Governance

Introduction

Good corporate governance is fundamental to 3i and its activities. Governance and oversight of the Group’s business model and strategy are critical to the delivery of value to the Group’s stakeholders. This is more important than ever given the volatile and uncertain economic and political environment and the changing regulatory landscape that our sector faces.

The Board is responsible to shareholders for the overall management and oversight of the Group and for its long-term success. In particular, the Board is responsible for agreeing the Group’s strategy, monitoring financial performance, setting and monitoring the Group’s risk appetite and maintaining an effective system of internal controls.

It is the Board’s responsibility to ensure that the Group has a clear strategy and that the necessary people, resources and structures are in place to support the delivery of this strategy.

Board and Committee structure

The Board is responsible for ensuring that there is an effective organisational and reporting structure in place such that there are clear reporting lines within the Group and well defined roles and responsibilities. This is to ensure that the right decisions are being made with involvement from the right people.

The Board is assisted by various Principal Committees of the Board which report to it regularly. This committee structure is outlined in the diagram below. The Board reviews membership of these Committees regularly. The Board aims to ensure that undue reliance is not placed on particular Directors. These Board Committees have clearly defined terms of reference.

Day-to-day management of the Group is the responsibility of the Chief Executive. To assist him in this role, the Chief Executive has established a number of additional Committees which are also outlined below.

Division of responsibilities

Role of the Chairman
  • Leads the Board in setting its agenda, agreeing strategy, monitoring financial and operational performance, and establishing the Group’s risk appetite.
  • Organises the business of the Board, ensuring its effectiveness, and maintaining an effective system of internal controls.
  • Ensures that non-executive Directors receive relevant and accurate information to facilitate an open and effective discussion. This includes ensuring that the non-executive Directors receive regular reports on shareholders’ views on the Group.
  • Responsible for the composition of the Board and facilitates the effective contribution of non-executive Directors and constructive relationships between Executive and non-executive Directors.
 
Role of the Chief Executive
  • Direct charge of the Group on a day-to-day basis and is accountable to the Board for the financial and operational performance of the Group.
  • Leads the Executive Committee to develop and implement the Group’s strategy and manage risk and the internal control framework.
  • Chairs the Investment Committee to review the acquisition, management and disposal of investments.
  • Reports to the Board on financial and operational performance, risk management and progress in delivering the strategic objectives.
  • Regularly engages with shareholders and other key stakeholders on the Group’s activities and progress.
 
Role of non-executive Directors
  • Scrutinise the performance of management in meeting agreed objectives and monitor the reporting of performance.
  • Seek assurance on the integrity of the financial information and that financial controls and systems of risk management are robust and defensible.
  • Determine appropriate levels of remuneration for Executive Directors and Executive Committee and have a prime role in appointing Directors and in succession planning.
  • Constructively challenge and help develop proposals on strategy; this occurs at meetings of the Board, and in particular at the annual review meeting to discuss ongoing strategy, the most recent of which took place in December 2015.

Governance framework

  The Board
Chairman: Simon Thompson
Chief Executive: Simon Borrows
Comprises: Chairman, 2 Executive Directors and 5 non-executive Directors
 
Principal Board Committees
Audit and Compliance Committee

Financial reporting, risk and internal controls

Caroline Banszky (Chairman)
Jonathan Asquith
Martine Verluyten
  Remuneration Committee

Director and senior management remuneration and Group remuneration structure

Jonathan Asquith (Chairman)
Caroline Banszky
David Hutchison
  Nominations Committee

Board appointments, and size, balance and composition of the Board

Simon Thompson (Chairman)
Jonathan Asquith
Caroline Banszky
Peter Grosch
David Hutchison
Martine Verluyten
  Valuations Committee

Valuation policy and investment valuations

David Hutchison (Chairman)
Simon Thompson
Simon Borrows
Peter Grosch
Martine Verluyten
Julia Wilson
valuations

In addition to its Principal Comittees, the Board also has a number of other staging committees, including the Treasurey Transactions Committee, established to consider specific items of business on a adhoc basis as required.

Chief Executive Committees
Executive Committee

Principal oversight body for management of the business

Simon Borrows (Chairman)
Menno Antal
Kevin Dunn
Jeremy Ghose
Alan Giddins
Ben Loomes
Phil White
Julia Wilson
  Investment Committee

Acquisition, management and disposal of investments

Simon Borrows (Chairman)
Menno Antal
Alan Giddins
Ian Lobley
Ben Loomes
Phil White
Julia Wilson
  Group Risk Committee

Oversees the Group's risk management framework

Simon Borrows (Chairman)
Menno Antal
Kevin Dunn
Jeremy Ghose
Alan Giddins
Ben Loomes
Phil White
Julia Wilson
Head of Group Compliance
Head of Internal Audit
  Conflicts Committee

Independent review of conflict issues

Kevin Dunn (Chairman)
Ben Loomes
Julia Wilson

How the Board operates

The Chairman leads the Board and ensures its effectiveness. He organises its business and sets its agenda. In addition to the Chairman, there are currently five non-executive Directors with a range of strong and complementary skills.

Attendance at Board and Committee meetings during the year to 31 March 2016 is shown on page 68 of the Annual Report and Accounts 2016. Before each Board and Committee meeting, relevant reports and papers, including financial performance data and detailed updates on the progress and implementation of the strategic plan where appropriate, are circulated to Directors. The Board is able to discuss these reports and updates and to challenge directly the Executive Directors and other senior management, who attend all or part of the Board meetings where relevant.

The key responsibilities and areas of focus for the Board are:

  • Strategy – contribute to the development of, and agree, the Group’s strategy. This includes through review and discussion of reports and updates at Board meetings as well as through the annual strategy conference which is attended by the Board and, where relevant, members of the Executive Committee.
  • Group financial and operational performance – review and monitor the performance of the Group, including through regular reporting and discussions with the Executive Committee and other senior management.
  • Senior management – ensure that the Executive Committee has the skills and resources to deliver the strategy and that appropriate succession and contingency planning is in place.
  • Evaluation and composition – review the performance of the Board and its Committees to ensure that they are effective. Ensure that the Board and its Committees comprise competent and capable individuals with a range of skills and experience who bring independent views to the decisions being made.
  • Internal controls – maintain an appropriate internal control framework.
  • Risk – ensure that there are effective risk management policies and processes in place and an appropriate governance structure.

The Board has a formal schedule of matters reserved to it and its duly authorised Committees for decision. Matters delegated by the Board to management include implementation of the Board approved strategy, day-to-day management and operation of the business, the appointment and remuneration of staff below the Executive Committee and the formulation and implementation of risk management policies and processes.

Effectiveness

During the year to 31 March 2016, the Board conducted its annual evaluation of its own performance and that of its Committees and individual Directors. On this occasion, the process was externally facilitated by Lintstock Limited. Lintstock Limited has no other connections with the Company. The evaluation consisted of a questionnaire, completed by all Board members plus the other six members of the Executive Committee, one-to-one interviews, and a subsequent report and action plan that was discussed and agreed at the Board. Overall, the evaluation concluded that the Board is performing well, but some areas for further improvement were identified and agreed.

The evaluation included the following topics: consideration of Board composition, expertise and dynamics; time management and Board support; the performance of the Board’s Committees; the Board’s strategic and operational oversight; succession planning and human resources management; and priorities for change. During the review Directors identified areas for further broadening of the Board’s experience and expertise through recruitment as opportunities arise. Areas requiring increased focus, debate and, in some cases, reporting were identified and additional opportunities for Directors to interact with senior personnel beyond the Executive Committee were agreed.

In his role as Senior Independent Director, Mr J P Asquith led a review by the Directors of the performance of the Chairman and subsequently reported back to the Board and provided feedback to the Chairman.