Corporate Governance
Mapeley, as a Guernsey incorporated company, is
not currently required to comply with the Combined Code. The
Directors believe, however that it is important for the Company, as a public company,
to maintain a high standard of corporate governance, and as such,
the provisions set out in the Combined Code which they consider applicable have been adopted during
the year and are summarised below. Throughout 2006, except as otherwise explained below,
The Company complied with the recommendations of the Combined Code in relation to
the management of the Company.
Role of the board
The Board sets strategy and monitors the Group's
operational and financial performance. A schedule of matters reserved for the Board was approved on
admission of the Company to the Official list and is reviewed on an annual basis. It
includes those matters that are most significant to the Group, based on the
nature and size of the matter, both in terms of financial impact and risk.
As part of its collective responsibility for the management of the Group, the
Board must ensure that adequate resources are in place to achieve its strategic
aims and that its obligations to its shareholders and other stakeholders are
met.
The Board is responsible to shareholders for the management
and control of the Group’s activities and good corporate governance. The Board
met sixteen times during the period and intends to meet at least seven times a
year, objectively setting and monitoring Group strategy, reviewing
performance, ensuring adequate funding, examining major potential acquisitions
and disposals, formulating policy on key issues and reporting to
shareholders.
To enable the Board to discharge its duties fully, all Directors receive
appropriate and timely information, including briefing papers distributed in
advance of Board meetings. All Directors have access to the advice and services
of the Company Secretary and his team, who are responsible to the Chairman on
matters of Corporate Governance.
Board balance and independence
During
the year, the Board has comprised the Chairman plus
one executive Director and four non-executive Directors. The Chairman is responsible for the
effectiveness of the Board, and the Chief Executive for the day-to-day
management of the Company. The Board considers that all four non-executive
Directors are independent (notwithstanding their entitlements to free Ordinary
Shares under their letters of appointment). Mr Edens, the Chairman may not be
regarded as ‘independent’ since he is the Chairman of Fortress Investment Trust
which has a controlling interest in the Company. However the Board considers
that the experience and independent judgment of its other Non-executive
Directors provides an appropriate and effective balance between the executive
and non-executive and independent and non-independent members. Throughout this
period and to the date of this report, more than half of the Board including the
Chairman, comprised independent non-executive Directors.
Mr Edens, as well as being the Chairman of Mapeley Limited, holds numerous
directorships in a professional capacity.
Non-executive Directors
The Non-executive Directors bring independent views to the Board and have
diverse experience in chartered surveying, accountancy, law, and finance to add
to the board’s effectiveness, particularly in the areas of corporate strategy,
governance and risk. Non-executive Directors take an active part in debate, not
being afraid to challenge proposals, ensuring the robustness of Board
decisions.
Remuneration for the Non-executive Directors is determined by the Board.
They do not participate in the Company’s bonus or pension schemes but
have been awarded shares in the Company. The Non-executive Directors are appointed
for an initial period of three years subject to renewal for further periods.
Board Committees
The Board has established Nomination, Remuneration, Audit and Investment
committees which deal with specific aspects of the Group’s affairs, each of
which has written terms of reference which will be regularly reviewed and which
deal with their authorities and duties.
The Nominations Committee and
the Remuneration Committee are chaired by Mr Edens. The Board believes that the
interests of the Company are better served with Mr Edens as a
member of these respective Committees, notwithstanding the requirement of the Combined Code
that all members should be independent. The Audit Committee is chaired by
Mr Parkinson.
Nominations Committee
The Nominations Committee
is appointed by the Board and chaired by Mr Edens. Its other members are
Mr Carey and Mr Parkinson. Other Board members, along with other individuals, attend if
invited, for all or part of any meeting, as and when appropriate. The Committee met once
during the year with full attendance.
The Committee is responsible for:
- considering the size, structure and composition of the
Board;
- considering the retirement of Directors and
appointment of additional and replacement Directors; and
- making appropriate recommendations to the Board.
Remuneration Committee
The Remuneration Committee is appointed by the Board and chaired by Mr Edens.
Its other members are Mr Carey and Mr Parkinson. The Chief Executive Officer,
the Finance Officer and others attend by invitation. The Committee aims to meet
at least once a year and during the period met once with full attendance.
The main role and responsibilities of the Remuneration Committee are set out
in written terms of reference, which are to be reviewed annually.
In accordance with the Committee’s terms of reference, no Director
participated in discussions relating to his terms and conditions of service or
remuneration.
Audit Committee
Membership
The Board
has an Audit Committee comprising non-executive Directors.
The members are appointed by the Board, and the Board is chaired by Mr Parkinson.
Its other members are Mr Carey and Mr Harris. The members of the Committee
have no links with the Company’s external auditors and are independent of the
Company’s management. The Board considers that collectively the Audit Committee
has significant financial experience and the ability to discharge its duties
properly, gained from managing businesses of a similar or greater size, and
through extensive service on the boards and audit committees of other listed
companies and at least one member has recent and relevant financial experience.
The Committee meets at
least three times a year, and where appropriate meetings coincide with key
dates in the Company’s financial reporting and audit cycle. The Finance Officer and
the Chief Executive Officer and others attend by invitation. During the period,
the Audit Committee met six times.
Responsibilities
The role and responsibilities of the Audit
Committee are set out in written terms of reference, which are to be reviewed
annually as part of the Committee's evaluation process. Copies of these
are available from the Company Secretary.
The main responsibilities are:
- considering and making recommendations regarding the
appointment and removal of the auditors;
- recommending the audit fee to the Board and
pre-approving fees in respect of non-audit services provided by the external
auditors;
- reviewing the nature and scope of the external audit
and monitoring the external auditor’s independence and objectivity;
- monitoring the integrity in relation to the interim
and annual financial statements and financial announcements and significant
reporting judgments therein before submission to the Board;
- ensuring effective systems of internal financial
control, financial reporting and risk management are maintained;
- reviewing and challenging, where necessary, the
actions and judgment of management in relation to the interim and annual
financial statements before submission to the Board; and
- reviewing the Company’s procedures for handling allegations from
whistleblowers.
Financial Reporting
The Audit Committee has reviewed the significant
financial reporting issues and judgments made in connection with the preparation
of the Group’s financial statements including significant accounting policies,
any changes to them and any significant estimates and judgments. The Audit
Committee has also reviewed the clarity and completeness of disclosures in the
financial statements and considered whether the disclosures made were set
properly in context. The review of the annual report included a review of the
operating and financial review and corporate governance relating to audit and
risk management.
Internal audit
The Audit Committee reviewed the requirement for an internal audit function during the
year on behalf of the board and considered there was no necessity for an internal
audit function, as the Group has a small management team operating from one location
and the Board and senior management team exercise close control over the
Group’s activities, This enables the close involvement of the executive Director and
the Chief Financial Officer in the day to day operational matters of the
Group. The Audit Committee expects to review this decision annually.
Auditors
The Committee’s terms of reference require the Audit Committee to
carry out an annual review of the independence of the Group’s Auditors, Ernst
& Young LLP. Senior members of the audit team are rotated on a regular
basis. The Company has a policy on the provision of non-audit services by the
Auditors. The implementation of the policy is continually monitored by the Audit
Committee. The Committee has considered the provision of non-audit services
performed by the Auditors and was satisfied they were and continue to be
objective and independent of the Group.
Investment Committee
The Company has clearly defined guidelines for capital expenditure. An
Investment Committee reporting to the Board and chaired by Mr Edens is
responsible for reviewing and approving all significant individual property
transactions proposed by the Group. The Committee also monitors: the disposals
of surplus property; rent reviews; lease renewals; development opportunities;
dilapidations settlements; and freehold and leasehold acquisitions.
The Committee evaluates, considers and makes recommendations to the Board in
relation to proposals for new business in terms of the type; fit with the
Company’s strategic plan; its profitability; and the resources required. In
addition, the Committee considers and makes recommendations to the Board in
relation to: customer requests; invitations to tender/bid; market research;
networking information; risk evaluation and major expenditure on lifecycle and
other projects in relation to the Group’s properties.
Internal
control
There is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Group. The executive Director and
senior operational management are responsible for identifying key risks and
assessing their probable impact through formal processes at both Group and
subsidiary levels.
The Group is committed to the highest standards of business conduct and seeks
to maintain these standards across all of its operations. The Group has what it
believes to be an appropriate organizational structure for planning, executing,
controlling and monitoring business operations in order to achieve its
objectives.
The Group has designed and implemented procedures to ensure complete and
accurate accounting and to limit the potential exposure to loss of assets or
fraud. Control measures undertaken include physical controls, segregation of
duties and reviews by management.
In accordance with the Combined Code on Corporate
Governance, the effectiveness of the Group’s system of internal control was kept under
review during the year by the Board. This review included financial, operational
and compliance issues. A formal evaluation was carried out in 2006 and the Audit
Committee has been requested tokeep the matter under review.
The Board considers its policy and procedures to be robust, whilst
recognising that such a system is designed to manage rather than eliminate the
risk of failure to achieve business objectives, and can provide reasonable but
not absolute assurance against material misstatement or loss.
