Overview of the board's responsibilities
- Our board is responsible for setting the strategy of the group and ensuring the long-term success of the group for customers, investors and wider stakeholders; and in creating shareholder value;
- It is responsible for challenging and encouraging the management team in its interpretation and implementation of how it manages the business, and that it is doing so in accordance with the strategic goals the board has set. Collectively, the directors have many years of experience gained across a variety of areas and industries. Some have spent part of their careers overseas, and whilst there is a huge diversity in their skills and experience, they have predominantly worked in regulated industries, as is appropriate to our business. Diversity in skills and experience helps the board to be proactive in its view of the business, and in its guidance and challenge to the management team;
- The board is responsible for ensuring the company's internal control systems (including financial, operational and compliance) and processes are sound and fit for purpose. See the 'Accountability' section of this report for more detail;
- The board has responsibility to ensure that the company has the necessary financial resources and people with the necessary skills to achieve its objectives; it also reviews managerial performance annually;
- Full details of the matters that the board has reserved for its own decision making due to their importance to the business or the working of the board, can be found on our website corporate.unitedutilities.com/corporate-governance; and
- The UUG board has oversight of capital expenditure projects which exceed £50 million, and any project which materially increases the group's risk profile or is not in the ordinary course of the group's business.
Governance structure for our board and our committees
In line with the Code, the board delegates certain roles and responsibilities to various sub-committees, as shown in the diagram below. Whilst the board retains overall responsibility, a sub-committee structure allows these committees to probe the subject matter more deeply and gain a greater understanding of the detail, and then report back to the board on the matters discussed.
The reports of the principal board committees required by the Code can be found on the subsequent pages. The executive management team is chaired by the CEO, and its members are the senior managers who have a direct reporting line to the CEO. Short biographies of the executive team can be found on our website at corporate.unitedutilities.com/united-utilities-executive-team
The board received reports from the CEO and CFO at every scheduled board meeting, providing the board with an updated overview of the business and its financial position. Minutes of board and committee meetings (with the exception of the remuneration committee) are tabled and the chairs of each of the board committees verbally report on their activities.
The executive management team is responsible for implementing the board's strategy and the day-to-day operation of running the business. Formal monthly meetings are scheduled, although it meets more frequently if required.
Responsible for reviewing the effectiveness of risk management and internal control systems, for considering the application of the financial reporting policies and for maintaining an appropriate relationship with the external auditor. For further information please go to the Audit committee section.
Reviews succession plans for the board and senior management and ensures that the skills and experience at board and senior level continue to be appropriate. For further information please go to the Nomination committee section
Makes recommendations to the board on executive remuneration framework, approves the employment and remuneration terms of the executive directors and senior executives. For further information please go to the Annual statement from the remuneration committee chair.
Considers and approves borrowing, leasing, bonding and other banking facilities within limits set by the board. Chaired by Brian May, other members are the CFO and treasurer. The treasury committee has delegated some of its powers, subject to certain limits, to the CFO and treasurer.
|Board activity in 2013/14||Cross reference||Link to strategic objectives|
- Received and discussed a presentation by Makinson Cowell on shareholders' views of United Utilities
|See Code principle: Relations with shareholders|
|Leadership and employees|
- Considered and approved executive share plans including the Long Term Plan (which received shareholder approval at the 2013 AGM) and Deferred Bonus Plan
|See Annual statement from the remuneration committee chair|
- Considered board succession planning and the appointment of Mark Clare as a new non-executive director
|See Nomination Committee|
- Reviewed and discussed executive succession plans and an update on the activities to develop talented employees
|See Nomination Committee|
- Discussed the results of the annual employee engagement survey
- Organisational capability review
|See Chairman's and Chief Executive Officer's statement|
- Debated and discussed fracking and the implications for our service provision to our customers and approved the company's policy statement
|See Letter from the Chairman|
- Reviewed and discussed energy strategy, in particular energy use and energy production at treatment works
|See Our performance|
- Held a strategy session dealing with forthcoming regulatory changes and a number of further updates
|See Our operating environment|
- Reviewed and debated the risk profile of the group and in particular the principal risks
|See Principal risks and uncertaities|
- Discussed and debated the threat of cyber crime and the implications and actions required
|See Letter from the Chairman|
- Approved revised terms of reference for the audit committee
|See Audit Committee|
- Bi-annual updates on changes and developments in corporate governance
- Reviewed and discussed the evaluation of the board, its committees and individual directors and conflicts of interest
|See Code principle: Leadership|
- Reviewed and debated compliance with the Ofwat requirements regarding holding companies
| See Letter from the Chairman|
- Reviewed the performance of the external auditor and recommendation for reappointment
|See Audit Committee|
- Reviewed internal controls and risk management processes
|See Code principle: Accountability|
|Regulation (UUW business)|
- Met on two occasions with representatives of the 'Customer Challenge group' to discuss and debate the impact on customers of the company's plans for the next five-year period
|See Our business plan 2015-20|
- Regular debate on progress with the 2015-20 business plan submission
- Reviewed and challenged the business plan, budget and dividend policy
- Reviewed and approved the half and full year results and associated announcements
- Reviewed and approved the company's tax strategy
|See Financial performance|
- Reviewed and approved the company's treasury policy
- Reviewed progress with material cases of litigation involving the group
|See Principal risks and uncertainties|
Key to strategic objectives (more detail on strategy can be found in the Our vision and strategy).
Best service to customers In a responsible manner Lowest sustainable cost
Attendance at board meetings
Eight scheduled board meetings were planned and held during the year (2013: eight). A number of other board meetings and telephone conferences were also held during the year, as the need arose. The table below shows the actual number of scheduled meetings attended and the figures in brackets are the maximum number of scheduled meetings which the directors could have attended.
|Board||Audit committee||Remuneration committee||Nomination committee||Corporate responsibility committee||Treasury committee|
|Steve Mogford||8 (8)||n/a||n/a||3 (3)||2 (2)||n/a|
|Russ Houlden||8 (8)||n/a||n/a||n/a||n/a||4 (4)|
|Catherine Bell||8 (8)||4 (4)||5 (5)||4 (4)||2 (2)||n/a|
|Mark Clare||2 (2)||2 (2)||n/a||1 (1)||n/a||n/a|
|Paul Heiden||4 (4)||1 (1)||n/a||2 (2)||n/a||1 (1)|
|Brian May||8 (8)||4 (4)||n/a||4 (4)||n/a||3 (3)|
|John McAdam||8 (8)||n/a||n/a||4 (4)||n/a||n/a|
|Nick Salmon||8 (8)||3 (3)||5 (5)||4 (4)||2 (2)||n/a|
|Sara Weller||8 (8)||n/a||5 (5)||4 (4)||n/a||n/a|
Paul Heiden retired from the board at the AGM on 26 July 2013. Paul stepped down as treasury committee chair prior to the meeting held in June 2013, when Brian May took over as the committee chair.
Mark Clare was appointed to the board and the audit and nomination committees on 1 November 2013.
Nick Salmon was appointed to the audit committee on 26 July 2013 when Paul Heiden stepped down to ensure the committee membership remained at three independent non-executive directors.
Steve Mogford stepped down from the nomination committee on 25 February 2014 prior to the February 2014 committee meeting.
As directors, our intention is always to attend all scheduled board and committee meetings, as you can see from the table above. Only in exceptional circumstances would we not do so. Similarly, every effort is made to attend ad hoc meetings either in person or via the use of video or telephone conferencing facilities if needs be. None of our non-executive directors have raised concerns over the time commitment required of them to fulfil their duties. The need for succinct board and committee packs is an enduring challenge. Board paper templates have been used for a number of years in order to provide a common structure for both the reader of the report and the author and promote a more consistent quality.
We, the non-executive directors, regularly meet the evening before a scheduled board meeting along with the CEO, which allows us to share our thoughts on current issues and the business of the meeting. This time together is well spent, allowing us extra time to share views and cross check our understanding of certain issues ahead of the meeting.
Conflicts of interest
The company's articles of association contain provisions which permit unconflicted directors to authorise conflict situations. Each director is required to notify the Chairman and/or company secretary of any potential conflict, and the board reviews the position of each director annually. No changes were recorded which would impact the independence of any of the directors who fulfilled the independence criteria on appointment.
We have again completed our internal board evaluation; we are due to engage an external facilitator for the 2015 evaluation.
The process is facilitated and evaluated by the company secretary and is based on the completion of questionnaires by board members seeking their views on the operation and effectiveness of the board; the balance of skills, experience, knowledge and diversity (including gender) of board members.
Questionnaires specifically related to the operation and effectiveness of the various board committees are also completed. Views were also sought on the administrative support for the board and the different committees, and whether there was sufficient information and time devoted to key activities such as strategic planning. The process we followed was that used by Lintstock (who undertook our external evaluation in 2012). In addition to board members, other senior managers who regularly attend and support committee meetings were asked to complete the same questionnaires. The results were then analysed by the company secretary. The findings, which are kept anonymous, were discussed with the Chairman or the chair of the specific committee as appropriate and tabled at a meeting of the relevant committee and then presented to the board.
Directors also complete individual questionnaires assessing their own performance, contribution and perceptions of being a director at United Utilities. The Chairman also conducts one-to-one interviews with each of the non-executive directors, with particular focus on challenging the independence credentials of those who have served a six-year term or longer. The senior independent director, supported by the other non-executive directors, leads the performance evaluation of the Chairman. Specific training has been provided to the directors during the year on a number of areas including regulatory matters and changes in reporting and governance requirements. On the appointment as a director to both UUG and/or the UUW board, directors receive information on the key duties of being a director of a regulated water company including the role of the regulated company's holding company (known as 'Condition P' of the regulatory licence). This information is kept continually under review.
|Actions arising from the 2012/13 evaluation||What we have done in response|
|Build further on improving the standard of presentations given to the board||These were felt to have improved considerably. Refinements and improvements will continue to be made, with presenters encouraged to take into account their audience and maintain a sharp focus on the key issues and be as succinct as possible.|
|Maintain the opportunities for the board to meet with members of the executive and wider senior management team||A variety of executive members and senior managers present to the board on a variety of issues. Due to the predominance of the price review process, the board has not had the opportunity to see the full range of senior executives that it would like, but steps will be taken to rectify this in 2014/15. Additionally, there are a number of events held during the year, including the management conference held in the North West, board meetings and the AGM when the board has the opportunity to meet with executives and other senior managers.|
|Further develop the focus of executive succession planning||In response to a letter sent to chairmen of FTSE100 companies from the Secretary of State for Business Innovation and Skills and Lord Davies of Abersoch regarding the recruitment of women board members, the Chairman and two female members of the executive team attended an event organised by the Department of Business Innovation and Skills where potential candidates for non-executive positions had the opportunity to meet chairmen of FTSE100 companies.|
|Given the evolving regulatory agenda, ensure the board continues to have opportunities to broaden its understanding and knowledge, with particular focus on market reform||Regulatory issues and updates have been given at every board meeting and the board has had the opportunity to meet with chair and deputy chair of the customer challenge group (CCG) on two occasions. The CCG is made up of representatives from our independent stakeholders who contributed to the price review process. More information can be found at corporate.unitedutilities.com/ccg|
The directors confirmed that they felt the action points coming out of last year's evaluation had been satisfactorily addressed.
The following actions came out of the 2013/14 evaluation:
- There was the need to further improve the visibility and engagement of the executive team and a wide range of senior managers with the board and provide more opportunities for such engagement; and
- Maintain the strong focus on succession planning for executives and those in critical posts in the talent pipeline.
Looking forward - what is on the board's agenda for 2014/15
- The regulatory price review process will continue to dominate the board's discussions for the first half of 2014/15.