united-utilities-annual-report-2015

UNITED UTILITIES GROUP PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2015Stock Code: UU.unitedutilities.comCorporate governance reportLetter from the ChairmanAlthough there are time constraintsfor non-executive directors whoalso have an executive role, theseindividuals bring valuable currentmarket experience to any board table.Similarly, we encourage our executivedirectors to serve as a non-executivedirector elsewhere to help broadentheir experience, although this isrestricted to one other directorship ina company which does not conflict withUnited Utilities’ business.Our CEO, Steve Mogford, has madesome changes during the year to thestructure of his executive team ofsenior managers. This has resulted in achange of reporting lines and a relatedchange in the male:female ratios of theexecutive team (excluding the CEO andCFO) of 4:3, (2014: 5:5).Our ethos and cultureOne of our key core values, both atboard level and as a company, is toact with integrity, by applying thehighest standards of responsiblebusiness practice. The company hascomplied with the 2012 UK CorporateGovernance Code in accordance withthe FCA’s Listing Rules with which wewere required to comply for the yearended 31 March 2015. For the periodfrom 25 July 2014 (on the retirementof Nick Salmon) until 1 September2014 (on the appointment ofStephen Carter), there were only twoindependent non-executives directorsappointed to the remunerationcommittee, notwithstanding thefact that the Code requires thatthree independent non-executivedirectors be appointed. During thistime no meetings of the remunerationcommittee were scheduled or held andas a result we do not regard this asbeing an incident of non-compliancewith the Code.Our approach to riskWe adopt a prudent approach tothe way we manage the risks to ourbusiness; we feel this is appropriatefor an organisation such as oursthat provides a vital service toits customers, and is an approachthat permeates the culture of ourbusiness. That being said, we are acommercial organisation operatingwithin a regulated framework, andaccepting some level of risk is anormal consequence of doing business.It is the board’s and the executiveteam’s role to understand the risksassociated with each activity of thebusiness and that actions are takento mitigate these risks as they feelappropriate. The greatest risk to ourbusiness is ensuring that we get theconstituent elements of our five-yearlybusiness plans correct to ensure ourfinanceability, and that they are agreedby Ofwat in its final determination, aswe are bound by these plans for thefollowing five-year period with limitedopportunity to change them.Our investorsThe remuneration committee, underSara Weller’s leadership, has beeninstrumental in updating the executivedirectors’ remuneration packages toensure they align the directors’ andsenior managers’ interests with thelong-term interests of the companyand its shareholders. At the time thechanges were introduced in 2013,the committee went to considerableeffort to consult on the changes witha number of the company’s largeinvestors. At the 2014 AGM, 98.48per cent of the vote was in favour ofthe directors’ remuneration policy and,although only an advisory vote, 99.39per cent of the votes cast were infavour of the directors’ remunerationreport, which would suggest that ourinvestors are comfortable with ourapproach to reward.We welcome any feedback you mayhave on this annual report -please email any comments you mayhave to secretariat@uuplc.co.ukDr John McAdamChairman62