Corporate Governance

The Board of Frontier Developments plc established Corporate Governance arrangements through consideration of best practice guidelines and aspects of the UK Corporate Governance Code relevant to the Company. Progress is reviewed against the 12 principles of Corporate Governance issued by the Quoted Companies Alliance issued in the 2013 Corporate Governance Code for Small and Mid-sized Quoted Companies. Being an AIM-listed company Frontier is not required to comply, and has not fully complied, with the UK Corporate Governance Code.

THE BOARD

The Board is responsible for the long-term growth and profitability of Frontier Developments plc. Among its responsibilities it works with management to set corporate values and to develop strategy, including deciding its risk management policy and financial objectives.

A schedule of matters reserved for the Board’s resolution details key aspects of the Company’s affairs that are not delegated beyond the Board (including, among other things, approval of business plans and budgets, material expenditure and alterations to share capital).

Approximately half of the time at Board meetings is set aside for Core Strategic issues. At least two meetings a year have extended time allowed where the focus is predominantly on Core Strategic issues.

BOARD MEETINGS AND PRACTICES

The Board seeks to meet regularly during the year with appropriate time allocated for extended strategic reviews. The entire Board is invited to attend all meetings. In the financial year to 31 May 2017 the Board met on
eight occasions.

The Chairman and the Company Secretary plan the agenda for each Board meeting in consultation with all other Directors. The agenda is issued with supporting papers ahead of the Board meetings, along with appropriate information required to enable the Board to discharge its duties.

The matters reserved for the attention of the Board include:

overall business strategy;
review of key operational and commercial matters;
review of key finance matters, including approval of financial plans, changes to capital structure, acquisitions and disposals of businesses, material capital expenditure and dividends;
governance: Board membership and powers including the appointment and removal of Board members, set up and delegation of matters to appropriate committees, and the reviewing of reporting back thereof;
approval of financial statements both interim and year end;
stock exchange related issues including the approval of communications to the stock exchange and communications with Shareholders in conjunction with any financial public relations firm;
subsidiary Board appointments, as the 100% shareholder, and review of key decisions at their Board meetings;
approval of acquisitions, disposals, borrowing facilities, premises and matters proposed by the corporate lawyer and nominated advisor and broker;
appointment and performance review of key advisors; and
approval of letters of recommendation for the Employee Benefit Trust in the respect of the operation of share option schemes.

BOARD COMPOSITION

The Board of Frontier Developments plc is comprised of the Non-Executive Chairman, two further Non-Executive Director and four Executive Directors: the Chief Executive Officer, Chief Operating Officer, Chief Creative Officer and Chief Financial Officer (also the Company Secretary). As per the individual biographies, the Directors have a range of experience and provide a balance of skills, experience and knowledge to the Board.

All Directors are subject to election at the first Annual General Meeting following their appointment and to re-election thereafter at intervals of no more than four years

The composition of the Board of Directors is illustrated on our Director Biography page located here. On 1 July 2016, Jonathan Milner stepped down as Non-Executive Director and Charles Cotton was appointed in his place. On 3 April 2017 Alex Bevis joined the Board as CFO, also taking over Company Secretarial responsibilities from Neil Armstrong
who resigned from the Group in 2016.

COMPANY SECRETARY

The CFO, Alex Bevis, (an Executive Director) also fulfills the role of the Company Secretary. The role of the Company Secretary is to ensure reliable and regular information flows to the Board and its committees and to ensure applicable rules and regulations are followed. The Company Secretary is available to all Directors to provide advice and assistance and is responsible for providing governance advice to the Board.

BOARD COMMITTEES

The committees report regularly to the Board on the performance of the activities they have been assigned.

Audit Committee

The Audit Committee comprises only independent Non-Executive Directors; its members are: David Gammon (committee Chair) and Charles Cotton. The committee is supported by Alex Bevis, CFO and Company Secretary.

The Audit Committee determines the terms of engagement of the Company’s Auditor and, in consultation with the Auditor, the scope of the audit. It will receive and review reports from management and the Auditor relating to the interim and annual accounts as well as the accounting and internal control systems in use by the Company and Group. The Audit Committee has unrestricted access to the Company’s Auditor. The Audit Committee also reviews accounting and treasury policies, financial reporting including key performance indicators and supporting key areas of management judgements, and corporate governance standards. The Audit Committee is open to attendance by any Director and reports its key issues at Board meetings.

Remuneration Committee

The Remuneration Committee is comprised of David Gammon (committee Chair), David Walsh, Alex Bevis and, as required, Yvonne Dawes (HR Manager).

The Remuneration Committee reviews the scale and structure of the Executive Directors’ future remuneration and the terms of the service agreements with due regard to the interests of shareholders. No Director is permitted to participate in discussions or decisions concerning their own remuneration.

The Remuneration Committee also approves annual salary review limits, bonus schemes and payment limits, in addition to significant employee benefits, such as pensions, medical insurance and share option schemes.

Nominations Committee

The Nominations Committee is comprised of David Gammon (committee Chair), Charles Cotton, David Braben and Alex Bevis.

The Nominations Committee reviews the constituents of the Board and its committees to ensure appropriate balanced representation.

AUDITOR INDEPENDENCE

Frontier Developments’ external Auditor is Grant Thornton UK LLP, who has served the Company since 2012. The external audit function provides independent review and audit. It is the responsibility of the Audit Committee to review and monitor the external Auditor’s independence, objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements as well as developing and implementing policy on the engagement of the external Auditor to supply non-audit services.

The Audit Committee monitors procedures to ensure the rotation of external audit partners every five years and audit managers every seven years.

SENIOR MANAGEMENT AND GROUP FUNCTIONS

Frontier’s Senior Management are involved in multiple functions within the Company.

They are responsible for reviewing the overall organisational structure of the Company, as well as refining and implementing the recruitment and retention programme in order to identify and hire the right candidates as required in addition to retaining existing staff members.

INTERNAL CONTROL AND ASSESSMENT OF BUSINESS RISK

The systems for internal control and risk management processes are designed to manage and mitigate risks that may impact achievement of the Company’s strategic objectives. Such systems can only provide a reasonable but not absolute level of assurance against material misstatement or loss.

The strategic risks are regularly reviewed by the Board and a Corporate Risk Register (CRR) is maintained.

The risk assessment process is facilitated by the COO who holds and appraises the Risk Register at least once a year.

A further review is then undertaken with Senior Management and the Register itself is updated for the Executive Team to consider.

Once the review has concluded the revised CRR is forwarded to the Audit Committee which assesses the updated register and confirms the key risks. A proposal for updating the risks reported in the Annual Report is then drawn up; the Audit Committee will then take its recommendations to the Board on key risks and the reporting thereof.

CONTROL ENVIRONMENT AND INTERNAL AUDIT

The Group has established operating procedures appropriate to its size and structure for reporting both financial and non-financial information to the Board.

These include, but are not limited to:

operating guidelines and procedures with approval limits;
accounting policies, controls and procedures;
performance monitoring systems updated monthly for review at Board meetings; and
regulatory and legal changes that may materially impact on the business.

Due to the Executive Directors’ close involvement in business activities, the Group does not currently believe that an internal audit function would be cost effective. The Audit Committee considers the need annually and will advise the Board as and when it feels this position is required.

INVESTOR RELATIONS

The Company places considerable importance on communication with Shareholders and maintains regular contact with its larger institutional Shareholders through its investor relations team, meetings with the Executive Directors and the Chairman and through investor events.

The Directors, together with the Group’s advisors, held a number of meetings and discussions with key institutional Shareholders, ensuring clarity around the Group’s strategic intent. The Executive Directors and officers also took the opportunity during the year to hold external (London based) and on-site meetings to demonstrate Elite Dangerous: Horizons and Planet Coaster to both investors and potential investors.

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