Compliance table

We have complied with all the provisions of the April 2016 version of the UK Corporate Governance Code (the "Code").

Throughout the 53 weeks ended 30 December 2017, the Company was fully compliant with the main and supporting provisions of the Code. A full version of the Code may be found on the Financial Reporting Council's website: www.frc.org.uk.

The Code sets standards of good practice in relation to board leadership and effectiveness, accountability, remuneration and relations with shareholders. Below we have stated how we have addressed each of the main principles in turn.

SECTION A: LEADERSHIP

A1 THE ROLE OF THE BOARD

"Every company should be headed b by an effective board which is collectively responsible for the long-term success of the company."

  • The Board held eight formal meetings during 2017. Individual Directors' attendance may be found on page 51 of the 2017 Annual Report. The number of meetings and the attendance of each Board Committee may also be found on the following pages:
  • A formal schedule of matters which only the Board may take decisions on is available on the Howdens website.
  • The Company maintains appropriate insurance cover against legal action brought against it or its subsidiaries, Directors and Officers. It has also provided indemnities to the Directors (to the extent permitted by the Companies Act 2006) in respect of liabilities incurred as a result of their office. Neither the indemnity nor insurance provides cover in the event that the Director is proved to have acted dishonestly or fraudulently.

A2 DIVISION OF RESPONSIBILITIES

"There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company's business. No one individual should have unfettered powers of decision."

  • The roles of Chairman and Chief Executive Officer are separate and clearly defined. They are not exercised by the same individual.
  • The responsibilities of each role have been set out in writing and agreed by the Board.
  • Further information about the separation of the roles and how they work together for the success of Howdens may be found on page 57 of the 2017 Annual Report.

A3 THE CHAIRMAN

"The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role."

  • The Chairman was considered independent on appointment.
  • The Chairman sets the agendas for all Board meetings and ensures sufficient time is given to each agenda item.
  • The Chairman ensures the full Board receives accurate and clear information in a timely fashion (please see B5 'Information and Support' on page 62 of the 2017 Annual Report for further information).
  • All the Directors are encouraged by the Chairman to participate in constructive and open discussions during meetings.

A4 NON-EXECUTIVE DIRECTORS

"As part of their role as members of a unitary board, nonexecutive directors should constructively challenge and help develop proposals on strategy."

  • The diversity of skills, experience, approach and mindset of our Non-Executive Directors mean that they are well placed to effectively scrutinise both strategy and operational management. In addition to the Executive Directors, members of the Executive Committee are frequently present in person at Board meetings where Non-Executive Directors can hold them directly accountable.
  • Tiffany Hall is the Senior Independent Director. She provides a valuable sounding board for the Chairman and intermediary for the other Directors. She is also available for shareholders to contact with concerns which cannot be resolved via the Chairman or the Executive Directors.

SECTION B: EFFECTIVENESS

B1 BOARD COMPOSITION

"The board and its committees should h have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively."

  • The Nominations Committee regularly reviews the size, composition and structure of the Board and makes recommendations to the Board for all new appointments and reappointments. It considers whether there are any gaps in skill, experience or knowledge on the Board when assessing Board effectiveness. Details of the work of the Nominations Committee may be found on pages 65 to 71 of the 2017 Annual Report.
  • At least half of the Directors were independent throughout the year. Further information on Board composition may be found on pages 52 and 53 of the 2017 Annual Report.

B2 BOARD APPOINTMENTS

"There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board."

  • The Nominations Committee is responsible for leading any process of appointing new directors to the Board.
  • The Nominations Committee will only recommend individuals for appointment who subscribe to Howdens' shared values. They must also understand and be sympathetic to our entrepreneurial culture and unique business model.
  • Further detail regarding CEO succession may be found in the case study on page 68 of the 2017 Annual Report.
  • Further information on Boardroom diversity may be found on page 67 of the Nominations Committee Report.

B3 COMMITMENT

"All directors should be able to allocate suffifificient time to the company to discharge their responsibilities effectively."

  • Each of the Directors' external commitments is set out in their biographies on pages 52 and 53 of the 2017 Annual Report. None of our Non- Executive Directors currently holds more than two non-executive directorships in other UK publically-listed companies and none of our full time Executive Directors holds any directorship in a FTSE 100 company.
  • Each Director's conditions of appointment is made available for inspection at the AGM and at the Company's registered office during normal business hours.

B4 DEVELOPMENT

"All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge."

  • A tailored induction programme is undertaken by all new Directors. Further information on inductions can be found on page 69 of the 2017 Annual Report.
  • Non-Executive Directors are invited to attend Howdens' events at different locations and to meet with employees of all levels.
  • Individual training and development needs are considered as part of the annual Board evaluation process. Formal training is also provided when there are specific legal and regulatory developments.

B5 INFORMATION AND SUPPORT

"The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties."

  • With the support of the Company Secretary, the Chairman ensures accurate, quality and timely information is available to the Board via an electronic portal. The use of an electronic portal ensures information is disseminated quickly and securely.
  • The Company Secretary, under the Chairman's direction, ensures information flows effectively within the Board and its Committees and between the Executive Committee and the Non-Executive Directors.
  • The Company Secretary ensures that all Board procedures are complied with and that all of the Directors have direct access to his advice and services.

B6 EVALUATION

"The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors."

  • The 2017 Board evaluation was lead by the Senior Independent Director, Tiffany Hall, with support from Independent Board Evaluation, who facilitated the 2016 external evaluation. Details of the evaluation, including recommendations, may be found on page 70 of the 2017 Annual Report.

B7 RE-ELECTION

"All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance."

  • At the 2018 Annual General Meeting, each Director will stand for election or re-election, with the exception of Matthew Ingle who will retire as a Director on 2 April 2018.

SECTION C: ACCOUNTABILITY

C1 FINANCIAL AND BUSINESS REPORTING

"The board should present a fair, balanced and understandable assessment of the company's position and prospects."

  • Howdens' annual performance, business model and strategy may be found within the Strategic Report (pages 7 to 49 of the 2017 Annual Report).
  • The Directors' going concern and viability statements may be found on pages 33 and 34 of the 2017 Annual Report.

C2 RISK MANAGEMENT AND INTERNAL CONTROL

"The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems."

  • The Board is responsible for the Group's systems of internal control and risk management, and for reviewing their effectiveness. The Board is assisted with these responsibilities by the Audit Committee.
  • The principal risks and uncertainties facing Howdens may be found on pages 30 to 32 of the 2017 Annual Report.

C3 AUDIT COMMITTEE AND AUDITORS

"The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the company's auditors."

  • The Audit Committee is comprised of five independent Non- Executive Directors. The Chairman is not a member of the Audit Committee.
  • The Audit Committee has at least one Audit Committee member with recent and relevant financial experience (please see page 91 of the Audit Committee Report for more information).
  • The Audit Committee, as a whole, has competence in the various relevant sectors which Howdens operates within (please see page 91 of the Audit Committee Report for more information).
  • The Audit Committee has recommended that the auditor, Deloitte LLP, be reappointed at the 2018 Annual General Meeting. Information about audit rotation can be found on page 89 of the 2017 Annual Report.

SECTION D: REMUNERATION

D1 LEVEL AND COMPONENTS OF REMUNERATION

"Executive directors' remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied."

  • Our remuneration policy is designed to incentivise our Executive Directors by aligning the way we reward them with the long-term strategic ambitions of Howdens. This in turn aligns the interests of the Executive Directors with those of our shareholders.
  • Howdens' executive remuneration policy is predicated on the principles of fairness and proportionality. It has been designed with the intention that it is easy to understand, that it is aligned with the wider reward practices for the wider workforce and provides safeguards against payment for sub-standard performance.

D2 PROCEDURE

"There should be a formal and transparent procedure for developing policy on executive remuneration and for fififixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration."

  • The Remuneration Committee is responsible for setting the remuneration of our Executive Directors. The Remuneration Committee Report may be found on pages 72 to 84 of the 2017 Annual Report.
  • The Remuneration Committee is made up of five independent Non-Executive Directors. The Chairman of the Board is not a member of the Remuneration Committee.
  • No Director is involved in deciding their own remuneration.
  • PwC provides remuneration consultancy services to the Remuneration Committee.

SECTION E: RELATIONS WITH SHAREHOLDERS

E1 DIALOGUE WITH SHAREHOLDERS

"There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place."

  • Both Executive and Non-Executive Directors met with shareholders during the year to discuss strategy, performance and governance matters.
  • Non-Executive Directors receive regular updates from the Deputy Chief Executive and Chief Financial Officer at Board meetings as to share price movement, shareholder sentiment and significant changes to the share register. The Company Secretary updates the Board at regular intervals as to wider Corporate Governance developments.

E2 CONSTRUCTIVE USE OF GENERAL MEETINGS

"The board should use general meetings to communicate with investors and to encourage their participation."

  • The Annual General Meeting provides an opportunity for shareholders to meet with the Board and to ask questions pertaining to the business of the meeting, as well as about the business more generally.
  • Where shareholders cannot attend the Annual General Meeting, we encourage them to submit their votes via a proxy.
  • The full Board attends the Annual General Meeting and the Chairs of the Board committees are available to answer questions.
  • Separate resolutions will be proposed on each substantially separate issue and the numbers of proxy votes cast for and against each resolution will be made available to shareholders via the corporate website and the London Stock Exchange news service once voting has been completed.

 

By order of the Board

Richard Pennycook Chairman

28 February 2018

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