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 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. The following statements set out the principles and methods to which it it adheres
BOARD MEETINGS AND PRACTICES
The Board seeks to meet formally at least nine times a year including two extended strategic review days. The entire Board is invited to attend all meetings. In the financial year to 31 May 2016 the Board met on nine 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 (Bird and Bird) and nominated advisor and broker, Numis Securities Limited;
• 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 two Non-executive Directors (including the Chairman) and four Executive Directors; the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO) and Chief Creative Officer (CCO). 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.
COMPANY SECRETARY
The CFO, Alex Bevis, (an Executive Director) also fulfills the role of the Company Secretary. The main objectives of the role are 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 Non-Executive Directors; its members are David Gammon and Charles Cotton. 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.
Remuneration Committee
The Remuneration Committee comprises David Gammon, Charles Cotton, David Walsh and Alex Bevis.
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 scheme
Nominations Committee
The Nominations Committee comprises David Gammon, 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 latest results presentation is available here.
Articles of association can be obtained here.
Details regarding restrictions on the sale and transfer of Ordinary Shares in the Company are contained in the Admission Document (paragraph 13.2 of Part 5). Other than as set out therein, there are no restrictions on the transfer of Ordinary Shares in the Company.
UK City Code on Takeovers and Mergers: the Company is subject to the UK City Code on Takeovers and Mergers
We do not comply with the UK Corporate Governance Code. However, we have reported on our Corporate Governance arrangements by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the company and best practice.
Frontier is an AIM listed company, all information pursuant to AIM Rule 26 can be found on this website.