Annual Report & Accounts 2012 - Euromoney Institutional Investor ...

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Euromoney Institutional Investor PLC Annual Report and Accounts 2012 www.euromoneyplc.com Corporate Governance continued Accountability and audit Audit Committee The audit committee comprises DP Pritchard (chairman, independent), JC Botts, JC Gonzalez (independent), and SW Daintith, the finance director of DMGT. Three of the four members are non-executive directors. All members of the committee have a high level of financial literacy, SW Daintith is a chartered accountant and a member of the ICAEW, and DP Pritchard has considerable audit committee experience. The committee meets at least three times each financial year and is responsible for reviewing the interim report, the annual report and accounts and other related formal statements before their submission to the board, and reviewing and overseeing controls necessary to ensure the integrity of the financial information reported to the shareholders. The audit committee advises the board on the appointment or reappointment of the external auditor and on their remuneration, both for audit and non-audit work. It has set and applied a formal policy, which focuses on the effectiveness, independence and objectivity of the external audit and includes a policy on employment of former audit staff, an annual assessment of the qualifications, expertise and resources of the external auditor, the type of non-audit work permissible and a de minimis level of fees acceptable. Any nonaudit work performed outside this remit is assessed and where appropriate approved by the committee. Fees paid to Deloitte for audit services, audit related services and other nonaudit services are set out in note 4. During 2012 Deloitte did not provide significant nonaudit services. The group’s non-audit fee policy is available on the company’s website (www. euromoneyplc.com/reports/nonauditfee.pdf). The committee considers the required audit partner rotation plans. It also discusses the nature, scope and findings of the audit with the external auditor and considers and determines relevant action in respect of any control issues raised by the external auditor. The appointment of Deloitte as the group’s external auditor (incumbents since the last audit tender in 1998) is kept under annual review and, if satisfactory, the committee will recommend the reappointment of the audit firm. The appointment of Deloitte followed a formal tender process undertaken in 1998 and, rather than adopting a policy on tendering frequency, the annual review of the effectiveness of the external audit is supplemented by a periodic comprehensive reassessment by the committee. The last such reassessment was performed in financial year 2009, when having received assurances on the continued quality of the audit, the committee determined to recommend the reappointment of the incumbent firm. As the appointment of the auditor is for one year only, being subject to annual approval at the company’s Annual General Meeting, there is no contractual commitment to the current audit firm and, as such, the committee may undertake an audit tender at any time at its discretion. In performing its review, the committee evaluated the adequacy of the audit firm’s key processes and controls in certain key areas including, but not limited to: arrangements for ensuring independence and objectivity; including the rotation of key audit partners; appropriateness of the planned audit scope and its execution; the robustness and perceptiveness of the auditor in their handling of the key accounting and audit judgements; and the quality of their reporting. The committee concluded that it was in the group’s and shareholders’ interests not to tender the external audit in 2012 and recommends the reappointment of Deloitte as the group’s auditor. The audit committee is also responsible for monitoring and assessing the effectiveness of internal audit, and reviews the internal audit programme and receives periodic reports on its findings. It reviews the whistle blowing arrangements available to staff. The audit committee’s terms of reference are available at www.euromoneyplc.com/reports/ Auditcommittee.pdf. Statement by the directors on compliance with the Code The UK Listing Rules require the board to report on compliance throughout the accounting year with the applicable principles and provisions of the 2010 UK Corporate Governance Code issued by the Financial Reporting Council. Save for the exceptions outlined below, the group has complied throughout the financial year ended September 30 2012 with the provisions set out in Section 1 of the Code. Provision B.1.2 states that half the board, excluding the chairman, should be comprised of non-executive directors determined by the board to be independent. During the year the board comprised 15 directors, of whom six were non-executive and only two were considered independent under the Code. However, there are clear divisions of responsibility within the board such that no one individual has unfettered powers of decision. The board, although large, does not consider itself to be unwieldy and believes it is beneficial to have representatives from key areas of the business at board meetings. JC Botts has been on the board for more than the recommended term of nine years under the Code and the board believes that his length of service enhances his role as a non-executive director. However, due to his length of service, JC Botts does not meet the Code’s definition of independence. 34
Euromoney Institutional Investor PLC Annual Report and Accounts 2012 www.euromoneyplc.com Sir Patrick Sergeant has served on the board in various roles since founding the company in 1969 and has been a non-executive director since 1992. As founder and president of the company, the board believes his insight and external contacts remain invaluable. However, due to his length of service, Sir Patrick Sergeant does not meet the Code’s definition of independence. The Viscount Rothermere has a significant shareholding in the company through his beneficial holding in DMGT and because of this he is not considered independent. The Viscount Rothermere and MWH Morgan are also executive directors of DMGT, an intermediate parent company. However, the company is run as a separate, distinct and decentralised subsidiary of DMGT and these directors have no involvement in the day-today management of the company. They bring valuable experience and advice to the company and the board does not believe these nonexecutive directors are able to exert undue influence on decisions taken by the board, nor does it consider their independence to be impaired by their positions with DMGT. However, their relationship with DMGT means they do not meet the Code’s definition of independence. Contrary to provision A.4.1, the board has not identified a senior independent non-executive director. However, JC Botts, although not independent due to his length of service, acts as senior non-executive director. Provision B.2.1 requires that the majority of the nominations committee should be comprised of independent non-executive directors. Although the committee consists of four non-executive and two executive directors, none of these non-executive directors can be considered independent under the Code. Provision B.3.2 states that the terms and conditions of appointment of non-executive directors should be available for inspection. As explained in the Directors’ Remuneration Report, the non-executive directors do not have service contracts. Provisions C.3.1 and D.2.1 require the remuneration and audit committees to comprise entirely of independent non-executive directors. The remuneration committee is comprised of three non-executive directors, one of whom can be considered independent under the Code. During the year, the audit committee comprised four members, only three of which were nonexecutive directors of the company only two of whom can be considered independent under the Code. On behalf of the board Richard Ensor Chairman November 14 2012 Corporate Governance Company Accounts Group Accounts Our Governance Our Performance 35
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