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Corporate governance

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Corporate governance

The Group operates in a number of countries and accordingly has a strong governance framework within which the component parts of the business operate.

Responsibilities across the Governance framework

The Board
Responsible for the overall management of our organisation and our business
The Board is collectively responsible for the success of the Company.
The Board provides entrepreneurial leadership of the Group within a framework of prudent and effective controls which enable risk to be assessed and managed. It sets the Group’s strategic aims, ensures that necessary financial and human resources are in place for the Group to meet its objectives sets the Group’s values and standards and ensures that its obligations to its shareholders and others are understood and met.  
Board Committees
Specific review and oversight committees
The Board has three committees each dealing with a specific aspect of governance.
Audit and Risk Committee
The Audit and Risk Committee oversees the Group’s financial reporting and internal controls and provides the link between the Board and the external and internal auditors.
Nominations Committee
The Nominations Committee’s purpose is to consider future appointments to the Board and the succession policy for key management positions.
Remuneration Committee
The Remuneration Committee has responsibility for setting the framework for the remuneration of the Chairman, executive directors and other senior executives in the Group and the remuneration packages of those individuals.
 
Executive management
Everyday management of our business and operations, and responsibility for monitoring detailed performance of all aspects of our business
The executive management operate under authority matrices agreed by the MCG Board.
Group executive management are responsible for the overall day-to-day management of the business. The two divisions each have their own leadership and management structures functioning within clearly established procedures and authority limits set by the Board.  

Board of directors

The Board is collectively responsible to our shareholders for the success of the Group. The Board currently comprises the Chairman, three executive directors and five non‑executive directors. The UK Corporate Governance Code requires that smaller companies should have at least two independent non-executive directors and the Company complies with this aspect. The Company also complies with the requirement to separate the roles of Chairman and Chief Executive.

Mr Ferriss, Mr Simon and Mr Waldron are considered to be independent non-executive directors.

The roles of the Board and management are clearly defined. Throughout the year, the roles of Chairman, Chief Executive and Senior Independent Director were separated and clearly defined in writing.

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.

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.

The Board annually evaluates the performance of individual directors, the Board as a whole and its Committees.

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 agreed that, with effect from the 2011 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. Six meetings were held during 2013. All members of the Board are supplied, in advance of meetings, with appropriate information covering matters which are to be considered. During the year the Chairman meets the non-executive directors in the absence of the 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. The review of certain matters is delegated to Board Committees, which make recommendations to the Board in relation to those matters.

The number of Board and Committee meetings eligible for attendance and attended by each of the directors during 2013 are in the table below.

  Board meetings Audit and Risk Committee meetings* Remuneration Committee meetings*

Nominaton Committee meetings*

A J Barber 6 - - 2
M Capello 6 - 2 2
L H Carvalho 6 - - -
S A Ferriss 6 4 3 2
C Mahjoub 6 - - -
C J Povey 6 - - -
E Di Spiezio Sardo 6 - - -
A H Simon OBE 6 3 3 2
N S Stagg 6 - - -
J D Waldron 6 4 3 2
Total meetings held 6 4 3 2

* For the Committee meetings attendance shown is that of the respective Committee members.

Audit and Risk Committee

The Audit and Risk Committee oversees the Group’s financial reporting and internal controls and provides the link between the Board and the external and internal auditors.

Membership

The current membership of the Committee is:

  • Mr Julian Waldron (Chairman, member since 2008)
  • Mr Stephen Ferriss (Member since 2006)
  • Mr Andrew Simon (Member since 2008)

Structure

The UK Corporate Governance Code (the “Code”) recommends that audit committees should comprise at least two members and that all members should be independent non-executive directors. The Committee comprises three independent non-executive directors.

The Code provides that at least one member of the Committee should have recent and relevant financial experience. Mr Ferriss is a banker and Mr Waldron is the chief financial officer of a French listed company and both are considered to have such experience.

Role of the Committee

The role of the Committee is, in summary:

  • to monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance, reviewing significant financial reporting judgements contained in them;
  • to assist the Board in ensuring the annual report and accounts, taken as a whole, is fair balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy;
  • to review the Group’s internal financial controls and to review the Group’s internal control and risk management systems;
  • to monitor and review the effectiveness of the Group’s internal audit function;
  • to make recommendations to the Board in relation to the appointment, reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;
  • to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process; and
  • to develop and implement policy on the engagement of the external auditor to supply non-audit services, and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and recommending the steps to be taken.

The Committee’s terms of reference are reviewed each year and were last updated in 2011 to conform with current best practice and the revised guidance from the Financial Reporting for Audit Committees issued in December 2010. A pdf copy of the terms of reference is attached below.

Operation of the Committee

The Committee works with a structured annual agenda of matters tied in to the key events in the Company’s financial reporting cycle, together with various standing items the Committee is required to consider.

The Chairman, Chief Executive, Finance Director, Group Head of Finance, Head of Internal audit, other financial managers and external auditors are invited to attend Audit Committee meetings. The Committee met four times during 2013. The external auditor attended three of these meetings and the Committee met privately with them on one occasion.

The Chairman of the Committee reports to the Board on the Committee’s activities after each meeting, identifying relevant matters requiring communication to the Board and recommendations on the steps to be taken. The performance of the Committee is considered as part of the Board performance evaluation process. In addition, each year the Committee members complete a detailed self-assessment as an aid to maintaining the Committee’s effectiveness.

The Committee discharges its responsibilities as follows:

Financial statements
The Committee reviews the interim financial statements and the annual report and accounts. Following discussion with both management and the external auditor, the Committee determines and takes steps to ensure the key risks of misstatement are addressed.

Presentations are made by management and the external auditor about the key technical and judgemental matters relevant to the financial statements. The Committee seeks to satisfy itself that it is appropriate for the Board to approve the financial statements.

Internal financial control and risk management systems
The Committee reviews the register of Group risks prepared by management, recommendations made by the external auditor and internal audit reports. A review of the register of Group risks is carried out by internal audit. The Committee seeks to satisfy itself that it is appropriate for the Board to make the statements regarding internal controls included in the Corporate Governance Statement.

Internal audit function
The Head of Internal Audit reports to the Committee, which reviews and approves the annual internal audit work programme and reviews all internal audit reports prepared in the year. The internal audit function also assists executive management on special projects.

External auditor
The Committee oversees the relationship with the external auditor and ensures that the external auditor continues to be independent, objective and effective in its work, as well as considering the reappointment of the auditor each year in light of this.

Independence
The Committee undertakes a structured annual review of the independence and objectivity of the external auditor and, with the external auditor, has in place procedures to ensure this is not compromised. The procedures include:

  • Audit partner rotation – The Committee consider this is a key control in ensuring continued independence and objectivity by reducing the risk of familiarity.
  • Restrictions on the nature and amount of non-audit work – In accordance with the Code, the Committee has established policies that the auditor shall not provide any services that would potentially result in them auditing the result of their own work or which are prohibited under the US Sarbanes Oxley Act and procedures to ensure compliance with the policies. The Committee reviews annually its policy and procedures on this area to ensure they remain appropriate in the context of regulatory changes and changes in the nature of the Group’s activities. Under the procedures in force in the year, the Committee pre-approves any permitted non-audit engagements with fees of more than £25,000 or which would cause the cumulative fees of such engagements for the year to exceed £100,000. At each Committee meeting a report is presented on non-audit activities and fees payable to the external auditor in order to ensure that the non-audit work is appropriate and relationship between non-audit fees and audit fees is not inappropriate.
  • The relationship of the auditor with senior management – The Committee reviews the relationship to ensure it has not become compromised due to familiarity or other factors. The Committee has considered the independence of the external auditor and is satisfied that independence has been maintained and Deloitte LLP has formally confirmed its continuing independence to the Committee.

Audit effectiveness
The Committee reviews the external audit plan proposed by the auditor and participated in the review of the quality of the service that they provide. The Committee’s consideration includes:

  • a review of the external audit plan;
  • the auditor’s assessment of Group accounting and business risks;
  • the auditor’s own quality control procedure;
  • the auditor’s assessment of the key risks of misstatement;
  • consideration of the audit strategy and its communication;
  • whether the staffing of the external audit has continuity whilst maintaining independence; and
  • communication of the findings to the Committee and the quality and key features of its work.

Audit tendering
The Audit Committee has noted the changes to the Code and related guidance regarding the tendering of external audit contracts at least every ten years. As the Company is not in the FTSE 350, the process is not mandatory. However, the Committee is mindful that the current external auditor was appointed in 2001 and will continue to give consideration to the timing of a formal tender in the light of the regulatory regime, its assessment of the independence of the current auditor and any future changes in regulations.

Reappointment
There are no contractual obligations that act to restrict the Committee’s choice of external auditor. The Committee considers the results of the procedures outlined above, and recommends to the Board whether the external auditor may be reappointed.

pdf Audit Committee terms of reference

Financial matters

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.

Nominations Committee

The Nominations Committee's purpose is to consider future appointments to the Board and the succession policy for key management positions.

Membership

The current membership of the Committee is:

Mr Stephen Ferriss
(Chairman, member since 2008)

Mr Alan Barber
(Member since 2005)

Mr Marco Capello
(Member since 2010)

Mr Andrew Simon
(Member since 2006)

Mr Julian Waldron
(Member since 2009)

Structure

The UK Corporate Governance Code recommends that a majority of the members of a nominations committee should be independent non-executive directors and the Committee complies with this recommendation.

The Nominations Committee adopted formal terms of reference dated 14 March 2003. These were updated on 2 March 2007.

The Committee meets on an ad hoc basis as required. The Committee has ongoing succession plans particularly in respect of non-executive directors approaching retirement due to their length of service.

At the end of 2013, Julian Waldron was appointed to the position of Deputy Chairman with the intention that he should take over as Chairman on Alan Barber's retirement at the end of 2014. The Committee is identifying the skill sets needed for new non-executive directors, in particular recognising that one will need to take on the chairmanship of the Audit and Risk Committee, and considering the diversity of the Board, and has instructed a search agency to identify suitable candidates so it may recommend appointments to the Board.

Remuneration Committee

The Remuneration Committee has responsibility for setting the framework for the remuneration of the Chairman, executive directors and other senior executives in the Group and the remuneration packages of those individuals.

Membership

The current membership of the Committee is:

Mr Andrew Simon
(Chairman, member since 2006)

Mr Marco Capello
(Member since 2010)

Mr Stephen Ferriss
(Member since 2008)

Mr Julian Waldron
(Member since 2008)

Structure

The UK Corporate Governance Code recommends that the Committee should comprise at least two independent non-executive directors. The Committee comprises three independent and one non-independent non-executive directors and therefore complies with the Code.

The terms of reference for the Committee were last updated in December 2010. They were last reviewed in 2013 and no changes were deemed necessary. A pdf copy is attached below.

Operation of the Committee

In determining the directors' remuneration for the year, the Committee consults the Chairman save in relation to his own remuneration. No director is involved in deciding their own remuneration. The Committee makes use of published reports on directors' remuneration packages and advice from independent external advisers is obtained when required. New Bridge Street is the independent adviser to the Remuneration Committee.

New Bridge Street provides advice to the Remuneration Committee on the operation of the Company's incentive schemes and the remuneration of executive and non-executive directors as well as employee remuneration and may also advise the Committee on other matters within the Committee's terms of reference.

The Board carries out an annual review of its operations, including the functioning of its Committees.

pdf Remuneration Committee terms of reference

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.

Internal controls

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 Audit and Risk Committee and 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 the Audit and Risk Committee and 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 and contract 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.

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MCG facts report

Group history

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.

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