Corporate Governance

The Board acknowledges the importance of, and is committed to, the principle of achieving and maintaining a high standard of corporate governance. The Board considers that it complies with the detailed provisions of the UK Corporate Governance Code.

Full details of how the Principles of Good Governance, including both the Main Principles and the Supporting Principles, are applied by the Group are set out in the Report of the Directors and the Report of the Board on Directors' Remuneration in the Annual Report.

The Board

The Board discharges its responsibilities by providing entrepreneurial leadership of the Company within a framework of prudent and effective controls, which enables risk to be assessed and managed. It sets the Company's strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews management performance. It also defines the Company's values and standards and ensures that its obligations to its shareholders are understood and met.

The Board has adopted a schedule of matters which are specifically reserved for its decision which includes various matters to do with Companies Acts and other legal requirements, listing requirements, Board membership and Board Committees, management, corporate governance, employment, financial and other miscellaneous items. In addition, it has a series of matters that are dealt with at regular Board meetings including an operational review, a financial review, strategy, land acquired, major projects, personnel, corporate governance, internal control, risk and health and safety. It has also adopted a framework of delegated commercial and operational authorities which define the scope of powers delegated to management below Board level.

All directors have access to the advice and services of the Group Company Secretary and all the directors may take independent professional advice at the Group's expense where they judge it necessary to discharge their responsibility as directors.

Board effectiveness

The Chairman is responsible for leading the Board and ensuring it operates effectively. The directors possess an appropriate balance of skills and experience to meet the requirements of the business.

Training and development

The Board received appropriate training and updates on various matters relevant to its role, as and when required, during the year. Training needs are reviewed as part of the performance evaluation process and on an ongoing basis. Mr Ayres was appointed to the Board on 1 August 2011 and his induction programme includes meetings with the Company's various advisers, and he has also attended a formal training course designed specifically for new plc directors. Mr Ayres has held senior roles within Bellway since 2002 and is therefore well versed in the operations, practice and procedures of the Group.

Board balance and independence

The roles of Chairman and Chief Executive, which are recorded in writing and approved by the Board, are separate, with a clear division of responsibilities, ensuring a balance of responsibility and authority at the head of the Group.

The senior independent non-executive director is Mr Johnson. The senior independent non-executive director is available for shareholders to contact with any queries or concerns they may have.

Each of the non-executive directors, excluding the Chairman, has at all times acted independently of management and has no relationship which would materially affect the exercise of his independent judgement and decision-making. The Company considers all of its non-executive directors, excluding the Chairman, to be independent, as defined in the UK Corporate Governance Code.

Whenever any director considers that he is interested in any contract or arrangement to which the Group is or may be a party, due notice is given to the Board. No such instances of any significance have arisen during the year.

Board Evaluation

During the year the directors undertook an evaluation of the performance and effectiveness of the Board, its Committees and individual directors. The evaluation was performed using a system of self-assessment. This involved the Chairman, acting on behalf of the Board, evaluating the performance of the other individual directors, and the non-executive directors, led by the senior independent non-executive director, assessing the performance of the Chairman, taking into account the views of the executive directors. The Board, led by the Chairman, evaluated its own performance, and the Committees, led by the Chairman of each, evaluated their own performance.

As part of the process of ensuring Board effectiveness, the non-executive directors, led by the senior independent non-executive director, met without the Chairman present. Additionally, the Chairman held a meeting with the non-executive directors without the executives present. The Chairman also had meetings with each of the executive directors.

The Board and its Committees reviewed the results of these evaluations and are satisfied with the evidence they provided about the balance, effectiveness and performance of the Board and its Committees and the effectiveness and commitment of each director.

The Board Committees

The Board has formally constituted Audit, Remuneration and Nomination Committees. The terms of reference for the Audit and Nomination Committees and the Board Committee on Executive Directors’ Remuneration are available below, on request or at the AGM.

Audit Committee

The Audit Committee comprises three independent non-executive directors, Mr Johnson (Chairman), Mr Toms and Mr Cuthbert. The Committee meets at least three times a year. The Committee’s responsibilities include the following:

• To monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance.
• To review and make recommendations in relation to the half year and annual accounts prior to submission to the Board.
• To assess the scope and effectiveness of the systems established by management to identify, assess, manage and monitor financial and non-financial risks.
• To review management’s reports on the effectiveness of systems for internal financial control, financial reporting and risk management.
• To consider the appointment/re-appointment of the external auditors and assess their independence each year.
• To recommend the audit fee to the Board and pre-approve any fees in respect of non-audit services provided by the external auditors and to develop and monitor the Company’s policy on the provision of non-audit services by the external auditor and to ensure that the provision of non-audit services does not restrict the external auditors’ independence or objectivity.
• To agree the nature and scope of the audit and review the quality control procedures and steps taken by the auditors to respond to changes in regulatory and other requirements.
• To oversee the process for selecting the external auditors and make appropriate recommendations through the Board to the shareholders to consider at the AGM.
• To consider annually whether there is a need for an internal audit function and make a recommendation to the Board.
• To review the Group’s procedures for handling allegations from “whistleblowers”.
• To review annually the Group’s compliance with its Anti-Bribery Policy.

The work of the Audit Committee is described more fully in the Annual Report, and in the Audit Committee's Terms of Reference.

Audit Committee (34 Kb)

Board Committee on Executive Directors' Remuneration

The Board Committee on Executive Directors’ Remuneration comprises Mr Toms (Chairman), Mr Johnson and Mr Cuthbert. The Committee meets at least twice a year. Its duties are to review and recommend the basic salary, taxable benefits, terms and conditions of employment, including performance-related payments, long-term incentive plans and other benefits of the executive directors and the Chairman. The Committee is also responsible, in consultation with the Chief Executive, for monitoring the total remuneration packages of senior executives below Board level.

The work of the Board Committee on Executive Directors’ Remuneration is described more fully in the Annual Report, and in the Committee's Terms of Reference.

Board Committee on Executive Directors' Remuneration (26 Kb)

Board Committee on Non-Executive Directors’ Remuneration

The Board Committee on Non-Executive Directors’ Remuneration comprises the executive directors and is chaired by Mr Watson. It meets at least once a year to review and recommend the terms, conditions and remuneration of the non-executive directors.

Nomination Committee

The Nomination Committee comprises Mr Dawe (Chairman), Mr Johnson, Mr Toms and Mr Cuthbert. The Committee’s main duties are to formulate plans for succession for both executive and non-executive directors and, in particular, for the key roles of Chairman and Chief Executive and to make recommendations regarding appointments to the Board. The Committee meets at least twice a year.

The work of the Nomination Committee is described more fully in the Annual Report, and in the Committee's Terms of Reference.

Nomination Committee (27 Kb)

Other committees of the Board are formed to perform certain specific functions as required from time to time.

Internal control

The Board is responsible for the Group’s system of internal control and also for reviewing its effectiveness. The Board has reviewed the effectiveness of the system of internal control throughout the year and up to the date of approval of the Annual Report and Accounts. The system is regularly reviewed by the Board in accordance with the guidance contained in the Turnbull Report “Internal Control Guidance for Directors of Listed Companies Incorporated in the United Kingdom”. The Board acknowledges its responsibility to establish, maintain and monitor a system of internal control relating to operational, financial and compliance controls and risk management to safeguard the shareholders’ interests in the Company’s assets. This system, however, is designed to manage and meet the Group’s particular requirements and reduce the risk to which it is exposed rather than eliminate the risk of failure to achieve business objectives. It can provide only reasonable and not absolute assurance against material misstatement or loss.

The Board reviews the effectiveness of the system of internal control and, in particular, it reviews the process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks are managed on an ongoing basis.

Management is responsible for the identification and evaluation of significant risks applicable to particular areas of the business together with the design and operation of suitable controls. These significant risks, which are described in the Operating Risk Statement on pages 24 and 25 of the 2011 Annual Report and Accounts, are regularly assessed and cover all aspects of the business, but in particular land acquisition, planning, construction, health and safety, information and reporting systems, sales, environmental issues, personnel, asset protection, treasury management and legal and regulatory compliance. In addition, there is a responsibility to mitigate risk by the provision of adequate insurance cover and by management reporting on material changes in the business or external environment affecting the risk profile.

There is a system of regular reporting to the Board which provides for appropriate details and assurances on the assessment and control of risks.

The continuing role of the Board is, on a systematic and ongoing basis, to review the key risks inherent in the business, the operation of the systems and controls necessary to manage such risks and their effectiveness and to satisfy itself that all reasonable steps are being taken to mitigate these risks. The key areas of control are as follows:

• The Board has agreed a list of key risks which affect the Group and has considered the extent to which the measures taken by the Group mitigate those risks.
• An established monitoring structure is in place, which provides short lines of communication and easy access to members of the Board.
• Delegation of clearly defined responsibilities to the Regional Chairmen and divisional boards with clear procedures and authority limits in place to provide and maintain effective controls across the Group.
• A comprehensive reporting system entailing annual budgets, regular forecasting and financial reporting.
• A central treasury function operates at Head Office.
• Regular meetings with management attended by members of the Board to review divisional performance.
• The acquisition of land and land interests is subject to checking by management and approval by the Board to ensure that purchasing criteria are met.
• Regular reviews of site costs and revenues by senior Head Office personnel which are reported to the Board.
• Regular visits to sites by senior management and external consultants to monitor health and safety standards and performance.
• A number of the Group’s key functions are dealt with centrally. These include finance, banking and treasury, taxation, financial services, pensions, insurance, information technology, legal, personnel and company secretarial.

Internal audit

The Company does not have a separate internal audit function and, as recommended by the UK Corporate Governance Code, the Audit Committee considers annually whether there is a need for such an internal audit function and makes a recommendation to the Board. During the year, having considered the robust systems and strong controls already present in the Group and as described above, the Audit Committee recommended that no separate internal audit function was presently required. The position will continue to be monitored by the Audit Committee on behalf of the Board.