The role and structure of the Board
The Board of Directors (the ‘Board’) is responsible for the long-term success of the Company and provides leadership to the Group.
The Board focuses on setting strategy and monitoring performance, and ensures that the necessary financial and human resources are in place to enable the Company to meet its objectives. In addition, it ensures appropriate financial and business systems and controls are in place to safeguard shareholders’ interests and to maintain effective corporate governance.
The Board is also responsible for setting the tone from the top in relation to conduct, culture and values, and for ensuring continuing commitment to treating customers fairly, carrying out business honestly and openly and preventing bribery, corruption, fraud or the facilitation of tax evasion.
The Board operates in accordance with the Company’s Articles of Association (the ‘Articles’) and its own written terms of reference. The Board has established a number of Committees as indicated in the chart on page 37 of the annual report. Each Committee has its own terms of reference which are reviewed at least annually. Details of each Committee’s activities during 2017 are shown in the Nomination and Governance, Audit, Risk and Remuneration Committee reports on pages 72 to 95 of the annual report.
The Board retains specific powers in relation to the approval of the Bank’s strategic aims, policies and other matters, which must be approved by it under legislation or the Articles. These powers are set out in the Board’s written ‘Terms of Reference’ and ‘Matters Reserved to the Board’ which are reviewed at least annually. A summary of the matters reserved for decision by the Board is set out below:
Strategy and management
- Overall strategy of the Group
- Approval of long-term objectives
- Approval of annual operating and capital expenditure budgets
- Review of performance against strategy and objectives
Structure and capital
- Changes to the Group’s capital or corporate structure
- Changes to the Group’s management and control structure
- Overall risk appetite of the Group
- Approval of the strategic risk management framework
Financial reporting and controls
- Approval of financial statements
- Approval of dividend policy
- Approval of treasury policies
- Approval of significant changes in accounting policies
- Ensuring maintenance of a sound system of internal control and risk management
- Determining the Remuneration Policy for the Directors, Company Secretary and other senior executives
- Determining the remuneration of the Non-Executive Directors
- Introduction of new share incentive plans or major changes to existing plans
- Review of the Group’s overall governance structure
- Determining the independence of Directors
- Changes to the structure, size and composition of the Board
- Appointment or removal of the Chairman, CEO, SID and Company Secretary
- The making of political donations
- Approval of the overall levels of insurance for the Group
In line with the Code provisions, the Board ensures that a fair, balanced and understandable assessment of the Group’s position and prospects is presented in all financial and business reporting. The Board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives and maintains sound risk management and internal control systems. The Board has established formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles and for maintaining an appropriate relationship with the Group’s auditors.
Financial and business reporting
The Board is committed to ensuring that all external financial reporting presents a fair, balanced and understandable assessment of the Group’s position and prospects. To achieve this, the Board reviews each report and considers the level of consistency throughout: whether there is a balanced review of the competitive landscape; the use of sufficiently simple language; the analysis of risks facing the business; and that there is equal prominence given to statutory and underlying profit. The Board has established an Audit Committee to assist in making its assessment. The activities of the Audit Committee are set out on pages 74 to 78 of the annual report.
Risk management and internal control
The Board retains ultimate responsibility for setting the Group’s risk appetite and ensuring that there is an effective risk management framework to maintain levels of risk within the risk appetite. The Board regularly reviews its procedures for identifying, evaluating and managing risk, acknowledging that a sound system of internal control should be designed to manage rather than eliminate the risk of failure to achieve business objectives.
The Board has carried out a robust assessment of the principal risks facing the business, including those that would threaten its business model, future performance, solvency or liquidity. Further details are contained in the viability statement on page 49 of the annual report.
The Board has established a Risk Committee to which it has delegated authority for oversight of the Group’s risk appetite, risk monitoring and capital management. The Risk Committee provides oversight and advice to the Board on current risk exposures and future risk strategy, assists the Board in fostering a culture within the Group which emphasises and demonstrates the benefits of a risk-based approach to internal control and management. Further details of the Group’s risk management approach, structure and principal risks are set out in the risk review on pages 32 to 48 of the annual report. The Board has delegated to the Audit Committee authority for reviewing the effectiveness of the Company’s internal control systems. The Audit Committee is supported by the internal audit function in discharging this responsibility, and receives regular reports from internal audit as to the overall effectiveness of the control system within the Group. Details of the review of the effectiveness of the Company’s internal control systems are set out in the Audit Committee report on page 76 of the annual report.
The Group is organised along the ‘three lines of defence’ model to ensure at least three stages of independent oversight to protect the customer and the Group from undue influence, conflict of interest and poor controls.
The first line of defence is provided by the operational business lines which measure, assess and control risks through the day-to-day activities of the business within the frameworks set by the second line of defence. The second line of defence is provided by the risk, compliance and governance functions which include the Board and Executive Committee. As noted above, the Board sets the Company’s risk appetite and is ultimately responsible for ensuring an effective risk management framework is in place. The Compliance function maintains the ‘key controls framework’ which tracks and reports on key controls within the business to ensure compliance with the main provisions of the Financial Conduct Authority (‘FCA’) and the Prudential Regulation Authority (‘PRA’) handbooks. Policy documents also include key controls that map back to the key controls framework.
The third line of defence is the internal audit function.
The Board is committed to the consistent application of appropriate ethical standards, and the conduct risk policy sets out the basic principles to be followed to ensure ethical considerations are embedded in all business processes and decision making forums. The Group also maintains detailed policies and procedures in relation to the prevention of bribery and corruption, and a whistleblowing policy.
The Directors who served during the year are listed in the table below. Mike Fairey, Nathan Moss and Tim Hanford retired on 10 May, 31 May and 31 December 2017 respectively. The Board currently consists of nine Directors, being the Chairman, two Executive Directors and six independent Non-Executive Directors. The biographies of Directors can be found on pages 60 to 61 of the annual report.
Board meetings and attendance
The Board met nine times during the year. The Board has a formal meeting schedule with ad hoc meetings called as and when circumstances require. This includes an annual calendar of agenda items to ensure that all matters are given due consideration and are reviewed at the appropriate point in the regulatory and financial cycle. The Board has established a number of Committees as shown on the table below. The table below shows each Director’s attendance at the Board and Committee meetings they were eligible to attend in 2017.
In October 2017, the Board attended a strategy away day. All Directors are expected to attend all meetings of the Board and any Committees of which they are members, and to devote sufficient time to the Company’s affairs to fulfil their duties as Directors. Where Directors are unable to attend a meeting, they are encouraged to submit any comments on the meeting materials in advance to the Chairman, to ensure that their views are recorded and taken into account during the meeting.
Key Board activities during the year included:
- Risk monitoring and review
- Governance and compliance
- External affairs and competitor analysis
- Talent review
- Annual, interim and quarterly reporting
- Customer/brand/product review
- Policy review and update
- Investment proposals
Role of the Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer (‘CEO’) are held by different people. There is a clear division of responsibilities, which has been agreed by the Board and is formalised in a schedule of responsibilities for each.
As Chairman, David Weymouth is responsible for setting the ‘tone at the top’ and ensuring that the Board has the right mix of skills, experience and development so that it can focus on the key issues affecting the business and for leading the Board and ensuring it acts effectively. Our CEO, Andy Golding, has overall responsibility for managing the Group and implementing the strategies and policies agreed by the Board. A summary of the key areas of responsibility of the Chairman and CEO, and how these have been discharged during the year, are set out below and overleaf.
|Chairman's Responsibilities||Activities carried out in 2017|
|Chairing the Board and general meetings of the Company.||The Chairman chaired almost all of the Board meetings held in 2017 and the 2017 AGM. The Senior Independent Director assumed the role of Interim Chairman from May to August 2017.|
|Setting Board agenda and ensuring that adequate time is available for discussion of all agenda items.||The Chairman, in liaison with the Company Secretary, sets the annual calendar of Board business and the agendas for the individual meetings. Time is allocated for each item of business at meetings.|
|Promoting the highest standards of integrity, probity and corporate governance throughout the Company.||The Board received regular updates from its Committees and reviewed its responsibilities and obligations at its meeting in May.|
|Ensuring that the Board receives accurate, timely and clear information in advance of meetings.||The Chairman, in liaison with the Company Secretary and the CEO, agrees the information to be circulated to the Board in advance of each meeting.|
Promoting a culture of openness and debate by facilitating the effective contribution of all NonExecutive Directors.
Ensuring constructive relations between Executive and Non-Executive Directors and the CEO in particular.
|The Chairman runs the meetings in an open and constructive way, encouraging contribution from all Directors. He regularly meets with the Non-Executive Directors without management present so that any concerns could be expressed.|
|Regularly considering succession planning and the composition of the Board.||The Board receives regular updates from the Nomination and Governance Committee. Details of the Committee’s activities are explained in the Nomination and Governance Committee report on pages 72 and 73.|
|Ensuring training and development needs of all Directors are met, and that all new Directors receive a full induction.||The Chairman, in liaison with the Company Secretary, has reviewed Directors training requirements. Details of induction and training held during the year are given on page 70.|
|Ensuring effective communication with shareholders and stakeholders||The Chairman, with the Board, assisted by the CEO, Chief Financial Officer and Investor Relations Manager, agrees a programme of investor relations meetings. Details of those carried out during the year are shown on page 71 of the annual report.|
Chief Executive Officer's responsibilities
Andy Golding’s responsibilities as CEO are to ensure that the Company operates effectively at strategic, operational and administrative levels. He is responsible for all the Bank’s activities: provides leadership and direction to encourage others to effect strategies agreed by the Board; channels expertise, energy and enthusiasm; builds individuals’ capabilities within the team; develops and encourages talent within the business; identifies commercial and business opportunities for the Group, building strengths in key areas; and is responsible for all commercial activities of the Group, liaising with regulatory authorities where appropriate. He is responsible for the quality and financial wellbeing of the Group, represents the Group to external organisations and builds awareness of the Group externally.
An experienced Executive team comprising of specialists in finance, banking, risk, legal, and IT matters assist the CEO in carrying out his responsibilities. The biographies for the Executive team are set out on page 63 of the annual report.