Dr John McAdam
We have aimed to adopt a more transparent approach to this year's annual report.
UK Corporate Governance Code
This is our first annual report whereby we are reporting in line with the 2012 version of the UK Corporate Governance Code (which incorporates the UK Corporate Governance Code 2010 with which we are required to comply under the FRC Listing Rules) and is referred to in this report as 'the Code'. I can confirm that the company has complied fully with the principles and spirit of the Code during the year. As a board, we aspire to apply the highest standards of governance to our conduct around the board table and we strive to ensure that these standards are applied by the executive team and cascaded throughout the group. Strong governance is business as usual at United Utilities.
As last year, we have used the key principles of the Code - of leadership, effectiveness, accountability, remuneration and relations with shareholders to provide the structure for this report.
Over the past year, there has been considerable change in the areas of governance and narrative reporting, and as a board we have been monitoring these developments. We have aimed to adopt a more transparent approach to this year's annual report and would welcome feedback as to whether you, as a reader, feel that this has been achieved.
On the board's agenda
One of the board's most important roles is to provide strategic leadership and direction throughout the development of the five-year business plan for 2015–20 which was submitted to Ofwat in December 2013. The plan will be finalised and agreed later in the year. The December plan sought to meet the needs of all our stakeholders by balancing affordability, customers' preferences and priorities, while ensuring we meet our statutory obligations. Discussions continue with Ofwat and through the process we will agree a plan that strikes the right balance between customer service, the environment and customer bills. We will work with the regulator and our Customer Challenge Group to achieve the right balance of risks and rewards against delivery of the outcomes that customers value most.
The emerging challenges for the board to address during the year included the risks posed by cyber crime and shale gas extraction and hydraulic fracturing ('fracking'), two very different but topical challenges. Cyber crime is high on the agenda for the UK Government, and our strategy to protect our business will be aligned with the government's plan. We have been working to understand the impact of fracking on our business and the services we provide to our customers. A statement on fracking can be found on our website at corporate.unitedutilities.com/documents/uu-shale-gas-statement.pdf
Board changes and succession
Current board members:
John McAdam (Chairman) ||
Steve Mogford ||
Russ Houlden ||
Catherine Bell ||
Mark Clare ||
Brian May ||
Nick Salmon ||
Sara Weller ||
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Biographies of the directors are in the Board of Directors
During the year we welcomed Mark Clare to the board as an independent non-executive director. Mark's biographical details can be found in the Board of Directors, his considerable experience in finance and his time spent in the regulated environment of the energy industry, and more latterly as CEO of a FTSE house building/construction company, are directly relevant to our business.
Nick Salmon is due to stand down at the AGM in July, after around nine years serving on the board and, since 2007, as the company's senior independent director.
We wish him well for the future and thank him for his extensive contribution to the board and the group. Mark Clare will be appointed as the senior independent director on Nick Salmon leaving the board.
Since 2011, the boards of UUG and UUW (our principal operating subsidiary which provides water and wastewater services to our customers) have had the same serving directors on the board, which we feel increases the efficiency and effectiveness of our corporate governance structure. The only exception is Steven Fraser, who was appointed as a director of UUW on 1 April 2013. Steven is the managing director of UUW's wholesale business, and is responsible for the day-to-day operational activities of UUW. His appointment provides the UUW board with additional insight into the operational challenges the company faces.
United Utilities has a simple corporate structure and its governance processes address Ofwat's published principles on board leadership, transparency and governance. Our statement can be found on our website at corporate.unitedutilities.com/corporate-governance
As Chairman, and leader of the board, it is my responsibility to ensure we have effective governance, and to do this we need to have the right atmosphere of openness and trust around the board table in order that queries and concerns can be raised and addressed in a constructive way. In our annual board evaluation, I am pleased to report that the views of my fellow directors reflected that we do indeed have a positive atmosphere around our board table and that issues are freely raised and addressed.
We have a comprehensive programme of events where our CEO, CFO and investor relations manager meet with investors and Sara Weller, the chair of our remuneration committee, has been keen to engage with shareholders to gain their views on our executive remuneration framework. As the board, we have an 'open door' policy and would encourage shareholders and investors to contact us if we can help in any way – please email us at firstname.lastname@example.org.
- The Chairman met the independence criteria as set out in the Code when he was appointed to the board
- The Code requires that half of the board is made up of independent non-executive directors (the test excludes the Chairman). At United Utilities, five out of seven directors (which excludes the Chairman) are independent non-executive directors
- The company secretary attends all board and committee meetings and advises the Chairman on governance matters. The company secretariat team provides administrative support
- All directors are subject to annual election at the AGM held in July. Following the completion of the annual evaluation process all the non-executive directors were considered by the board to be independent and making a valuable and effective contribution to the board. As a result, the board recommends that shareholders vote those wishing to stand for a further term back into office at the forthcoming AGM
Schedule of matters reserved for the board
FRC 2012 UK Corporate Governance Code