HOLDERS GROUP LIGHTING COMPONENTS WIRELESS LIGHTING CONTROL PCB Home About Us Investors Contact Us Home Corporate Governance INTRODUCTION The Board recognises the importance of sound corporate governance and has decided to adopt the Quoted Company Alliance’s Corporate Governance Code (“the QCA Code”). As Executive Chairman I have oversight of the board and ultimate responsibility for the Group’s governance; Paul Geraghty, in his capacity as Group Finance Director and Company Secretary, is responsible for ensuring that the Group has appropriate corporate governance standards in place and that these requirements are followed and applied within the Group as a whole. The corporate governance standards set by the Board and followed by the Group are intended to help ensure that the Group delivers long term value to its shareholders, applies sound ethical values and allows shareholders the opportunity for open dialogue with the Board. The Board closely monitors senior management to ensure that these values are recognised and adopted. The Board currently consists of four directors, of which three are executive and one is non-executive. The Board periodically considers whether it would be appropriate to seek to appoint an additional Non-executive director but at this time believes that appropriate oversight of the Group is provided by the currently constituted Board, given the size of the company and the nature of its business. This belief will continue to be reviewed by the Board. Yours faithfully Rudi Weinreich Executive Chairman CORPORATE GOVERNANCE REPORT The QCA Code sets out 10 principles which it advocates should be applied. These are listed below together with a short explanation of how the Group applies each of the principles. Where the Group does not fully apply a principle, an explanation as to why has been provided. PRINCIPLE ONE: BUSINESS MODEL AND STRATEGY For each business unit the Board has adopted a strategy to promote long-term value for shareholders as outlined in the Operating and Business Review in the Annual Report 2017 on pages 2 to 3. PRINCIPLE TWO: UNDERSTANDING SHAREHOLDER NEEDS AND EXPECTATIONS The Board is committed to maintaining good communications and constructive dialogue with its shareholders. Institutional shareholders and analysts are welcome to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company though its website, www.holdersgroup.com. Paul Geraghty, Group Finance Director is available in the first instance to respond to investor enquiries. PRINCIPLE THREE: STAKEHOLDER AND SOCIAL RESPONSIBILITIES The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees, customers and suppliers to the Group. The Board has put in place a range of processes and systems to ensure close contact with these key stakeholders is maintained. The Board also ensures that key relationships with customers and suppliers are the responsibility of one of the directors or the Divisional Managing Directors. The Board at all times seeks to act in a legally compliant and socially responsible manner and also seeks to ensure that senior management act in a similar fashion. PRINCIPLE FOUR: RISK MANAGEMENT The Board and Divisional Managing Directors are responsible to the Board for ensuring both that procedures are in place, and that these are being effectively implemented so as to identify, evaluate and manage the risks faced by the Group. The nature of the risks and degree of exposure are reviewed periodically. The following principal risks, and controls to mitigate them, have been identified: Activity Risk Impact Control(s) Customers and Suppliers Loss of major customer/ supplier Reduction in profitability Multiple-level contact. Reduce dependence on any one customer/ supplier. Regular review. Key Management Recruitment/ retention of key management Reduced performance Competitive short term and long-term remuneration and incentives. Stimulating environment with clear two-way communication. Business Interruption Loss of operating capability. Potential loss of business Business interruption insurance. Dual capacity UK and Germany. Ongoing renewal and maintenance of machinery. Financial Control Fraud or misstatement of accounts Financial loss Multiple authorisation levels and internal controls. Segregation of duties. Monthly review of operating results and cash. There are a range of Group policies which cover matters such as share dealing. The current Board takes the view that an internal audit function is not necessary or practical due to the size of the Group and the close day to day control exercised by the executive directors. However, the Board will continue to monitor the need for an internal audit function. PRINCIPLE FIVE: A WELL-FUNCTIONING BOARD OF DIRECTORS The Board comprises: Executive Chairman Rudi Weinreich Group Managing Director Victoria Blaisdell Group Finance Director Paul Geraghty Non-executive Director David Mahony* Currently the Group Managing Director and Group Finance Director are full time employees. The Executive Chairman is a part time employee, and the non-Executive Director David Mahony is a part time consultant. Biographical details of the current directors are set out within Principle Six below. At each Annual General Meeting, one-third of the Board members retire by rotation and offer themselves for re-election. *David Mahony is deemed by the Board to be independent even though he has served on the Board since the company was floated on the Unlisted Securities Market in 1988. The Board believes that Mr Mahony’s broad senior level experience enables him to be classed as independent. The letters of appointment of all directors are available for inspection at the Company’s Tweedbank office during normal business hours. The Executive and Non-Executive Directors are bound by contracts which require no more than one year’s notice. The Non-executive Director receives a fee for his services as a director which is approved by the Board, based upon the time commitment and responsibilities of his roles, of current market rates for comparable appointments, and within any constraints imposed by the current financial position of the Group. The Non-executive Director is also reimbursed for travelling and other incidental expenses incurred on Group business. Directors’ emoluments, including Directors’ interest in share options over the Group’s share capital, are set out in Note 23 of the 2017 Annual Report. The Board meets each month. It has an established Audit Committee and a Remuneration Committee, particulars of which appear hereafter. The Board has resolved that any appointments to the Board are made by the Board as a whole and therefore a Nominations Committee has not been created. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS The Board retains full control of the Group with day-to-day operational control delegated to Executive Directors. The full Board meets monthly and on other occasions as it considers necessary. During 2017 there were twelve Board meetings, one Remuneration Committee meeting and two Audit Committee meetings. All meetings were fully attended by their constituent directors apart from one board meeting where apologies were received from David Mahony. PRINCIPLE SIX: APPROPRIATE SKILLS AND EXPERIENCE OF THE DIRECTORS The Board currently consists of five directors. The Board believes that the Board composition is appropriate to provide the necessary skills, balance and experience for the needs of the company. Board biographies: Rudi Weinreich, Executive Chairman, born in 1946 in Austria, was sole executive director of Holders Technology until 1987. He has been responsible for all aspects of the business since the business commenced in 1972 and continues to be closely involved with all aspects of the Group. Victoria Blaisdell BSc, born in 1972, joined the Group in 2004 and is now the Group Managing Director. She previously worked in the IT industry and has worked in several countries as a Senior Consultant for one of the largest global IT consultancies. Paul Geraghty BSc, FCA, born in 1960, joined the Group in 2011 as Group Finance Director and Company Secretary. He previously held senior financial roles in engineering companies, including Elektron Components Limited and Protec plc. David Mahony BA (Economics), MSc, born in 1944, is the Senior Non-executive Director, appointed in 1988. He is also a Director of Tower Mint David spent thirty-five years with Hambros Bank in Corporate Finance and as an Industrial Advisor, during which time he was Chairman or Director of various PLC, Aim and Private companies. PRINCIPLE SEVEN: EVALUATION OF BOARD PERFORMANCE In 2019 the Board will strengthen its hitherto informal monitoring of individual directors’ performance by instituting a formal system whereby the Chairman and non-executive director will formally meet to evaluate and record the performance of the executive directors whilst the executive directors will perform the same exercise in regard to the Chairman and any non-executive directors. This process of board evaluation will also examine issues relating to succession planning as necessary. PRINCIPLE EIGHT: CORPORATE CULTURE The Board recognises the importance of appropriate ethical values and behaviour in relation to the Group’s activities and encourages suitable behaviour and principles from employees and suppliers. These principles are set out in the company’s Ethics Policy and the Board keeps a watching brief over its application. The Company has adopted, for the Board and Senior Management, a Share Dealing Code in accordance with Aim Rule 21. PRINCIPLE NINE: MAINTENANCE OF GOVERNANCE STRUCTURES AND PROCESSES Ultimate authority for all aspects of the Group’s activities rests with the Board. Rudi Weinreich is Executive Chairman of the Board, which sets the overall business strategy. Victoria Blaisdell is Group Managing Director responsible for the performance of the Group in line with its agreed business strategy. The following matters are reserved for the Board: Senior appointments and remuneration Budget approval Acquisitions Major capital expenditure Major sales quotations and purchase orders Foreign exchange policy Significant legal, health and safety matters Stock exchange compliance and other corporate governance issues Mr Weinreich when required acts in an Executive capacity, for example by deputising for the German Managing Director when necessary. The board recognises that his role is therefore not 100% independent however it believes that, given Mr Weinreich’s unique skills and experience, this is a cost-effective beneficial arrangement for the size of the company. In accordance with the Companies Act 2006, the Board complies with its duties: to act within its powers; to promote the success of the Company; to exercise independent judgement; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties and always to declare any interest in a proposed transaction or arrangement. AUDIT COMMITTEE For the period under review the Audit Committee comprised David Mahony. Paul Geraghty as Group Finance Director is invited to attend Audit Committee meetings when appropriate. The Audit Committee meets as required and specifically to review the Interim Report and Annual Report. There were two meetings of the Audit Committee during 2017. The Audit Committee also reviews the findings of the external auditor and reviews accounting policies and material accounting judgements. The independence and effectiveness of the external auditor is reviewed annually. The possibility of undertaking an audit tender process is considered on a regular basis. The Audit Committee meets at least once per year with the auditor to discuss their independence and objectivity, the Annual Report, any audit issues arising, internal control processes, appointment and fee levels and any other appropriate matters. As well as providing audit related services, the auditor also provides taxation and other advice. The fees in respect of audit and tax services are set out in Note 8 of the Annual Report. Fees for non-audit services paid to the auditor are not deemed to be of such significance to them as to impair their independence and therefore the Audit Committee considers that the objectivity and independence of the auditor is safeguarded. REMUNERATION COMMITTEE The Remuneration Committee is comprised of David Mahony. The purpose of the Remuneration Committee is to ensure that the Executive Directors and other employees are fairly rewarded for their individual contribution to the overall performance of the Group. The Committee considers and recommends to the Board the remuneration of the Executive Directors and is kept informed of the remuneration packages of senior staff and invited to comment on these. There was one Remuneration Committee meeting during 2017. The Board retains responsibility for remuneration policy. Executive remuneration packages are designed to attract and retain executives of the necessary skill and calibre to run the Group. The Remuneration Committee recommends to the Board the remuneration packages by reference to individual performance, general market changes and any constraints imposed by the then financial position of the Group. The Remuneration Committee has responsibility for recommending the adoption of any long-term incentive schemes. There are three main elements of the remuneration packages for Executive Directors and staff: Basic salaries and benefits in kind: Basic salaries are recommended to the Board by the Remuneration Committee, considering the performance of the individual and the rates for similar positions in comparable companies. Certain benefits in kind are available to senior staff and Executive Directors. Share options: The Company operates an approved share option scheme for Executive Directors and certain other employees both to motivate those individuals through equity participation, and to align the interests of senior employees with those of shareholders. Exercise of share options under the schemes is subject to specified exercise periods and compliance with the AIM Rules. The schemes are overseen by the Remuneration Committee which recommends to the Board all grants of share options specifying the terms under which eligible individuals may be invited to participate. Bonus Scheme: The Group has a discretionary bonus scheme for staff and Executive Directors which is specific to each individual and the role performed by that individual within the Group. Salaries and benefits were reviewed in November 2017 to cover the period to 30 November 2018. Future reviews will be held in November/ December each year for implementation from 1 December. PRINCIPLE TEN: SHAREHOLDER COMMUNICATION The Board is committed to maintaining good communication with its shareholders. All shareholders are encouraged to attend the Company’s Annual General Meeting. Investors also have access to current information on the Company through its website, www.holdersgroup.com, and via Paul Geraghty, Group Finance Director, who is available to answer investor queries. 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