The maintenance of effective corporate governance is a key priority for the Board. Accordingly, the Board has considered carefully the requirements of the Combined Code on Corporate Governance adopted by the Financial Reporting Council in June 2008 ("the Code") and has taken various actions in light of its guidance. The Company has complied throughout the year with the provisions set out in Section 1 of the Code except as explained below.
Board of directors
From 1 January 2010 until 17 June 2010 the Board comprised the Executive Chairman, six other executive directors and four non-executive directors. Mr Capello and Mr Di Spiezo Sardo were appointed as non-executive directors on 18 June 2010. On 31 October 2010, Mr Smith stood down as an executive director and Mr Povey was appointed as an executive director. Thus, from 18 June 2010 until the year end, there were seven executive directors and six non-executive directors. The Code requires that smaller companies should have at least two independent non-executive directors and the Company complied with this aspect. Combining the roles of Chairman and Chief Executive constitutes a breach of provision A.2.1 of the Code. This occurred as a result of the previous Chairman and Chief Executive standing down from the Board and was remedied on 1 July 2010 when Mr Stagg took over as Chief Executive.
Baroness Cohen, Mr Ferriss, Mr Simon and Mr Waldron are considered to be independent non-executive directors.
The roles of the Board and the management are clearly defined. Throughout the year, the roles of Executive Chairman and Senior Independent Director were separated and clearly defined in writing. The terms and conditions of appointment of the non-executive directors are available for inspection at the Company's registered office and will also be available at the Annual General Meeting.
The Board is satisfied that each of the non-executive directors committed sufficient time during 2010 for the fulfilment of their duties as directors of the Company. None of the non-executive directors has any conflict of interest which has not been disclosed to the Board.
The number of Board and Committee meetings eligible for attendance and attended by each of the directors during the year was as follows:
|Name||Board meetings||Audit Committee meetings||Remuneration Committee meetings||Nominations Committee meetings|
|A J Barber||11||-||-||5|
|M Capello (appointed 18 June 2010)||3||-||2||2|
|L H Carvalho||11||-||-||-|
|S A Ferriss||10||4||5||5|
|M E Lopinto||10||-||-||-|
|C J Povey (appointed 31 October 2010)||2||-||-||-|
|E Di Spiezio Sardo (appointed 18 June 2010)||3||-||-||-|
|A H Simon||9||4||6||5|
|C H Smith (stood down 31 October 2010)||9||-||-||-|
|N S Stagg||11||-||-||-|
|J D Waldron||9||4||4||5|
|Total meetings held||11||4||6||5|
On appointment, directors are provided with formal details of their responsibilities under legislation applicable to a company listed in the UK. Changes to such legislation and other relevant factors affecting the Group are communicated to all directors. Newly appointed directors are also required to participate in an induction programme in order to familiarise themselves with the Group's businesses. Regular presentations are made to the Board by senior management in order to refresh and expand this knowledge.
All directors are authorised to obtain, at the Company's expense and subject to the Chairman's approval, independent legal or other professional advice where they consider it necessary. All directors have access to the Company Secretary who oversees their ongoing training and development needs.
Election and re-election of directors
The Company's Articles of Association contain detailed rules for the appointment and retirement of directors. There is a formal procedure in place to select and appoint new directors to the Board. These directors are required to retire at the next Annual General Meeting, but can offer themselves for re-election by shareholders. Under the Articles, all directors are required to submit themselves for re-election at intervals not exceeding three years. However, the Board has agreed that, with effect from the forthcoming Annual General Meeting, directors should stand for re-election every year.
The Board annually evaluates the performance of individual directors, the Board as a whole and its Committees. This review comprises structured interviews with each director followed by the presentation of the results of this process to the Board and individual discussions with the Executive Chairman. The results of the evaluation were approved by the Executive Chairman and an agreed plan of action produced. The results are specifically taken into account when considering the re-appointment of directors.
Operation of the Board
The Board meets regularly. Eleven meetings were held during 2010. All members of the Board are supplied, in advance of meetings, with appropriate information covering matters which are to be considered. The Executive Chairman met throughout the course of the year with the non-executive directors in the absence of the other executive directors.
There is a formal schedule of decisions reserved for the Board. This includes approval of the following: the Group's strategy; the annual operating plan and budget; the annual and interim financial statements; significant transactions; major capital expenditures; risk management policies; the authority levels vested in management; Board appointments; and remuneration policies. As described below, the review of certain matters is delegated to Board Committees, which make recommendations to the Board in relation to those matters reserved for the Board as a whole.
Audit and Risk Committee
Details of the membership, role and operation of the Audit and Risk Committee are provided in the Report of the Audit and Risk Committee.
The Code recommends that the Committee should comprise at least two members and that all members should be independent non-executive directors. The Committee comprised four independent non-executive directors throughout 2010.
The Group has adopted a code of ethical conduct applicable to the Board and all members of the finance function. In addition, it has a whistleblowing policy whereby procedures exist that allow employees to report any financial wrongdoing that they believe may have occurred.
The Board has also defined which services can be purchased from the Group's auditors and has adopted procedures in respect of the purchase of these services to minimise the risk of an actual or perceived conflict of interest. For similar reasons, the Board has adopted a policy in respect of hiring staff from the auditor who have been involved in the Group's audit.
The membership of the Committee during 2010 was:
Mr Stephen Ferriss
(Chairman, member since 2008)
Mr Alan Barber
(Member since 2005)
(Member since 2003)
Mr Andrew Simon
(Member since 2006)
Mr Julian Waldron
(Member since 2009)
Mr Marco Capello
(Member since 18 June 2010)
The Committee's purpose is to consider future appointments to the Board and the succession policy for key management positions. The Nominations Committee adopted formal terms of reference dated 14 March 2003. These were updated on 2 March 2007 and are available from the Group's website (www.mcgplc.com) or the Company Secretary upon request.
The Code recommends that a majority of the members of the Nominations Committee should be independent non-executive directors. The majority of the Committee was independent throughout 2010.
During the year the Committee completed a rigorous succession planning process to appoint a new Chief Executive. This process, carried out with assistance from external executive search consultants, included the identification of external candidates by the consultants and the interview and assessment of both internal and external candidates by the consultants and the Committee and resulted in the appointment of Mr Stagg as Chief Executive on 1 July 2010.
Details of the membership, role and operation of the Remuneration Committee are provided in the Directors' Remuneration Report.
The Code recommends that the Committee should comprise at least two independent non-executive directors. The Committee comprised four independent non-executive directors from the beginning of the year until 17 June 2010 and four independent and one non-independent non-executive directors from 18 June 2010 to the end of the year.
Relations with investors and the Annual General Meeting
The Annual General Meeting gives all shareholders the opportunity to communicate directly with the Board. During the year, the directors are available to respond to enquiries from investors on the Group's operations. Effective communication with fund managers, institutional investors and analysts is actively pursued and this encompasses issues such as performance, policy and strategy.
During the year, the executive directors hold discussions with major shareholders. The Chairman is available to shareholders if there are matters that they wish to discuss with him directly. Announcements are made to the London Stock Exchange and the business media concerning trading and business developments to provide wider dissemination of information. Registered shareholders are sent copies of both the annual report and accounts and the half-year report. The Group's website www.mcgplc.com also contains information relevant to investors.
The Executive Chairman, Chief Executive and the Finance Directors met with key shareholders throughout the year and in particular around the time of the full year results and the half year results.
The notice convening the Annual General Meeting to be held on 19 April 2011 is contained in the circular to shareholders.
The Company, as required by the Listing Rules, has complied with the Code provisions on internal control having established the procedures necessary to implement the guidance issued in September 1999 (The Turnbull Committee Report) and by reporting in accordance with that guidance.
The Board has overall responsibility for the Company's system of internal control and reviewing its effectiveness, whilst the role of management is to implement Board policies on risk and control. The system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives. In pursuing these objectives, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss.
There is a continuous process for identifying, evaluating and managing the significant risks faced by the Company which is in accordance with the guidance set out in The Turnbull Committee Report and has been in place for the year under review and up to the date of approval of the annual report and accounts. This process, which is regularly reviewed by the Board, is as follows:
- the Group's management operates a risk management process which identifies the key risks facing the business and reports to the Board on how those risks are being managed. This is based on a risk register produced by executive management which identifies those key risks, the probability of those risks occurring, their impact if they do occur and the actions being taken to manage those risks to the desired level. This risk register is discussed at Board meetings on a regular basis and regular monitoring reports are presented to the Board. The management of these risks is monitored by the internal audit function;
- large acquisitions and capital projects require Board approval; and
- there is regular communication between management and the Board on matters relating to risk and control.
The Board has established a strong control framework within which the Group operates. This contains the following key elements:
- organisational structure with clearly defined lines of responsibility, delegation of authority and reporting requirements;
- defined expenditure authorisation levels;
- on site, video and teleconferencing reviews of operations, covering all aspects of each business, are conducted by Group executive management on a regular basis throughout the year;
- the financial reporting and information systems which comprise: a comprehensive annual budget which is approved by the Board; weekly reports of key operating information; cash flow and capital expenditure reporting; monthly results and forward performance indicators which are measured against the annual budget and the prior year's results. Significant variances are reviewed by the Board and executive management and action is taken as appropriate. The forecast for the year is revised when necessary;
- Group tax and treasury functions are coordinated centrally. There is weekly cash and treasury reporting to Group management and periodic reporting to the Board on the Group's tax and treasury positions; and
- internal audits are performed by Group's internal audit function.
During the course of its review of the system of internal control, the Board has not identified nor been advised of any failings or weaknesses which it deemed to be significant. Therefore a confirmation in respect of necessary actions has not been deemed appropriate.
2011 Ineum Consulting and Kurt Salmon Associates merged to become Kurt Salmon, a stronger, more global consultancy business.
2010 Nick Stagg was appointed Chief Executive from 1 July. Alan Barber remained Executive Chairman until the beginning of 2011 when he transitioned to Non-executive Chairman.
2010 Management Consulting Group PLC raised £25 million through a firm placing, placing and open offer of new ordinary shares and warrants. Through this fundraising BlueGem Capital Partners LLP became an active, long term cornerstone investor in the business.
2008 Parson Consulting was restructured, merged into Ineum Consulting and the brand name discontinued. Viaduct Consulting was merged into Ineum Consulting.
2008 Chairman, Rolf Stomberg, and Chief Executive, Kevin Parry, left the Group. Alan Barber became Executive Chairman and the heads of Alexander Proudfoot, Ineum Consulting and Kurt Salmon joined the Main Board.
2007 The Group acquired Kurt Salmon Inc., a consultancy business specialising in the global consumer goods and retail industry and the US healthcare industry.
2007 The Group purchased CBH Consultants Inc., which operates predominantly on the west coast of the USA. This business was rebranded CBH Consulting. This business was subsequently merged with Parson Consulting.
2007 Viaduct Consulting was established to provide commercial due diligence services to corporate and financial buyers.
2006 The Group purchased 51% of the Salzer Group, which was then rebranded Salzer Consulting, a business operating in Greater China and throughout the Asia Pacific region. In 2008 this stake was sold back to its original owners.
2006 The Group purchased Ineum Consulting, the former French Deloitte Consulting business
2002 A new issue of shares raised £39 million which was used to finance the acquisition of Parson Consulting, a US financial management consultancy and its expansion to London, Paris and Sydney.
2001 The Group acquired Czipin & Partners, a business similar to Proudfoot, primarily based in Germany and Austria
2001 Proudfoot PLC changed its name to Management Consulting Group PLC.
2000 Proudfoot PLC purchased IMR Europe, a Proudfoot clone with significant presence in France and Spain.
2000 Proudfoot Japan was sold for £28.5 million in an MBO to its management.
2000 Proudfoot PLC raised £6.74 million with a placing and open offer
1999 Following a strategy review the Chairman, Rolf Stomberg, and the non-executive directors recruited a new management team led by Chief Executive Kevin Parry.
1990s The business declined during the 1990s under a succession of chief executives.
1994 Proudfoot PLC raised £9.6 million in a 2 for 7 rights issue at 60p per new ordinary share.
1993 Alexander Proudfoot PLC changed its name to Proudfoot PLC.
1991 Alexander Proudfoot PLC acquired Indevo, a strategy consultancy with its main office in Stockholm. This business was partly sold and the remainder closed in 1993.
1989 Proudfoot opened an office in Johannesburg, South Africa.
1989 Alexander Proudfoot PLC acquired Philip Crosby Associates, then a publicly traded company on the US Stock Exchange. This business declined in the mid-1990s, was closed in 1996 and partly resold to its original owner in 1997.
1987 Via a reverse takeover of City and Foreign Holdings PLC, Alexander Proudfoot PLC was listed on the London Stock Exchange.
1980s To increase its global reach Proudfoot opened an office in Singapore, followed shortly thereafter by one in Sydney. By the late 1980s Proudfoot had offices throughout the Asia-Pacific region.
1970s Proudfoot commenced operations in Europe, opening an office in London.
1960s Proudfoot began its expansion out of Chicago, initially within the USA and then in partnership with Unibanco in Brazil.
1946 Mr Alexander "Alec" Proudfoot founded the Alexander Proudfoot Company in Chicago, USA. He headed the firm until his death in 1968, when the senior management purchased the company from his widow.