CORPORATE GOVERNANCE STATEMENT
The Board of Total Produce plc is firmly committed to business integrity, high ethical values and professionalism in all of its activities and operations. The Board recognises the importance of maintaining the highest standards of corporate governance and that it is accountable to its shareholders in this regard. Companies whose shares are traded on the AIM and ESM markets are not subject to mandatory compliance with corporate governance codes. However the Company provides the following voluntary disclosures and has undertaken to design appropriate corporate governance arrangements having regard to the Company’s size and the markets on which its shares are traded. This Corporate Governance Report, together with the Audit and Compensation Committees’ reports on pages 50 to 56 of the Annual Report, describe the corporate governance arrangements in place.
THE BOARD OF DIRECTORS
Total Produce plc is led by a strong and effective Board of Directors. The Directors of the Company comprise the following individuals:
C P McCann Executive Chairman
R P Byrne Chief Executive
F J Davis Finance Director
J F Gernon Director
R B Hynes Senior Independent Non-Executive Director, Chairman of the Compensation Committee
J J Kennedy Chairman of the Audit Committee
S J Taaffe
K E Toland
Total Produce considers that the size and structure of its Board is appropriate for the AIM and ESM markets on which its shares are traded and as a smaller listed company, allowing for an efficient decision making process.
All of the Directors have fiduciary responsibilities to shareholders. In addition, the Executive Directors are responsible for the operation of the business while the Non-Executive Directors bring independent objective judgment to bear on Board decisions by constructively challenging management and helping to develop and execute the Group’s strategic objectives.
Each of the Executive Directors has extensive knowledge of the fresh produce industry, in addition to wide-ranging business skills and commercial acumen. This is complemented by the broad industry expertise and background of the non-Executive Directors. The Board as a whole is therefore well placed to address any major challenges for Total Produce should they arise. All of the Directors bring an objective judgment to bear on issues of strategy, performance, resources (including key appointments) and standards of conduct.
Effective governance is fostered by the separation of the roles of the Executive Chairman and the Chief Executive, as this division of responsibilities at the head of the Group ensures a balance of power and authority. The Executive Chairman has overall responsibility for Group strategy and to see that the Group achieves a satisfactory return on investment for shareholders. He oversees the operation and effectiveness of the Board and ensures appropriate interaction between it, executive management and the Company’s shareholders. The Chief Executive is responsible for developing and delivering the Group’s strategy, and ensuring, along with the Finance Director, that the Directors receive accurate, timely and clear information, and is accountable for its overall performance and day-to-day management.
Board members are selected (refer to Nomination Committee terms of reference below) because of their relevant experience, and appropriate training is available to them whenever necessary. Arrangements exist for new Directors to receive a full, formal and tailored induction into the Group’s activities and into the operation and procedures of the Board on their appointment.
INDEPENDENCE OF NON-EXECUTIVE DIRECTORS
The Board has determined all of the Non-Executive Directors to be independent. In arriving at its conclusion, the Board considered many factors including, inter alia, whether any of the Non-Executive Directors:
- has been an employee of the Group within the last five years;
- has, or had within the last three years, a material business relationship with the Group;
- receives remuneration from the Group other than a director’s fee;
- has close family ties with any of the Group’s direct advisers, Directors or senior employees;
- holds cross-directorships or has significant links with other Directors through involvement in other companies or bodies
- represents a significant shareholder; or
- has served on the Board for more than nine years from the date of their first election.
R B Hynes and J J Kennedy were first elected to the Board in May 2007. The Board has assessed and concluded that notwithstanding their tenure on the Board, that they each are independent of management and that they discharge their duties in an independent manner.
Each of the Non-Executive Directors brings considerable business experience and independent challenge to the Board’s deliberations and an unfettered perspective to their advisory and monitoring roles.
The Board considers that the four independent Non-Executive Directors are sufficient to maintain the balance between Executive Directors and Non-Executive Directors on the Board.
The terms and conditions relating to the appointment of the Non-Executive Directors are available for inspection at Charles McCann Building, Rampart Road, Dundalk, Co Louth, during normal office hours.
SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR
R B Hynes is the Senior Independent Non-Executive Director.
OPERATION OF THE BOARD
The Board met regularly throughout the financial year with seven scheduled Board meetings, in addition to which meetings are called as and when warranted by matters arising. Attendance at scheduled Board and Committee meetings during the year was as follows:
|C P McCann
|R P Byrne
|F J Davis
|J F Gernon
|R B Hynes
|J J Kennedy
|S J Taaffe
|K E Toland
* In attendance only
Additional Board or Committee meetings were held to issue formal approvals, or deal with other matters of a routine or administrative nature.
The Chairman held meetings with the Non-Executive Directors without the Executives present. There is interaction, as necessary, between senior executive management and Board members.
The Board has identified and formally adopted a schedule of key matters that are reserved for its decision, including the annual budgets, half-yearly and preliminary results announcements, the Annual Report, interim and final dividends, the appointment or removal of Directors and the Company Secretary, circulars to shareholders, Group treasury policies and capital expenditures and acquisitions in excess of €20 million. Certain other matters are delegated to Board Committees, the details of which are set out below.
There is an agreed Board procedure enabling Directors to take independent professional advice, in the furtherance of their duties, at the Company’s expense. Each Board member has access to the impartial advice and services of the Company Secretary, who is responsible to the Board for ensuring that appropriate procedures are followed. The appointment and removal of the Company Secretary is a matter for the Board as a whole. The Company has put in place a Directors’ and Officers’ liability insurance policy.
The Memorandum and Articles of Association of the Company require that one third of the Board must, by rotation, seek re-election at the AGM each year.
EVALUATION OF PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS
On an annual basis, the Board evaluates its own performance and that of its Committees and of each individual Director.
In assessing the performance of the Board in 2016, the Directors considered such matters as the appropriateness of its composition, its effectiveness in developing Group strategy, its contribution to managing the Group’s business and operational risks, its response to developing issues and its communications with the Group’s stakeholders.
In assessing the performance of the committees of the Board, the Directors considered the appropriateness of their composition and terms of reference, their effectiveness in fulfilling their roles and their interaction with the Board.
The assessment of the performance of individual Directors included consideration of their contribution to the effective functioning of the Board, the appropriateness of their knowledge, skill and experience levels and their commitment to their roles. In addition, the Non-Executive Directors meet without the Chairman annually to appraise the effectiveness of the Chairman.
The Chairman summarised the outcome of these evaluation processes and reported them to the Board. The Board concluded that the composition of the Board, the Directors and its Committees was appropriate and they effective in the performance of their duties.
There are three principal Board committees, the Audit, the Compensation and the Nomination Committees.
Please click on the link below for full details of the composition, terms of reference and activities of the Audit Committee.
Please click on the link below for full details of the composition, terms of reference and activities of the Compensation Committee.
Please click on the link below for full details of the composition, terms of reference and activities of the Nomination Committee.
INTERNAL CONTROLS AND THE MANAGEMENT OF RISK
The Board is ultimately responsible for the overall system of internal controls applied in the Company and its subsidiaries and for reviewing the effectiveness of these controls. Some of this responsibility has been delegated to the Audit Committee.
The Group’s control system is designed to actively manage rather than eliminate the risks of failure to achieve its business objectives. The internal controls system is designed to provide reasonable but not absolute assurance against material misstatement or loss material misstatement or loss.
The Group’s multinational operations expose it to different financial risks that include foreign exchange risk, credit risk, liquidity risk, interest rate risk, and equity price risk. The Group has a risk management programme in place which seeks to limit the impact of these risks on the performance of the Group and it is the policy to manage these risks in a non-speculative manner. Details of the policies and control procedures to manage the financial risks involved, including hedging strategies, are set out in Note 32 of the Annual Report.
Total Produce plc has established a strong reporting and internal audit function and its effectiveness is reviewed by the Audit Committee.
Risk management within Total Produce plc is co-ordinated by an Executive Risk Committee (‘ERC’ or the ‘Committee’) which directs the implementation of the process consistently throughout the Group. Responsibility for the identification and evaluation of financial, operational and compliance risks is delegated to senior management, which reports back to the Committee. The Committee meets during the year, as required, to review the relevant findings, and to make recommendations. The Committee reports its findings to the Audit Committee, which in turn reports to the Board.
The members of the Committee include the Chief Executive (Chairman), the Finance Director, an Executive Director, the Company Secretary, the Head of Internal Audit and a representative of senior management.
The reporting structure, internal audit and risk management functions complement each other and, together with divisional management, provide the Board with distinct sources of reasonable assurance as to the effectiveness of the system of internal controls that underlies the Group’s control environment. The Board conducts its own risk identification and assessment so that it is sufficiently aware of the principal threats to which the Group may be exposed. The Board’s review includes financial, operational and compliance controls and risk management systems.
The Board, through the ERC and the Audit Committee, has reviewed the process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks are managed effectively. The Board has embedded these structures and procedures throughout the Group and considers these to be a robust and efficient mechanism for creating a culture of risk awareness at every level of management.
The Directors regard the process of risk management as a positive medium for change, adding value in the interests of shareholders by utilising sound and considered judgment, while simultaneously making the organisation alert to best management practices.
Under Irish company law, the Group and Company are required to give a description of the principal risks and uncertainties which they face. These principal risks, and the actions taken to mitigate against them are set in the Risk and Risk Management Report on pages 12 to 15 of the Annual Report.
COMMUNICATION WITH SHAREHOLDERS AND THE AGM
Communication with shareholders is given a high priority by Total Produce plc. The Group recognises the importance of maintaining regular dialogue and meetings with shareholders to ensure the Group’s strategy and performance is understood.
The Group communicates with its shareholders by way of the AGM and the Annual Report and financial statements. The Group publishes its preliminary and interim results presentations on its website (www.totalproduce.com). Stock Exchange announcements in respect of trading updates and corporate activity are similarly published on the website.
In addition, the Group communicates with its institutional shareholders through analysts’ briefings throughout the year but particularly at the time of announcement of the preliminary and interim results.
The Executive Directors and Non-Executive Directors are kept informed on investor issues and the outcome of meetings with shareholders through reports and regular updates.
The Chairman is available to discuss strategy and governance with major shareholders. The Chairman and the Senior Independent Non-Executive Director are available to address concerns with shareholders which cannot be addressed through normal channels.
A business presentation is provided at the Company’s AGM followed by a question and answer forum which offers shareholders the opportunity to question the Board. The AGM is valued by the Board as an occasion where individual shareholders’ views and suggestions can be noted and considered by the Directors.
Details of proxy voting are announced in respect of each resolution considered at the AGM or at any EGM. The Company will arrange for the Notice of the 2017 AGM and related papers to be sent to shareholders at least 20 clear working days in advance of the meeting.
ACCOUNTABILITY AND AUDIT
The contents of the Annual Report including the Operating Review, the Financial Review, the Directors’ Report and financial statements (in addition to official Company press releases, Stock Exchange announcements, Preliminary Results Announcements, and Interim Results Announcements) have been reviewed by the Board in order to ensure a balanced and clear presentation so that the Group’s position and results may be properly appreciated by shareholders.
The Board considers that the Annual Report and accounts taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Comapany's performance, business model and strategy. The Board delegates the review and assessment of the contents of the Annual Report and accounts to the Audit Committee.
A summary of Directors’ responsibilities in respect of the financial statements is given on page 58 of the Annual Report. The system of internal controls and risk management established to safeguard the Company’s assets is set out above. The Audit Committee, whose composition and functions are described on page 50 of the Annual Report, has considered, in conjunction with the external auditor, the accounting policies adopted in the financial statements and has evaluated the internal controls that have been established within the Group and concluded that they are appropriate.
ENVIRONMENTAL MANAGEMENT, CORPORATE RESPONSIBILITY AND ETHICAL TRADING INITIATIVES
The European Commission has published recommendations governing the recognition, measurement and disclosure of environmental issues in the annual reports of companies. Although the provisions of the recommendations are not binding on the Group in the conduct of its business, the Group recognises its social responsibility and endorses the growing trend towards environmental accountability.
The Group actively promotes best business practices and standards that seek to enhance the health, education and conditions of workers and their families and to universally encourage the use of sustainable farming methods by its suppliers. Further information on this can be found in our Corporate Social Responsibility Report on pages 24 to 29 of the Annual Report.
The Directors are satisfied that the Company, and the Group as a whole, has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they have adopted the going concern basis in preparing the financial statements. Further information can be found in the viability statement on page 15 of the Annual Report.