Board report on corporate governance (continued)

As referred to above, Michael Hartnall has served on the Board of the Company or a subsidiary for twelve years but in all other respects is considered by the Board to be an independent non-executive director whose views and input into Board related decisions are highly valued. Michael Hartnall is the senior non-executive director who is available to shareholders if they have concerns which contact through the usual routes of Chairman, Chief Executive or Finance Director has failed to resolve.

Only members of the Nomination, Audit and Remuneration Committees are entitled to attend meetings of those Committees and all other attendees, including the executive directors and advisors to such committees, may only attend by invitation.

Keith Hopkins, who is Chairman of the Company, is also Chairman of the Nomination Committee but is not a member of the Audit Committee or the Remuneration Committee. Michael Hartnall is Chairman of the Audit Committee and a member of the Nomination and Remuneration Committees. Edward Wilson is Chairman of the Remuneration Committee and a member of the Audit and Nomination Committees. Kevin Matthews, a newly appointed non-executive Director, is a member of all three Board Committees. The Chief Executive is a member of the Nomination Committee. Jonathan Fry was a member of the Nomination and Remuneration Committees until his resignation during the year. The other two executive directors are not members of any of the Committees.

Appointments to the Board

Nomination Committee
The Nomination Committee leads the process for orderly succession planning for Board appointments and makes recommendations to the Board, with the actual appointment being made by the Board as a whole. The Committee met seven times during the year. All the members of the Committee and Peter Russell, Director of Group Human Resources, attended all the meetings, with the exception of one meeting from which Edward Wilson was absent. The other executive directors attended four meetings.

The succession planning process includes reviewing the current skills, knowledge and experience of existing Board members as well as considering the future strategy and objectives to be achieved by the Company so that an appropriate skills set within the Board is maintained.

Any new appointment to the Board involves a comprehensive performance evaluation of the role to be filled and the development of a job description to ensure the appointment is made on the basis of merit against agreed objective criteria. In addition, at least one external recruitment consultant is appointed to manage the selection process of potential candidates and open advertising is used where considered appropriate.

The expected time commitment which the role requires is discussed with candidates and clearly set out in the letter of appointment.

The terms of reference of the Nomination Committee are available on request and on the Company website.

Information and professional development
The Board normally meets at least ten times a year and papers to be considered at each Board meeting are usually provided five clear days before each meeting. A report from the Chief Executive on current trading and major business issues is considered at each meeting and the Board also considers reports from various heads of corporate functions, including finance and legal, on a regular basis. In addition the Board agrees major strategic initiatives and the operating plan for the following financial year. Such information enables business performance to be monitored, evaluated, discussed and challenged where necessary and enables informed, sound decisions to be made.

The Chairman leads the process to ensure that all directors keep their skills and knowledge up to date to enhance the overall effectiveness of the Board and its committees and actively encourages professional development. The Company ensures that the financial resources and time are available for directors to attend courses and seminars where necessary.

An induction programme is in place to help a new director settle into his/her role and become effective as quickly as possible. The programme includes details of fiduciary duties and dealing restrictions as outlined in the Model Code, Board and business related matters, meetings with senior management, site visits and the opportunity to meet with major shareholders.

Board report on corporate governance continues on the next page >
[Page 2 of 4]