Roles, responsibilities and duties within the Board – at a glance summary
The Board operates within a corporate governance framework designed to support the achievement of long-term sustainable success. This governance framework consists of the Board which has reserved matters to its own judgement and delegated responsibilities to its committees and management. The schedule of matters reserved for the Board has been reviewed during the year and is available from the Governance section of the Company’s website, www.headlam.com. It includes matters relating to strategy and management, structure and capital, financial reporting and controls, risk management and internal controls, contracts, board membership and delegation of authority, acquisitions and risk management. An overview of the main duties, roles and responsibilities of the Board are also available on the Company’s website. The Statement of the Responsibilities of the Chairman, Chief Executive and Senior Independent Director have been reviewed during the year and are also available on the Company’s website.
The Board is responsible for providing strategic and entrepreneurial leadership of the business and promoting its long-term sustainable success. This is achieved within a framework of strong governance and effective controls enabling opportunities and risks to be assessed and managed appropriately. In doing so, the Board aims to generate value for shareholders while contributing positively to the wider society. In addition, the Board sets the Company’s strategic objectives; ensures that the necessary financial and human resources are in place for the Company to meet its objectives; and reviews management performance.
The Board takes decisions on strategy and in relation to items set out in the written schedule of matters reserved for its deliberation. Various operational matters and decisions have been delegated to Board or management committees. The Company has long-established Board, Audit, Nomination and Remuneration Committees which oversee and debate important issues of policy and assist the Board in attending to its responsibilities. Terms of reference for each Committee have been reviewed during the year and are available on the Governance section of the Company’s website.
The Executive Directors are responsible for the detailed implementation of the strategic decisions of the Board. The Non-Executive Directors are responsible for evaluating and challenging management’s proposals and their mix of skills and experience bring a broader perspective to the Board’s dialogue and decision-making process.
Until the departure of the Chief Executive in October 2021, the Board consisted of the Non-Executive Chairman, two Executive Directors and four Non-Executive Directors (one of whom was the Senior Independent Director). As such, at least half the Board, excluding the Chairman, were Non-Executive Directors in accordance with the Code. Temporarily only one Executive Director serves on the Board, as Chris Payne performs the dual role of, Chief Executive (previously Interim) and Chief Financial Officer whilst the recruitment process for a new Chief Financial Officer takes place. The Board has ensured that suitable expertise and resources are in place to support Chris during this time and intends to appoint an Interim Chief Financial Officer shortly while the search process is ongoing
The Board undertook a review of the size and balance of the Board and confirmed that the balance achieved between Executive and Non-Executive Directors was in compliance with the Code during the year and, once a new CFO is appointed, appropriate to meet the business and operational objectives. Decisions are made by the Board following detailed consideration of the items under review and no one individual or small group of individuals dominate the Board’s decision-making. The Nomination Committee will keep this under review.
The Company recognises the importance of its Non-Executive Directors remaining independent of executive management in character and judgement in order for them to effectively support and challenge management’s proposals. The Board has considered the independence of the four Non-Executive Directors and, taking into account the Board’s review of the Conflicts of Interests register, consider that all remain independent in character and judgement and free from any business or other relationship that could materially interfere with the exercise of independent and objective judgement. None of the circumstances outlined in the Code that may impair, or could appear to impair, independence apply in the case of any Non-Executive Director. Philip Lawrence was considered independent upon appointment to the Board in 2015 and continued to be so upon taking up his role as Non-Executive Chairman. Keith Edelman, who takes the role of Chairman after the AGM was also independent upon appointment to the Board. The Senior Independent Director is available to shareholders if they have concerns which are not resolved through the normal channels of the Chairman, Chief Executive or Chief Financial Officer, or for which such contact is inappropriate.
The Non-Executive Chairman and Non-Executive Directors do not participate in any bonus, share option or pension scheme of the Company, nor are they subject to minimum shareholding requirements. They are initially appointed for a three-year term and, subject to review and re-election by shareholders, can serve up to a maximum of three such terms. In line with the Code, all Board members stand for re-election by shareholders annually and will do so at the 2022 AGM.
Procedures are maintained by the Board whereby potential conflicts of interest are reviewed regularly and upon appointment to the Board or prior to taking on an external appointment. A review of these procedures was undertaken during the year and it was agreed that they remained appropriate and effective and were therefore re-approved. The operation of these procedures mean that the Board may be reasonably assured that any potential situation where a director may have a direct or indirect interest which may conflict, or may possibly conflict, with the interests of the Company will be identified and, where appropriate, dealt with in accordance with the Companies Act 2006 and the Company’s Articles of Association.
Directors holding significant commitments outside of the Company are required to disclose them prior to appointment and on an ongoing basis where there are any changes. Actual and potential conflicts of interest are both included on a register which is maintained by the Company Secretary and reviewed annually as it was in 2021. Under the Company’s Articles of Association, the Board has authority to authorise potential conflicts of interest and to impose any limits or conditions it sees fit. In addition, the Board has delegated approval of new appointments where no conflict exists to a committee of two Directors, or where a potential conflict could exist, this is referred to the Nomination Committee for consideration.
During the appointment process for both Simon King and Stephen Bird, their other commitments were considered in addition to whether or not a conflict or potential conflict would exist with the interests of the Company. In each case, it was agreed that no potential conflict existed and that the interests of either candidate would allow sufficient time to be dedicated to their role with the Company. Both Directors were subsequently appointed to the Board.
The Board does not consider that any of its Directors are overboarded.
All Directors share collective responsibility for the activities of the Board; the long-term success of the business and its impact on stakeholders and the wider society. The Board roles are constructed to ensure a clear distinction between leadership of the Board and the executive leadership of the business. Specific Board roles are outlined in the table below:
Chris Payne (a recruitment process is underway to fill this role on a permanent basis)
Senior Independent Director
In addition to their role as a Non-Executive Director:
Independent Non-Executive Directors
The Company Secretary provides support to the members of the Board:
The Board met fifteen times during the year to discuss the latest operating and financial information, key strategic items and other topics requiring discussion or decision. Board papers are issued where possible, five working days prior to each meeting to allow adequate consideration of the matters to be discussed. The Board’s meeting agenda is structured to ensure sufficient time is given to each item under consideration.
A record of Directors’ attendance at Board meetings held during the year is set out below. Committee meeting attendance is given in the relevant Committee reports.
|Directors||Role||Meetings attended||Eligible to attend|
|Phillip Lawrence1||Non-Executive Chairman||14||14|
|Amanda Aldridge||Independent Non-Executive Director||15||15|
|Stephen Bird||Independent Non-Executive Director||4||4|
|Keith Edelman||Senior Independent Director||15||15|
|Simon King2||Independent Non-Executive Director||8||9|
|Chris Payne3||Chief Financial Officer||13||14|
|Alison Littley||Independent Non-Executive Director||2||2|
|Steve Wilson||Chief Executive||11||11|
1 Philip Lawrence absented himself from one ad-hoc Board meeting during the year which was dealing with a matter upon which he was conflicted.
2 Simon King was unable to attend one single item ad-hoc board meeting held at short notice and submitted his views in advance of the meeting.
3 Chris Payne absented himself from one ad-hoc Board meeting during the year which was dealing with a matter upon which he was conflicted and additionally was unable to attend one ad-hoc Board meeting held at short notice and submitted his views in advance of the meeting.
Additionally, an offsite strategy day was held with the Executive Team to assist with the development of Group strategy and strategic objectives. Other members of senior management responsible for certain areas attended the strategy meeting and provided an update on various focus areas within their remit. This provided the Board with an opportunity to meet senior leaders in a more formal way and constructively challenge the detailed direction of strategy implementation.
During the year under review, the Non-Executive Directors and the Chairman regularly met without management present, usually before a board meeting or after formalities had been concluded. Two additional ad-hoc meetings of the Non-Executive Directors and the Chairman took place to discuss items of importance. The Senior Independent Director also held a meeting of the Non-Executive Directors without management or the Chairman present.
The Board considers that it may be beneficial for the Executive Directors to hold external directorships to broaden their experience and has therefore approved a policy which would limit such appointments to one Non-Executive Directorship or other significant appointment.
The process for identifying and evaluating new candidates for Board positions has been delegated to the Nomination Committee under its terms of reference. Once a preferred candidate has been identified they are recommended to the Board for appointment.
Upon joining, each new Director receives a tailored induction programme relevant to their experience, expertise and committee membership. Particular emphasis is placed on the new Director visiting several operating locations and businesses and meeting the associated senior managers and colleagues to aid with deep understanding of the Group’s business operations. The Director is also able to accompany a salesperson and a driver for a day to help develop an allround understanding of the roles and the day-to-day challenges faced at all levels of the organisation.
Additionally, an induction programme will typically include briefings on strategy and other matters, site visits, and one-to-one meetings with senior colleagues, including other Directors and each member of the Executive Team, in addition to advisers such as the Company’s stockbrokers and auditor.
A comprehensive information pack is provided which includes (but is not limited to):
The new Director is also provided with an explanation of the Company’s financing structure and relevant statutory and regulatory guidance, including the Code and FRC Board Effectiveness guidance.
All Directors are considered to be suitably qualified, trained and experienced so as to be able to participate fully in the work of the Board. To assist with the independent conduct of their function and, if required in connection with their duties, a process is in place for the Non-Executive Directors to obtain professional advice at the Company’s expense.
Training and development (as did the format of Board meetings until later in the year) once again had to take into account the circumstances of the continuing pandemic. Virtual seminars and on line courses run by professional bodies on various commercial, operational and regulatory matters were attended by the Directors as part of their ongoing development. Such courses included short webinars and conferences in additional to longer term courses on items of importance including sustainability strategies, remuneration and regulatory updates. Directors additionally receive regular updates appropriate to the business throughout the year as part of the Board meeting programme, which develops and refreshes their knowledge and capabilities. During 2021, training also included presentations by the Executive Team to the Board on items within their remit, including ESG, branding, culture and cyber security. In addition, the Company Secretary provides regular updates on developments in Corporate Governance
The Non-Executive Directors further enhance their understanding and knowledge of the business and culture by spending time with the Executive Directors, the Executive Team, other senior management and colleagues.
I followed a thorough induction process which was a combination of meetings with Board members, senior management, site leaders and external advisers. I was fully briefed on all aspects of strategy and operations, including health and safety, investor and workforce engagement, culture, governance and risk.
I spent time as part of the structured induction programme with all Board members and members of the Executive Team to understand strategy and areas of focus for the Group, in addition to Board procedures and process. Outside the formal induction programme, I had further meetings with the Company’s brokers and external audit partner. I also met with various site leaders and other colleagues around the business to understand the challenges they experience every day.
I visited various sites around the core distribution business, including some of our larger sites at Ipswich, Coleshill, Mercado and Tamworth, plus two smaller sites, Kidderminster and Thatcham. I also visited various trade counters and our ceramics specification business, Domus.
We have some great people around the Group who are dedicated to Headlam and to achieving excellent service for our customers. Many of our people have dedicated themselves over many years to their local businesses and there is a vast amount of knowledge of the flooring industry which we as a Board are anxious to build into our decision-making.
The Company Secretary provided an outline of the governance framework including the roles and responsibilities of each of the Board committees. I met with each of the Chairs of the Board Committees to understand the priorities of each committee. For the Remuneration Committee, I additionally met with FIT Remuneration Consultants LLP (the independent adviser to the Remuneration Committee) and for the Audit Committee, I met separately with the lead partner from the External Auditor, PwC.
Visiting the sites around the business helped me understand the challenges faced by the business every day and gave me a true insight into the quality of our people and how we go about achieving our aims for our stakeholders. Also, visiting our smaller customers on the high street and listening to the sales team regarding relationships with multi-site customers gave me an insight into the importance of providing a great service and an appreciation of our customers’ views and requirements.