MEMBERSHIP AND RESPONSIBILITIES
The members of the Audit Committee (the ‘Committee’), all of whom are independent Non-Executive Directors, are J J Kennedy (Chairman), R B Hynes and S J Taaffe.
The UK code requires that at least one member of the Audit Committee has recent and relevant financial experience. The Board believes that all members of the Committee satisfy that requirement and that all members are sufficiently knowledgeable in relevant financial matters to enable them to fulfil their responsibilities of the Committee.
These responsibilities are set out in the terms of reference of the Audit Committee, which are available on request from the Company Secretary. They are summarised as follows:
- to approve the terms of engagement and remuneration of the external auditor and to recommend to the Board, when appropriate, any change in the external auditor;
- to agree, in advance, with the external auditor the nature and scope of their audit as set out in their audit plan;
- to annually assess and monitor the independence, objectivity and effectiveness of the external auditor. As part of this process, the Committee reviews the implementation of its policy in relation to the provision of non-audit services by the external auditor, taking into account relevant ethical guidance;
- to agree with the Board (and to subsequently monitor) a policy on the employment by the Group of former employees of the external auditor;
- to review the Group’s interim results and preliminary results announcements, financial information and full year consolidated financial statements and to report to the Board on the outcome of these reviews. As part of this process, the Committee considers:
- the appropriateness of the Group’s accounting policies, including any changes in these policies;
- any significant judgmental matters;
- any significant adjusted and unadjusted audit differences;
- the continuing appropriateness of the going concern assumption;
- the contents of the Operating and Financial Reviews as set out in the Annual Report;
- compliance with relevant financial reporting standards, and related legislative requirements; and
- compliance with legal and Stock Exchange requirements
- to review any issues raised by the external auditor during the conduct of their audit. As part of this review, the Committee considers any report from the external auditor on their findings in relation to the Group’s financial systems and controls, together with any management responses. In addition, the Committee reviews the representation letters required by the external auditor as part of the audit, prior to their endorsement by the Board. The Committee also meets the external auditor independently of management at least annually;
- to review the Group’s statement on internal control systems and the risk management framework, prior to endorsement by the Board;
- to review and to report to the Board on the effectiveness of the Group’s internal controls including co-ordination between the internal and external auditors and the adequacy of the internal audit function;
- to approve, in consultation with the Chairman of the Board, the appointment and removal of the Head of Internal Audit;
- to consider any major findings from internal investigations and the Company’s response;
- to review the Group’s arrangements for employees to raise concerns, in confidence, about possible impropriety in financial reporting or other matters and to ensure there is provision for a proportionate investigation and follow-up of such matters; and
- to review, at least annually, the Committee’s own performance and terms of reference and to recommend any changes it considers necessary to the Board for approval.
INDEPENDENCE OF EXTERNAL AUDITOR
As part of the approval of the appointment of the external auditor, the Committee sought confirmation from the external auditor that it is, in its professional judgment, independent of Total Produce plc. The Committee monitors the nature, extent and scope of non-audit services provided by the external auditor on an annual basis. In this regard, the engagement of the external auditor to provide any non-audit services, where the expected costs exceed a pre-approved limit, requires the approval of the Audit Committee.
Four key principles underpin the provision of non-audit services by the external auditor, namely that the auditor shall not:
- audit its own firm’s work;
- make management decisions for the Group;
- have a mutuality of financial interest with the Group; or
- be put in the role of advocate for the Group.
The amounts paid to the external auditor during the financial year for audit and non-audit services are disclosed on page 75 of the Annual Report.
The Committee also reviewed the Group’s practices in respect of the hiring of former employees of the external auditor in order to assess whether such appointments might affect, or appear to affect, the external auditor’s independence and where appropriate approve such appointments.
COMPOSITION AND TERMS OF REFERENCE OF COMPENSATION COMMITTEE
The members of the Compensation Committee (‘the Committee’), both of whom are independent Non-Executive Directors, are R B Hynes (Chairman) and J J Kennedy. Both members bring significant expertise to their roles on the Committee due to their broad commercial and professional experience over many years as Directors of other publicly listed companies. These Directors have no financial interest and no potential conflicts of interest, other than as shareholders, in the matters to be decided, arising from cross-directorships and no day-to-day involvement in the running of the business.
The terms of reference, which are available on request from the Company Secretary, of the Committee are summarised as follows:
- to establish the Company’s policy on Executive Directors’ remuneration;
- to establish the terms of service agreements, remuneration packages and employment conditions of Executive Directors;
- review the ongoing appropriateness and relevance of the remuneration policy;
- the objective of such policy shall be to ensure that members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company;
- within the terms of the agreed policy and in consultation with the Chairman to determine the total individual remuneration package of each Executive Director including bonuses, incentive payments and share options or other share awards;
- where appropriate to recommend to shareholders the establishment of long term incentive schemes, to set appropriate performance targets for such schemes, to define the basis of participation in such schemes and to determine the grant of awards under such schemes;
- to approve the granting of share options to Executive Directors and employees and to determine whether the conditions as set out in Clause 7 of the December 2006 share option scheme have been achieved;
- to ensure that contractual terms on termination and any payments made are fair to the individual and the Company; that failure is not rewarded and that the duty to mitigate loss is fully recognised;
- in determining such packages and arrangements, give due regard to any relevant legal requirements, the recommendations in the UK Code and the Listing Rules of the AIM/ESM and associated guidance;
- to monitor the level and structure of remuneration for senior management as determined by the Board; and
- to review and note annually the remuneration trends across the Company or Group.
The Executive Chairman of Total Produce plc is consulted about the remuneration of other Executive Directors and the Committee is authorised to obtain access to professional advice, if deemed appropriate. The Committee can recommend changes to the remuneration structure for senior management.
The remuneration of the Non-Executive Directors is approved by the Board.
The members of the Nomination Committee (the 'Committee') are C P McCann (Chairman), R P Byrne, R B Hynes and J J Kennedy. A majority of the Committee's members cannot be considered independent under the UK code. However, considering the size of the Board, a 50:50 split is considered appropriate by the Board. The terms of reference of the Committee, which are available on request from the Company Secretary, are to evaluate the balance of skills, knowledge and experience of the Board, to consider the need for any new or additional appointments, where necessary to prepare a list of potential candidates and forward the names of potential candidates to the Board for its consideration and, if appropriate, approval.
The Committee regularly assesses the Board composition, the Board members and the various Board roles and concluded that no additional appointments are required at this time. The Committee has further examined the Group succession plans and concluded that they are appropriate.
The Committee and the Board understand the importance of ensuring diversity including gender and the key role a diversified Board plays in ensuring effectiveness. The Board takes diversity into consideration whilst ensuring that the best people are nominated to all appointments, and suitable candidates are selected on the basis of relevant experience, backgrounds, skills and knowledge and insight, having due regard to the benefits of Board diversity.