The Board is committed to the highest standards of corporate governance set out in the Combined Code on corporate governance published by the Financial Reporting Council in June 2006 (the ‘Code’). The Board is accountable to the Company’s shareholders for good governance and this Report describes how the Board applied the main principles of good governance set out in the Code during the year under review.
As at 30 September 2008, the Board of directors was made up of nine members. This increased to ten members as at the date of this Report, comprising the Chairman, three executive directors and six non-executive directors. Susan Murray was appointed as a non-executive director on 11 October 2007. Tim Parker retired from the Board on 23 May 2008 and was re-appointed as a non-executive director on 1 November 2008. Peter Blackburn retired from the Board on 31 October 2007. The non-executive directors are considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. The Board considers that each of the non-executive directors brings his own senior level of experience, gained in his own field mainly in international operations.
Biographical details of the directors currently in office are shown under Board of directors. The Company’s policy relating to the terms of appointment and the remuneration of both executive and non-executive directors is detailed in the Directors’ remuneration report.
The Board meets regularly during the year as well as on an ad hoc basis, as required by business need. The Board manages the business of the Company and may, subject to the Articles of Association and applicable legislation, borrow money, guarantee, indemnify, mortgage or charge the business, property, assets (present and future) and issue debentures and other securities and give security, whether outright or as a collateral security, for any debt, liability or obligation of the Company or of any third party. The Board has a formal schedule of matters reserved for its decision, although its primary role is to provide entrepreneurial leadership and to review the overall strategic development of the Group as a whole. In addition, the Board sets the Group’s values and standards and ensures that it acts ethically and that its obligations to its shareholders are understood and met. The Board may delegate any of its powers to any committee consisting of one or more directors. The Company has delegated day-to-day operational decisions to the Executive Committee referred to below. The Board met eight times during the year and director attendance for each meeting is shown in the table below. The Board has established a procedure for directors, if deemed necessary, to take independent professional advice at the Company’s expense in the furtherance of their duties. This is in addition to the access that every director has to the General Counsel and Company Secretary, who is charged with ensuring that Board procedures are followed and that good corporate governance and compliance is implemented within the Group. Together with the Group Chief Executive and the General Counsel and Company Secretary, the Chairman ensures that the Board is kept properly informed and is consulted on all issues reserved to it. Board papers and other information are distributed at times to allow directors to be properly briefed in advance of meetings. In accordance with the Company’s Articles of Association, directors have been granted an indemnity issued by the Company to the extent permitted by law in respect of liabilities incurred as a result of their office. The indemnity would not provide any coverage to the extent that a director is proved to have acted fraudulently or dishonestly. The Company has also arranged appropriate insurance cover in respect of legal action against its directors and officers. The roles of Chairman and Group Chief Executive are separate and clearly defined with the division of responsibilities set out in writing and agreed by the Board.
The Chairman has addressed the developmental needs of the Board as a whole, with a view to developing its effectiveness as a team and assists in the development of individual skills, knowledge and expertise. During the year, the Board conducted a detailed evaluation of its own performance and that of the Audit, Nomination and Remuneration Committees by means of a written questionnaire. The evaluation focused on several areas, including Board structure, functionality, objectives, meetings (and their content), administration, risk management, access to management and governance. The results of the evaluation were considered and discussed by the Board and will be used to assess effectiveness in the future.
Performance evaluations, including the skills brought to the Board and the contributions each director made to it, were carried out for each director. Executive directors’ performance has been assessed by the Chairman and the Group Chief Executive. The Group Chief Executive’s performance was evaluated by the Chairman and the non-executive directors. The senior independent non-executive director led the review of the Chairman’s performance in consultation with the executive and non-executive directors. The non-executive directors’ performance was considered by the Chairman and by the Group Chief Executive, as well as by the Board as a whole, which reviewed the results of the questionnaires referred to above.
Meetings between the non-executive directors, both with and without the presence of the Group Chief Executive, are scheduled in the Board’s annual programme. The Board has also arranged to hold at least two Board meetings each year at Group business locations to help all Board members gain a deeper understanding of the business. This also provides senior managers from across the Group the opportunity to present to the Board as well as to meet the directors on more informal occasions.
As part of their ongoing development, the executive directors are encouraged to seek an external non-executive role on a non-competitor board, for which they may retain the remuneration in respect of the appointment. In order to avoid any conflict of interest, all appointments are subject to the Board’s approval and the Board monitors the extent of directors’ other interests to ensure that the effectiveness of the Board is not compromised.
With effect from 1 October 2008 a director has a duty under the Companies Act 2006 (the ‘CA 2006’) to avoid a situation in which he has or can have a direct or indirect interest that conflicts or possibly may conflict with the interests of the Company. This duty is in addition to the existing duty that a director owes to the Company to disclose to the Board any transaction or arrangement under consideration by the Company. The CA 2006 allows directors of public companies to authorise conflicts and potential conflicts where the Articles of Association contain a provision to that effect. Shareholders approved amendments to the Company’s Articles of Association at the Annual General Meeting held on 8 February 2008 which included provisions giving the directors authority to approve such situations and to include other provisions to allow conflicts of interest to be dealt with in a similar way to the position that existed before 1 October 2008. The Board has a procedure when deciding whether to authorise a conflict or potential conflict of interest. Firstly, only independent directors (i.e. those that have no interest in the matter under consideration) will be able to take the relevant decision. Secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. In addition, the directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate.
Succession planning is a matter for the whole Board rather than for a committee. The Company’s Articles of Association provide that one-third of the directors retire by rotation each year and that each director will seek re-election at the Annual General Meeting every three years. Additionally, new directors may be appointed by the Board but are subject to election by shareholders at the first opportunity after their appointment. The Articles of Association limit the number of directors to not less than two and not more than 20 save where shareholders decide otherwise. It is Board policy that non-executive directors are appointed normally for an initial term of three years which is then reviewed and extended for a further three year period. It is also Board policy that non-executive directors should not generally serve on the Board for more than nine years. Following their appointment, formal comprehensive and tailored induction is offered to all non-executive directors, supplemented by visits to key locations within the Group and meetings with members of the Executive Committee and other key senior executives. With the exception of Tim Parker, all of the directors being proposed for election or re-election at the Annual General Meeting have been subject to a performance evaluation during the year ended 30 September 2008 and the Board is content that each has continued to be effective and has demonstrated his commitment to his respective role.
Although the non-executive directors are not asked to meet the shareholders of the Company, their attendance at presentations of the annual and interim results is encouraged. The Chairman ensures that the Board maintains an appropriate dialogue with shareholders. Sir James Crosby is the Company’s senior independent non-executive director.
The formal terms of reference for the main Board committees, approved by the Board and complying with the Code, to assist in the discharge of its duties, are available from the General Counsel and Company Secretary and can also be found on the Company’s website at www.compass-group.com. Membership of the various committees is shown below. The General Counsel and Company Secretary acts as secretary to all Board committees.
The Audit Committee comprises Steve Lucas (Chairman), Sven Kado, Tim Parker (to 23 May 2008 and from 1 November 2008) and Sir Ian Robinson. The committee’s membership is reviewed by the Nomination Committee and as part of the annual Board performance evaluation. Members of the committee are appointed by the Board following recommendations by the Nomination Committee.
Each member of the committee brings relevant financial experience from senior executive levels. The expertise and experience of the members of the committee are summarised under Board of directors. The Board considers that each member of the committee is independent within the definition set out in the Code. Steve Lucas is considered by the Board to have significant, recent and relevant financial experience, as he is currently Finance Director of National Grid plc.
All members of the committee receive appropriate induction, which is in addition to the induction which all new directors receive and includes an overview of the business, its financial dynamics and risks. Audit Committee members are expected to have an understanding of the principles of, and developments in, financial reporting, including the applicable accounting standards and statements of recommended practice, key aspects of the Company’s policies, financing, internal control mechanisms, and matters that require the use of judgement in the presentation of accounts and key figures as well as the role of internal and external auditors. Members of the committee undertake ongoing training as required.
The committee meets regularly throughout the year and its agenda is linked to events in the Company’s financial calendar. Each member of the committee may require reports on matters of interest in addition to the regular items. Members’ attendance at the meetings held during the year is set out in the table below.
The committee invites Sir Roy Gardner, the Group Chief Executive, the Group Finance Director, the Group Financial Controller and the Director of Internal Audit together with senior representatives of the external auditors to attend each meeting although it reserves part of each meeting for discussions without invitees being present. Other senior management are invited to present such reports as are required for the committee to discharge its duties.
The Chairman of the Audit Committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the committee’s activities. The remuneration of the members of the committee and the policy with regard to the remuneration of the non-executive directors is set out in the Directors’ remuneration report.
The committee assists the Board to fulfil its responsibilities related to external financial reporting and associated announcements. During the year, the committee reviewed: the interim and annual financial statements; the interim and annual results announcements made to the London Stock Exchange; significant accounting issues including the consideration of any goodwill impairment assessments; operation of the whistle-blowing policy; litigation and contingent liabilities and tax matters, including compliance with statutory tax reporting obligations.
The committee is also responsible for the development, implementation and monitoring of the Company’s policy on external audit. The committee reserves oversight responsibility for monitoring the auditors’ independence, objectivity and compliance with ethical, professional and regulatory requirements. The committee recommends the appointment, re-appointment and removal of the Company’s external auditors. The committee also reviews the terms, areas of responsibility and scope of the audit as set out in the external auditors’ engagement letter; the overall work plan for the forthcoming year, together with the associated fee proposal and cost-effectiveness of the audit; any major issues which arise during the course of the audit and their resolution; key accounting and audit judgements; the level of errors identified during the audit; the recommendations made to management by the auditors and management’s response; and the auditors’ overall performance. The committee also ensures that key partners within the external auditors are rotated from time to time in accordance with applicable UK rules. The committee also monitors the extent of non-audit work which the external auditors can perform. Deloitte & Touche LLP, in its capacity as the Company’s external auditors, undertakes work that it is obliged or, in the view of the committee, is best placed to perform. Such work includes tax-related services, formalities relating to financing facilities, shareholder circulars, regulatory matters and work in respect of acquisitions, mergers and disposals. Nevertheless, to provide safeguards against the objectivity and independence of the external auditors being compromised, the committee has agreed, that unless there is no other competent and available provider, the external auditors should be excluded from providing the Company with general consultancy and all other non-audit and non-tax-related services.
Within the constraints of applicable UK rules, the external auditors undertake some due diligence reviews and provide assistance on tax matters given their in-depth knowledge of the Group’s business although assistance on tax matters is also obtained from other firms. The provision of non-audit services within such constraints and the agreed policy is assessed on a case-by-case basis so that the best-placed advisor is retained. During the year, the committee reviewed the effectiveness of the external auditors and considered whether the agreed plan had been fulfilled and the reasons for any variation from the plan. The committee also considered the external auditors’ robustness and the degree to which the external auditors were able to assess key accounting and audit judgements and the content of the management letter.
The total fees paid to Deloitte & Touche LLP in the year ended 30 September 2008 were £5.3 million (2007: £5.1 million) of which £2.1 million (2007: £2.1 million) related to non-audit work. Further disclosure of the non-audit fees paid during the year ended 30 September 2008 can be found in note 2 to the consolidated financial statements.
The committee also reviews the effectiveness of the Group’s internal audit function and its relationship with the external auditors, including internal audit resources, plans and performance as well as the degree to which the function is free of management restrictions. Throughout the year, the committee reviewed the internal audit function’s plans and its achievements against plans. The committee considered the results of the audits undertaken by the internal audit function and considered the adequacy of management’s response to matters raised, including the time taken to resolve any such matters.
The committee also reviews, where practicable, all proposed announcements to be made by the Company to the extent that they contain material financial information. The committee monitors and reviews the effectiveness of the Group’s internal control systems, accounting policies and practices and compliance controls as well as the Company’s statements on internal control before they are agreed by the Board for each year’s Annual Report. The Board retains overall responsibility for internal control and the identification and management of business risk.
The Company’s whistle-blowing or ‘Speak Up’ policy (which is an extension of the Code of Ethics) sets out arrangements for the receipt, in confidence, of complaints on accounting, risk issues, internal controls, auditing issues and related matters which would, as appropriate, be reported to the committee. A copy of the Code of Ethics is available on the Company’s website at www.compass-group.com. The committee also receives regular updates on bribery and fraud trends and activity at least twice each year with individual updates being given to the committee, as needed, in more serious cases of alleged bribery, fraud or related activities. The Group’s anti fraud policies are a subset of the Code of Ethics which does not tolerate any activity involving fraud, dishonesty or deception. These policies, for which the committee retains overall responsibility, will set out how allegations of fraud or bribery are dealt with, such as by the local HR or finance team and the frequency of local reporting which feed into the regular updates which are presented to the committee. Reporting of these matters to the committee is managed and overseen by internal audit. The ‘Speak Up’ policy operates when the complaint is received through the whistle-blowing channel and that policy will redirect the alleged fraud or bribery for investigation by the most appropriately placed person, who may, on occasion, for example, be the committee itself or a member of a local HR team.
Each year the committee reviews critically its own performance and considers where improvements can be made.
The Nomination Committee meets on an as needed basis and at the date of this Report is comprised of Sir Roy Gardner (Chairman), Sir James Crosby, Richard Cousins, Susan Murray and Sir Ian Robinson. The committee reviews the structure, size and composition of the Board and its committees and makes recommendations with regard to any changes that are considered necessary, both in the identification and nomination of new directors and appointment of members to the Board committees, and the continuation of existing directors in office to ensure that there is a balanced Board in terms of skills, knowledge and experience. The committee retains external search consultants as appropriate and reviews the leadership needs of the Group to enable it to compete effectively in the marketplace. The committee also advises the Board on succession planning for executive board appointments although the Board itself is responsible for succession generally. The committee met twice during the year and director attendance for such meetings is shown in the table below.
The Remuneration Committee comprises Sir James Crosby (Chairman), Steve Lucas, Sven Kado and Tim Parker (to 23 May 2008 and from 1 November 2008), all of whom are independent within the definition set out in the Code. The committee met four times during the year and director attendance for each meeting is shown in the table below. The committee is responsible for making recommendations on remuneration to the Board, details are set out in the Directors’ remuneration report.
The Chairman of the Remuneration Committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the committee’s activities.
The General Business Committee comprises all the executive directors and meets as required to conduct the Company’s business within the clearly defined limits delegated by the Board and subject to those matters reserved to the Board.
The Corporate Responsibility Committee comprises Susan Murray (Chairman from 1 November 2008), Sir Roy Gardner (Chairman until 31 October 2008), Richard Cousins, Andrew Martin, Steve Lucas, Mark White and Jane Kingston, the Group Human Resources Director. The committee’s primary responsibilities include: health, safety and environment practices, business conduct, the promotion of employee engagement and diversity and community investment.
The Disclosure Committee comprises Andrew Martin, Mark White, the Group Financial Controller and the Director of Corporate Strategy, Media and Investor Relations. The committee meets as required to deal with all matters relating to public announcements of the Company and the Company’s obligations under the Listing Rules and Disclosure Rules of the UK Listing Authority.
The Executive Committee comprises the executive directors of the Company, the General Counsel and Company Secretary, the Group Human Resources Director and the Group Managing Directors. The committee normally meets monthly and it is responsible for implementing Group policy, day-to-day management, monitoring business performance and reporting on these areas to the Board.
The following table shows the attendance of directors in office at 30 September 2008 at meetings of the Board, Audit, Remuneration and Nomination Committees during the year:
Board meetings |
Audit Committee meetings |
Remuneration Committee meetings |
Nomination Committee meetings |
|||||
|---|---|---|---|---|---|---|---|---|
| Attended | Eligible to attend |
Attended | Eligible to attend |
Attended | Eligible to attend |
Attended | Eligible to attend |
|
| Richard Cousins | 8 | 8 | – | – | – | – | – | – |
| Sir James Crosby | 7 | 8 | – | – | 4 | 4 | 2 | 2 |
| Sir Roy Gardner | 8 | 8 | – | – | – | – | 2 | 2 |
| Gary Green | 8 | 8 | – | – | – | – | – | – |
| Sven Kado | 8 | 8 | 4 | 4 | 4 | 4 | – | – |
| Steve Lucas | 7 | 8 | 4 | 4 | 4 | 4 | – | – |
| Andrew Martin | 8 | 8 | – | – | – | – | – | – |
| Susan Murray1 | 7 | 8 | – | – | – | – | – | – |
| Sir Ian Robinson | 8 | 8 | 4 | 4 | – | – | 2 | 2 |
The internal audit function is involved in the assessment of the quality of risk management and internal control and helps to promote and further develop effective risk management within the businesses. Certain internal audit assignments (such as those requiring specialist expertise) continue to be outsourced by the Director of Internal Audit to KPMG LLP as required. A policy has been established regarding the recruitment of staff from Deloitte & Touche LLP. The Audit Committee reviews internal audit reports and considers the effectiveness of the function.
In a highly decentralised Group, where local management has considerable autonomy to run and develop their businesses, a well-designed system of internal control is necessary to safeguard shareholders’ investments and the Company’s assets. The directors acknowledge that they have overall responsibility for the Group’s systems of internal control and for reviewing the effectiveness of those controls. In accordance with the guidance set out in the Turnbull Report, ‘Internal Control: Guidance for Directors on the Combined Code’, an ongoing process had been established for identifying, managing and evaluating the risks faced by the Group. This process has been in place for the full financial year and up to the date on which the financial statements were approved.
The systems are designed to manage rather than eliminate the risk of failure to achieve the Group’s objectives, safeguard the Group’s assets against material loss, fairly report the Group’s performance and position and to ensure compliance with relevant legislation, regulation and best practice including that related to social, environmental and ethical matters. The systems provide reasonable, not absolute, assurance against material misstatement or loss. Such systems are reviewed by the Board to deal with changing circumstances.
A summary of the key financial risks inherent in the Group’s business is given under Risk and mitigation. Risk assessment and evaluation is an integral part of the annual planning cycle. Each business documents the strategic objectives and the effectiveness of the Group’s systems of internal control. As part of the review, each significant business and function has been required to identify and document each significant risk, together with the mitigating actions implemented to manage, monitor and report to the management on the effectiveness of these controls. Senior managers are also required to sign biannual confirmations of compliance with key procedures and to report any breakdowns in, or exceptions to, these procedures. Summarised results have been presented to senior management (including to the Executive Committee) and to the Board. These processes have been in place throughout the financial year ended 30 September 2008 and have continued to the date of this Report. The Board has reviewed the effectiveness of the Group’s system of internal control for the year under review and a summary of the principal control structures and processes in place across the Group is set out below.
Whilst the Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness, it has delegated responsibility for the operation of the internal control and risk management programme to the Executive Committee. The detailed review of internal control has been delegated to the Audit Committee. The management of each business is responsible for internal control and risk management within its own business and for ensuring compliance with the Group’s policies and procedures. Each business has appointed a risk champion whose primary role in such capacity is to ensure compliance by local management with the Group’s risk management and internal control programme. The internal and the external auditors have reviewed the overall approach adopted by the Group towards its risk management activities so as to reinforce these internal control requirements.
The Board reviews its strategic plans and objectives on an annual basis and approves Group company budgets and strategies in light of these. Control is exercised at Group and business level through the Group’s Management and Performance (‘MAP’) process and monthly monitoring of performance by comparison with budgets, forecasts and cash targets and by regular visits to Group businesses by the Group Chief Executive and the Group Finance Director. Group businesses approve and submit risk reports for the Board on a biannual basis, summarising the key risks facing their businesses and the controls in place to manage those risks. These reports, together with reports on internal control and departures, if any, from established Group procedures prepared by the internal and external auditors, are reviewed by the Group Finance Director and the Board. The Group companies also submit biannual risk and internal control assurance letters to the Group Finance Director on internal control and risk management issues, with comments on the control environment within their operations. The Group Finance Director summarises these submissions for the Audit Committee and the Chairman of the Audit Committee reports to the Board on any matters that have arisen from the committee’s review of the way in which risk management and internal control processes have been applied. The Board has formal procedures in place for approval of investment and acquisition projects, with designated levels of authority, supported by post investment review processes for selected acquisitions and major capital expenditure. The Board considers social, environmental and ethical matters in relation to the Group’s business and assesses these when reviewing the risks faced by the Group. The Board is conscious of the effect such matters may have on the short- and long-term value of the Company. The external auditors of the Company and the Director of Internal Audit attend Audit Committee meetings and receive its papers. The report of the Audit Committee is set out above and the Audit Committee members meet regularly with the Director of Internal Audit and the external auditors without the presence of executive management.
There were no changes to the Company’s internal control over financial reporting that occurred during the year ended 30 September 2008 that have affected materially, or are reasonably likely to affect materially, the Company’s internal control over financial reporting.
The Company applied all of the principles set out in section 1 of the Code for the period under review and has throughout the year complied with the detailed provisions set out therein.
The Company’s auditors, Deloitte & Touche LLP, are required to review whether the above statement reflects the Company’s compliance with the nine provisions of the Code specified for its review by the Listing Rules of the UK Listing Authority and to report if it does not reflect such compliance. No such report has been made.
The Company places considerable importance on communication with its shareholders, including its employee shareholders. The Group Chief Executive and the Group Finance Director are closely involved in investor relations and a senior executive has day-to-day responsibility for such matters. The views of the Company’s major shareholders are reported to the Board by the Group Chief Executive and the Group Finance Director as well as by Sir Roy Gardner (who remains in contact with the ten largest shareholders) and discussed at its meetings. The Annual Report and Accounts are available to all shareholders either in paper form or electronically and can be accessed via the Company’s website at www.compass-group.com.
There is regular dialogue with institutional shareholders and this has been extended to include private shareholders through the Annual General Meeting and meetings with the United Kingdom Shareholders Association. Contact with institutional shareholders (and with financial analysts, brokers and the media) is controlled by written guidelines to ensure the protection of share price sensitive information that has not already been made generally available to the Company’s shareholders. Contact is also maintained, when appropriate, with shareholders to discuss overall remuneration plans and policies. The Group’s preliminary and interim results, as well as all announcements issued to the London Stock Exchange, are published on the Company’s website at www.compass-group.com. The Company issues regular trading updates and interim management statements to the market and these, together with copies of presentations and interviews with the Group Chief Executive and Group Finance Director, are and will be posted on the Company’s website. The Notice of Annual General Meeting is circulated to all shareholders at least 20 working days before such meeting and it is Company policy not to combine resolutions to be proposed at general meetings. All shareholders are invited to the Company’s Annual General Meeting at which they have the opportunity to put questions to the Board and it is standard practice to have the Chairmen of the Audit, Nomination and Remuneration Committees available to answer questions. The proxy votes for and against each resolution, as well as abstentions (which may be recorded on the proxy form accompanying the Notice of Meeting), are counted before the Annual General Meeting and the results will be made available at the meeting after shareholders have voted on each resolution on a show of hands. The results are also announced to the London Stock Exchange and are published on the Company’s website shortly after the meeting.
The Group’s charitable donations in 2008 totalled £1.5 million (2007: £1.2 million). Further details are given in the Compass in the Community section of the Corporate Responsibility report.
At each Annual General Meeting held since 2004, shareholders have passed a resolution, on a precautionary basis, to approve donations to EU political organisations and to incur EU political expenditure (as such terms were defined under the then relevant legislation) not exceeding £125,000 per annum. The Board has consistently confirmed that it operates a policy of not giving any cash contribution to any political party in the ordinary meaning of those words and that it has no intention of changing that policy. The directors, however, propose to seek renewed authority for the Group to make political donations and incur political expenditure (as such terms are defined in sections 362 to 365 of CA 2006) of not more than £125,000 in total until the Company’s next Annual General Meeting, which they might otherwise be prohibited from making or incurring under the terms of CA 2006 and which would not amount to ‘donations’ in the ordinary sense of the word. The authority sought by Resolution 12 in the Notice of Meeting will last until the Company’s next Annual General Meeting.
In March 2008 options were granted under the Compass Group Management Share Option Plan over 4,670,990 ordinary shares (March 2007: 4,198,525) to senior employees of the Group at an option price of 321.50 pence per share. In September 2008 further options were granted under the Compass Group Management Share Option Plan over 207,309 ordinary shares (September 2007: 265,354) to senior employees of the Group at an option price of 331.25 pence per share. The Company also operates the Compass Group Share Option Plan for senior employees and there are rules in place for all-employee share plans in the UK and overseas. No grants were made under any of these plans during the year ended 30 September 2008 (2007: nil). Further details regarding the plans, including the total number of options outstanding, are set out in note 24 and note 26 to the consolidated financial statements. Details of awards made to directors of the Company under the LTIP, a detailed description of the Plan and the total number of LTIP awards outstanding as at 30 September 2008 are set out in the Directors’ remuneration report
The Group places particular importance on the involvement of its employees, keeping them regularly informed through informal bulletins and other in-house publications, meetings and the Company’s internal websites, on matters affecting them as employees and on the issues affecting their performance. Those Compass businesses in the European Economic Area which have domestic information and consultation processes in place, such as works councils, are able to select representatives to participate in the Compass European Council, which has been in operation since 1996 and provides a forum for exchanging information and engaging in consultation on the Group’s performance and plans, and relevant transnational issues. At the date of this Report there are 18 employee representatives on the Compass European Council from ten countries.
Permanent UK employees are usually invited to join either the Company’s defined contribution scheme (‘CRISP’) or the Company’s stakeholder pension arrangement. However, those UK employees who transfer from the public sector under the Transfer of Undertakings (Protection of Employment) Regulations 2006 will be eligible to join the Compass Group Pension Plan (the ‘Plan’), a defined benefit arrangement which is otherwise closed to new entrants. CRISP has a corporate trustee. The Chairman, Tony Allen, is independent. The other six trustee directors are UK-based employees of the Group, three of whom have been nominated by CRISP members. The Plan has a corporate trustee and two independent directors, including the Chairman, Peter Morriss. There are a further eight trustee directors and they are UK-based employees or former employees of the Group, four of whom have been nominated by Plan members. The other main UK pension arrangement, the Compass Pension Scheme (the ‘Scheme’) is a closed defined benefit scheme. As with the Plan and CRISP, the Scheme has a corporate trustee. The Chairman, David Bishop, is independent. The remaining seven trustee directors are UK-based employees or former employees of the Group, three of whom have been nominated by Scheme members. Permanent employees outside of the UK are usually offered membership of local pension arrangements if and where they exist or limited global arrangements where it is appropriate to have company sponsored arrangements.
Employees are offered a range of benefits depending on the local environment, such as private medical cover. Priority is given to the training of employees and the development of their skills is of prime importance. Employment of disabled people is considered on merit with regard only to the ability of any applicant to carry out the function required. Arrangements to enable disabled people to carry out the function required will be made if it is reasonable to do so. An employee becoming disabled would, where appropriate, be offered retraining. The Group continues to operate on a highly decentralised basis. This provides the maximum encouragement for the development of entrepreneurial flair, balanced by a rigorous control framework exercised by a small head office team. Local management is responsible for maintaining high standards of health and safety and for ensuring that there is appropriate employee involvement in decision making.
All Group companies are responsible for establishing terms and conditions with their suppliers and it is Group policy that payments are made within such agreed terms and conditions. The amount of trade creditors for the Group as at 30 September 2008 was equivalent to 53 days (2007: 49 days for the continuing business on a comparable basis) of trade purchases.
The Share Portal is a service offered by our Registrars, Capita Registrars, which allows shareholders online access to a range of shareholder information. The Share Portal provides access to details of shareholdings in the Company and practical help on transferring shares and updating personal details. It enables shareholders to receive shareholder communications electronically, rather than by post and it also enables shareholders to appoint proxies to attend and vote at general meetings of the Company. To register, shareholders simply need to log on at www.capitashareportal.com and follow the instructions to register. Shareholders registering for the Share Portal will need to have their investor code to hand which is shown on share certificates and on the form of proxy sent with this Report.
The Company’s ordinary shares can be traded through most banks, building societies, brokers or ‘share shops’ in the UK and, in addition, Capita Registrars provides a share dealing service (maximum deal size £25,000) which is available to shareholders who live in the UK. This is a simple and convenient way to buy and sell shares over the telephone and on the Internet without the need to pre-register and complete application forms. To use this service either log on at www.capitadeal.com or call Freephone 0800 280 2545 (Monday to Friday between 8.00 a.m. and 4.30 p.m.).
Further general shareholder information is set out in Shareholder information or on the Company’s website at www.compass-group.com.
The Company’s ordinary shares and Sterling Eurobonds are in CREST, the settlement system for stocks and shares.
Deloitte & Touche LLP (from 1 December 2008 Deloitte LLP) are willing to continue as auditors of the Company and Resolution 7 in the Notice of Meeting concerning its re-appointment and Resolution 8 in the Notice of Meeting concerning the determination of their remuneration will be proposed at the Annual General Meeting. The directors confirm that, so far as they are each aware, there is no relevant audit information of which Deloitte & Touche LLP are unaware and each director has taken all the steps that ought to have been taken as a director to be aware of any relevant audit information and to establish that Deloitte & Touche LLP are aware of that information.
The resolutions to be proposed at the Annual General Meeting to be held on 5 February 2009 together with explanatory notes are set out in the Notice of meeting which is also available on the Company’s website at www.compass-group.com.
On behalf of the Board
Mark J White
General Counsel and Company Secretary
26 November 2008
