's expense.
The chairman has held meetings with the non-executive directors without the executives present to discuss relevant matters.
Director independence
The Board considers each of the three Non-Executive Directors, including the non-executive Chairman, to be independent in character and judgement and does not consider that there are any relationships or circumstances which affect, or could appear to affect, their independent judgement. Ian Cormack is a non-executive director of the Authority Board of Qatar Financial Centre for whom the Bloomsbury Information publishing division of the Company provides publishing related support services. He does not have any executive responsibilities for the management of either the Qatar Financial Centre or Bloomsbury Information and does not benefit financially from the relationship. The Board is therefore satisfied that this relationship does not affect Mr Cormack's independent judgement.
Board Committees
Remuneration Committee
The Remuneration Committee comprises solely independent non-executive directors and is chaired by Sarah Jane Thomson. The chairman of the Board, Jeremy Wilson, is one of the three independent non-executive director members of the Remuneration Committee and was considered to be independent on appointment as chairman. The Committee met five times during the period to 28 February 2011. During the period Charles Black and Mike Mayer retired from the Board and the Committee on 28 May 2010 and 31 December 2010 respectively. Sarah Jane Thomson and Ian Cormack joined the Board and the Committee on 28 May 2010 and 1 January 2011 respectively.
The Committee formulates and recommends to the Board the policy for the remuneration of the Chairman of the Board, executive directors including the Chief Executive, Company Secretary and senior executives designated by the Board. It approves the design of, and determines the targets for, reward schemes for the executive directors. The remuneration of the non-executive directors is determined jointly by the Chairman and the executive directors and the remuneration of the Chairman is determined by the executive directors. The Committee is supported by remuneration consultants Hewitt New Bridge Street who work exclusively for the Committee and have no other commercial connection with the company. A statement to this effect is included on the Company's website, www.bloomsbury-ir.co.uk.
The Committee ensures that the contractual terms and payments upon the termination of directors' services are fair and do not reward failure, and that the duty to mitigate loss is fully recognised. It approves the design of employee share incentive plans, the grant of share incentive awards and options to employees and determines whether the performance criteria have been met for the vesting of awards and options. The Committee monitors the remuneration trends for employees generally across the Group and oversees major changes in employee benefits structures.
The terms of reference of the Remuneration Committee are available here.
The Committee is supported by remuneration consultants Hewitt New Bridge Street who work exclusively for the Committee and have no other commercial connection with the company.
Audit Committee
The Audit Committee comprises two independent nonexecutive directors including the Committee Chairman, Ian Cormack, who has recent and relevant financial experience.
The Committee met on four occasions during the period to 28 February 2011. During the period Charles Black and Mike Mayer retired from the Board and the Committee on 28 May 2010 and 31 December 2010 respectively. Sarah Jane Thomson and Ian Cormack joined the Board and the Committee on 28 May 2010 and 1 January 2011 respectively.
The terms of reference of the Committee can be found on the Company's website, www.bloomsbury-ir.co.uk, and set out the role and authority of the Committee. Duties and matters reserved for the Committee include oversight of the relationship and process with the external auditor; review of significant financial information, including assumptions, judgements of management and a critical accounting policies, to be published externally; reviewing the Company's effectiveness of the systems of internal control and risk management; and recommending to the board changes to the Committee's terms of reference.
During the period, the Committee has reviewed the interim and annual results and Interim Management Statements to ensure that they present a fair assessment of the Group's position and prospects before approval by the Board. The Committee approves all significant changes in accounting policies. It has reviewed the Company's statement on internal control systems prior to endorsement by the Board and has reviewed the policies and processes for identifying, assessing and managing business risks.
The Committee evaluates the effectiveness of the external auditor and oversees their appointment, reappointment and fees, ensuring these are adequate for the work they are required to undertake. The Committee monitors the independence and objectivity of the external auditor, ensuring that key audit partners are rotated at appropriate intervals. The Committee reviews the level of non-audit fees relative to audit fees and has approved a formal policy on the provision of nonaudit services to safeguard the independence and objectivity of the external auditors. The policy prohibits the external auditor from being engaged on work where their independence could be threatened and requires the pre-approval by the Committee for a non-audit service where the fees of the external auditor would exceed £5,000 or if non-audit fees for the year would exceed audit fees. Further safeguards are employed such as audit and non-audit work being performed by different teams from the external auditor.
The Company has employed an outsourced internal audit function during the period. The Committee reviews the plans, findings and recommendations of the internal auditor, and management's responses to internal audit recommendations. It ensures that the internal audit function is adequately resourced and has appropriate standing within the Company. The Committee evaluates the effectiveness of the internal auditor and makes recommendations to the Board on the removal or appointment of the outsourced internal audit function.
The Committee typically invites the external auditor, internal auditor, Chief Executive and Finance Director to attend meetings. After the period end, the Committee met the external auditor alone without management present, in respect of the period ended 28 February 2011.
The Committee formally reviews the whistle-blowing arrangements of the Company by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters at least annually. The Committee's objective is to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.
The terms of reference of the Audit Committee are available here.
Nominations Committee
The Nomination Committee comprises three independent directors, including the Chairman of the Board, and the Chief Executive who chairs the Committee.
The Committee meets as required and operates under terms of reference agreed by the whole Board, and which are available on the Group's website. Its role is to regularly review the composition of the Board, consider succession planning and nominate to the Board, for approval, candidates to fill Board vacancies.
The Board formally approves the appointment of all new Directors on the recommendation of the Nomination Committee.
The terms of reference of the Nominations Committee are available here.
Board appointment process
The Board adopts a formal and rigorous approach to the appointment of directors. The following outlines the typical board appointment process:
- the need to appoint a new director is identified by an existing board member's intention to retire or by the regular monitoring by the Committee of the board's structure, balance, succession planning and need for progressive refreshing which takes account of the findings of the Board's evaluation of the skills and capabilities of Board members;
- the Committee determines the recruitment process;
- the Committee considers the strengths and weaknesses of the Board, the management team and the business to define the experience and capabilities required for the new appointment;
- external recruitment consultants are appointed and briefed with the requirements for candidates; filtering selects a long list of the highest calibre candidates; standard interviews are conducted on the long list by two directors sitting together supported by the external recruitment consultant; and a short list of candidates is recommended to the Committee. The recommended candidates are supported by further detailed background research to confirm their suitability which includes detailed references taken up by the Company;
- the Committee considers whether a suitable high candidate can be selected and, if so, recommends a single candidate to the Board.
The Chairman ensures that new directors receive a full, formal and tailored induction on joining the board. Wendy Pallot, a newly appointed executive director, will be provided with the opportunity to meet major shareholders as part of the investor relations programme of the Company.
Re-Election of Directors
All Directors are subject to appointment by the shareholders at the first Annual General Meeting after their appointment, and reappointment thereafter at intervals of no more than three years. Non-executive Directors are appointed for an initial period of three years, subject to reappointment and a notice period by the Company or the director (notice periods are set out in the Directors' Remuneration Report in the 2010 Annual Report). A policy is followed of progressive refreshing of the Board and the independent non-executive Directors can be expected to retire from the Board by the completion of the third three year period.
Performance Evaluation
The performance of the Board, and of each individual Director, is evaluated through completion of self assessment questionnaires and one-to-one interviews with the Chairman. Upon completing interviews, the Chairman considers the findings and decides on appropriate steps to take which can include further research on the issues raised. Where needed the Chairman holds confidential follow up meetings with individual directors to address concerns they have raised or to address concerns raised about them by other Directors.
The performance evaluation of the Chairman is by the other nonexecutive directors and is led by the Senior Independent Director. The evaluation is undertaken by completion of a self assessment questionnaire and one-to-one interview with the Senior Independent Director who takes into account the confidential views of the other directors.
The Chairman and Senior Independent Director update the Board on their findings, conclusions and recommendations for approval and implementation by the Board.
The performance of the Audit Committee, Remuneration Committee and Nomination Committee is evaluated using questionnaires to support Board discussion. Improvements to subcommittee processes arising from the evaluations are agreed by the Board and implemented.
Each subcommittee considers its own terms of reference at least annually and, if considered necessary, recommends changes for the Board to approve.
The conclusions of the Board evaluations are considered by the Nomination Committee when reviewing the structure and composition of the Board and succession planning.
Board and Committee Attendance
The table below shows the attendance at Board and subcommittee meetings during the 14 month period ending 28 February 2011. Further meetings of the Directors were convened during the period to discuss specific issues:
| |
Board |
Remuneration |
Audit |
Nomination |
| Total number of meetings during the period |
10 |
5 |
4 |
3 |
| Executive Directors |
|
|
|
|
| Nigel Newton (Chief Executive) |
10 |
- |
- |
3 |
| Colin Adams |
10 |
- |
- |
- |
| Richard Charkin |
10 |
- |
- |
- |
| Non-Executive Directors |
|
|
|
|
| Jeremy Wilson (Chairman) |
10 |
5 |
- |
3 |
| Charles Black ¹ |
3 |
2 |
2 |
1 |
| Michael Mayer ¹ |
8 |
4 |
3 |
2 |
| Sarah Jane Thomson ² |
7 |
3 |
2 |
1 |
| Ian Cormack ² |
2 |
1 |
1 |
0 |
1 Charles Black and Mike Mayer retired from the Board/Committee respectively on 28 May 2010 and 31 December 2010.
2. Sarah Jane Thomson and Ian Cormack joined the Board/Committee respectively on 28 May 2010 and 1 January 2011.
In respect of the meetings identified in the table above, all directors attended all meetings arising during their appointment.
Training and development of the Directors
Evaluation of the Board reviews whether the Directors have refreshed their skills and knowledge sufficiently and provides an opportunity for directors to identify where training and development can assist them in the performance of their duties. Development may include, for example, meetings with senior managers to gain an improved understanding of processes and issues specific to the business. Directors are provided with relevant technical reports and updates by the Company Secretary as part of the Board's information process.
The Board is progressively refreshed so that three directors have recently retired and been replaced by new appointments bringing new skills and experience to the Board.
Shareholder Communications
The Annual Report, Interim Reports, Interim Management Statements, AGM and post results announcement presentations are the principal means through which the Company communicates its strategy and performance to its shareholders. All shareholders are welcome to attend the AGM and private investors are encouraged to take advantage of the opportunity given to ask questions. The Chairmen of the Audit, Remuneration and Nomination Committees attend the meeting and are available to answer questions, as appropriate.
The Company maintains an active dialogue with its institutional shareholders and City analysts through a planned programme of investor relations. The programme includes formal presentations of results and post results meetings with the major shareholders and other investors who request meetings. The presentations are made available on the website www.bloomsbury-ir.co.uk. The meetings and presentations provide an opportunity for shareholders to ask questions and to meet the executive directors including the Chief Executive and non-executive directors including the Senior Independent Director. The outcome of regular meetings with the main shareholders, presentations and post results meetings is reported to the Board. This includes both feedback from individual directors and feedback collated from discussions by the Company's corporate broker with the main shareholders. The Company's corporate broker provides regular shareholder analysis to the Board.
At least annually, the Chairman writes to the major shareholders inviting them to meet to discuss governance and strategy and to review with them the Group's performance.
Internal Control and Risk Management
The Code requires the directors to assess at least annually the effectiveness of the Company's systems of internal control which include financial, operational and compliance controls, and risk management. This review has been carried out by the Audit Committee on behalf of the Board.
The Board has overall responsibility for the Group's system of internal control and for reviewing its effectiveness, for setting policy on internal control, and for reviewing the effectiveness of internal control. The role of management is to implement Board policies on risk and control. 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, and not absolute, assurance against material financial misstatement or loss.
The Board operates both formally, through Board and Committee meetings, and informally, through regular contact amongst Directors. High level decisions on such matters as strategy, financial performance and reporting, dividends, risk management, major capital expenditure, acquisitions and disposals are reserved for the Board or Board Committees. For its regular formal meetings, the Board receives appropriate information in advance from management. Other decisions outside of these areas are delegated to the Company's management, which reports to the Executive Directors.
The Board has put in place an ongoing process for identifying, evaluating and managing the significant risks faced by the Group in accordance with the guidance of the Turnbull Committee on internal control. This process has been in place for the period under review, and up to the date of approval of this annual report. The process is regularly reviewed by the Audit Committee on behalf of the Board to ensure that the procedures implemented continue to be effective and where appropriate recommendations are made to management to improve the procedures. The Group's system of internal financial control aims to safeguard the Group's assets, ensure that proper accounting records are maintained, that the financial information used within the business and for publication is reliable, that business risks are identified and managed and that compliance with appropriate legislation and regulation is maintained.
Internal Control and Risk Management Framework
The preparation of the consolidated financial statements of the Group is the responsibility of the Finance Directors overseen by the Audit Committee and the Board. This includes responsibility for ensuring appropriate internal controls are in place over financial reporting processes and related IT systems. The Audit Committee monitors the risks and associated controls over financial reporting processes, including the consolidation process.
Relevant features of the Group's system of internal controls and risk management in relation to the financial reporting process and preparation of the group accounts include:
Organisational culture: The Group has a highly skilled, professional and committed workforce. The Board is committed to developing a culture of openness, integrity, competence and responsibility. The Board concentrates mainly on strategic and significant organisational issues, approving objectives and monitoring, at a high level, the financial and operational performance against objectives.
Risk and control review: The Group maintains risk logs and a risk matrix supported by the outsourced internal auditor KPMG. The Executive Committee (formerly the Finance Committee) and Board has reviewed the significant risks and ensures appropriate action is being taken to address the risks. The Audit Committee has reviewed the Group's risk matrix when considering the financial statements.
Financial internal control and risk review: The Finance Director formally reviews the internal financial controls taking account of the risks within the financial information systems and reports the findings of this review to the Audit Committee. Analytical review of operating results and detailed control questionnaires completed for the publishing divisions and overseas offices supplement management's knowledge of the business for the evaluation of the risks and assessment of the internal financial controls. The Audit Committee also receives independent reports on the internal financial controls and risks provided by the internal auditor. The Audit Committee receives other reports from management relevant to the internal financial controls such as reports on the progress of key group projects including the implementation of a new accounting and management information system.
Authority levels: The Board sets the level of authority required, before Board approval is needed, to commit the Group or to undertake transactions. It also approves budgets and other performance targets. Business publishing divisions and business functions operate within these authority levels and budgets and determine the authority to be delegated to individual managers.
Financial management reporting: The Board approves annual budgets. Sales are reported daily, weekly and monthly. Financial results of the business operations are reported monthly and compared to budgets. Detailed forecasts for the Group are updated regularly and reviewed by the Board. The Finance Director approves author advances in the balance sheet.
Acquisition procedures: Established procedures, such as the review and approval by an executive director of acquisition proposals of rights to new books, are operated within set authority limits and used for transactions in the ordinary course of business such as for acquisition of books for future publication. Acquisitions exceeding delegated authority limits require approval by the Board. Acquisition of companies and businesses are approved by the Board.
Accountability: The Group has clearly defined lines of responsibility headed by the Chief Executive and Executive Committee to control the publishing divisions and business functions. Each overseas office has a local manager who is responsible for operational effectiveness and the local internal controls. Detailed operational and financial performance data are monitored by supervisory management to ensure the performance of operations is in line with targets. The reasons for variances and under performance are established by supervisory line management.
Internal audit: An outsourced internal audit function provided by KMPG, undertakes a programme agreed with the Audit Committee to review the internal controls. Its conclusions are communicated to senior management and the Audit Committee. The Audit Committee considers reports from external and internal audit to ensure that adequate measures are being taken by management to address risk and control issues. The outsourced internal audit function reports to the Chairman of the Audit Committee.
Key Controls and Procedures
The Board maintains full control and direction over appropriate strategic, financial, organisational and compliance issues, and has put in place an organisational structure with defined lines of responsibility and delegations of authority.
The annual budget and forecasts are reviewed by the Board prior to approval being given. This includes the identification and assessment of the business risks inherent in the Group and the publishing sector as a whole along with associated financial risks.
The system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The key procedures include:
- detailed budgeting and forecasting programme with annual budget and forecast approved by the Board;
- regular review by the Board of actual results compared with budget and forecasts;
- regular review by the Board of year-end forecasts;
- established procedures for acquisition of books for future publication, capital expenditure and expenditure incurred in the ordinary course of business;
- detailed budgeting and monitoring of costs incurred on the development of reference databases;
- established procedures for credit evaluation of new and existing customers with credit insurance on material customer accounts;
- reporting to, and review by, the Board of changes in legislation and practices within the publishing sector and accounting and legal developments pertinent to the Group;
- appointing experienced and suitably qualified staff to take responsibility for key business functions to ensure maintenance of high standards of performance;
- preparation of monthly consolidated accounts by suitably qualified staff and review by senior management and the Board against budgets and forecast;
- an internal audit programme;
- qualified finance team, experienced Group Finance Director and senior finance managers, keeping up to date with International Financial Reporting requirements; and
- regular review of financial reporting and controls, and taking advice from internal audit.
The Schedule of Matters Reserved for the Board is available here.
Internal Audit
To view the Company's Internal Audit Charter click here |
