Corporate governance

Brief biographical details of current Directors are detailed in the Directors section. The roles of Chairman and Chief Executive are separate and there is a clear division of responsibilities between those roles. The Chairman leads the Board and ensures the effective engagement and contribution of all Non-executive and Executive Directors. The Chief Executive has responsibility for all Group businesses and acts in accordance with the authority delegated from the Board. Responsibility for the development of policy and strategy and operational management is delegated to the Executive Directors and the Operational Directors. There is also a Senior Non-executive Director (Norman Murray) whose role is separately defined.

During the course of the year the Board comprised up to four Executive Directors and six Non-executive Directors. Four of the Non-executive Directors are considered by the Group to be independent. Norman Murray, as the Senior Independent Non-executive Director, is available to address concerns which shareholders may have that have not been dealt with through the normal communication channels with the Chairman and the Executive Directors. The Non-executive Directors who were deemed to not be independent are:

• Alan Wiseman, on account of his previous Executive position, shareholding and relationship with the Chief Executive; and
• Beverley Hodson, on account of the fact that she sat on the Board as a representative of First Milk who hold a 10% share of the Company and are the largest single supplier to the Group. Beverley Hodson resigned from the Board on 31 March 2010.

In accordance with the Company’s Articles of Association, which provide for all Directors to stand for re-election at intervals of no more than three years, RT Wiseman, D Dobbins, and A Dare will retire by rotation and only RT Wiseman and D Dobbins will seek re-election by shareholders, at the 2010 AGM. Our Articles of Association require that a director appointed to the Board since the last AGM should retire at the next AGM and stand for election to the Board to give shareholders an opportunity to confirm their appointment, therefore JS Perry retires and offers himself for election by shareholders at the 2010 AGM.

In addition, as we explained at our AGM last year, EJ Finch was re-elected in 2008 for a three year term however this appointment spans the period in which the Code would require the Company to consider whether he is no longer independent by reason of the duration of his involvement with the Company. Whilst EJ Finch was reappointed for a period of three years we consider it appropriate that he stand for re-election on an annual basis. The Board is satisfied that, following the review of Board and Director effectiveness in 2010, EJ Finch remains independent in character and judgment. He continues to demonstrate the characteristics of independence which we consider essential, such as objectively challenging management and taking part in rigorous debate. We believe that it is advantageous to the Company to retain his services due to his commercial experience and strong knowledge of the Group’s business and affairs, together with his experience gained as Chairman of the Remuneration Committee.

In addition, as we explained at our AGM last year, EJ Finch was re-elected in 2008 for a three year term however this appointment spans the period in which the Code would require the Company to consider whether he is no longer independent by reason of the duration of his involvement with the Company. Whilst EJ Finch was reappointed for a period of three years we consider it appropriate that he stand for re-election on an annual basis. The Board is satisfied that, following the review of Board and Director effectiveness in 2010, EJ Finch remains independent in character and judgment. He continues to demonstrate the characteristics of independence which we consider essential, such as objectively challenging management and taking part in rigorous debate. We believe that it is advantageous to the Company to retain his services due to his commercial experience and strong knowledge of the Group’s business and affairs, together with his experience gained as Chairman of the Remuneration Committee.

Particulars of Directors’ remuneration and interests in shares of the Company are given in the Report of the Board in relation to Remuneration Policy and Practice (the ‘Directors’ Remuneration Report’) and Notes to the Financial Statements- Notes 9 respectively of our 2010 Annual Report .

There are several changes which shall affect the Directors and the balance of the Board as from the date of the AGM on 8 July 2010:

As detailed in the Chairman’s statement, AW Wiseman shall resign from the Board, RT Wiseman, who is currently Chief Executive will move to the • role of Executive Chairman, WG Keane, the current Group Finance Director, will assume the role of Managing Director for the Group and G Sweeney, current Finance Director for the main trading subsidiary Robert Wiseman & Sons Limited will assume the role of Group Finance Director. The Group believe these proposals allow for a seamless change within the business. The Corporate Governance aspects of these succession plans have been carefully considered by our Non-executive Directors, including the division of Executive responsibilities and the need to ensure the continued robust independent oversight, scrutiny and challenge of all our affairs.

• AR Dare shall retire as a Director.
• EJ Finch, shall stand down as Chairman of the Remuneration Committee and shall be succeeded by JS Perry. Whilst the Board is satisfied that EJ Finch remains independent in character and judgment, as he has been a Non-executive Director of the Group for over ten years we believe that it is appropriate that a new Chairman of the Remuneration Committee be appointed. EJ Finch shall continue in his role as Non-executive Director and shall remain a member of the Remuneration, Audit and Nomination Committees.

At Robert Wiseman Dairies we believe that the Board needs to be independent, balanced and insightful, informed and effective.

The Board meets regularly to determine the strategic direction of the Group and to review operating, financial and risk performance. There is a formal schedule of matters reserved to the Board which includes:

• approval of the Group's annual Business Plan;
• the Group's strategy;
• acquisitions, disposals and capital expenditure projects above certain thresholds;
• all guarantees;
• treasury policies;
• the financial statements;
• the Company's dividend policy;
• transactions involving the issue or purchase of Company shares;
• borrowing powers;
• appointments to the Board;
• alterations to the Memorandum and Articles of Association;
• legal actions brought by or against the Group above certain thresholds; and
• the scope of delegations to Board Committees, subsidiary boards and executive management of the Group.

On appointment to the Board, Directors are provided with a full, formal and tailored programme of induction, to familiarise them with the Group's businesses; the risks and strategic challenges the Group faces; and the economic, competition, legal and regulatory environments in which the Group operates.

Board Meeting Agenda

In advance of all Board meetings the Directors are supplied with detailed and comprehensive papers covering the Group's operating functions. Members of the executive management team attend and make presentations as appropriate at meetings of the Board. The Company Secretary is responsible to the Board for the timeliness and quality of information.

How Does the Board Demonstrate Independence?

The Board considers that its make up is in keeping with its requirements. Whilst the Board currently has 4 directors considered to be independent by the Board, post the AGM there will only be 3 independent directors; however, we believe that this is appropriate given the size of the Company. In addition, with the two largest shareholders RT Wiseman and AW Wiseman on the Board then the interests of shareholders are always represented.

How Does the Board Demonstrate Balance and Insight?

The Board considers that, more important than the number of independent Non-executive Directors on the Board, it is a question of the make up of the Board. The Board of Robert Wiseman Dairies’ combines a broad range of skills and experience which ensures that there is always the necessary level of challenge in respect of executive performance. We are conscious of the need to give sufficient time for questions and debate in the boardroom so discussion does not get curtailed.

The governance committees carry out detailed independent oversight on behalf of the Board to ensure we have the appropriate processes in place for succession, remuneration and audit. The non-executives are provided access to the management team through presentations at Board and committee meetings and ad hoc meetings at their request.

The Company Secretary supports the members of the Board in carrying out their governance accountabilities.

On appointment to the Board, Directors are provided with a full, formal and tailored programme of induction to familiarise themselves with the Group’s businesses, the risks and strategic challenges the Group faces, and the economic, competition, legal and regulatory environments in which the Group operates.

How Does the Board Keep Fully Informed?

We have a comprehensive but efficient committee structure to help keep the Board fully informed.

In advance of all Board meetings the Directors are supplied with detailed papers covering the Group’s operating functions. Members of the executive management team attend and make presentations as appropriate at meetings of the Board. The Company Secretary is responsible to the Board for the timeliness and quality of information.

Directors can obtain independent professional advice at the Company’s expense in performance of their duties as Directors. None of the Directors obtained independent professional advice in the period under review. All Directors have access to the advice and the services of the Company Secretary. In addition to these formal roles, the Non-executive Directors have access to senior management.

A programme of strategic and other reviews, together with other training provided during the year, ensures that Directors continually update their skills, their knowledge and familiarity with the Group’s businesses, and their awareness of sector, risk, regulatory, legal, financial and other developments to enable them to fulfil effectively their role on the Board and committees of the Board. During the year representatives from Deloitte LLP and Maclay, Murray & Spens gave presentations to the members of the Board as part of the Board training and technical update process.

The committee chairmen report to the full Board on the outcomes of each meeting. With detailed work being delegated to the committees, it is essential that time is given to keeping all directors up to date and to give them opportunities to ask questions.

The Operational Board (this is the Board of Robert Wiseman & Sons Limited) also support the Board in fulfilling its governance accountabilities.

Board Effectiveness

Good governance is a matter of the Board working effectively as it goes about meeting its objectives and undertaking its responsibilities. To this end we annually undertake a review of both the Board and its governance committees. This matters to us – a strong Board makes a significant difference to a company’s ability to achieve its objectives.

What did the Board do during 2009/10?

The Board meets regularly to determine the strategic direction of the Group and to review operating, financial and risk performance. During the current year the Board considered the following:

• Approval of the Group’s annual Business Plan;
• The Group’s strategy;
• Capital expenditure projects above certain thresholds;
• All guarantees;
• Treasury policies;
• The monthly, interim and year end financial statements;
• The Company’s dividend policy;
• Transactions involving the issue or purchase of Company shares;
• Borrowing powers;
• Risk management;
• Appointments to the Board;
• Legal actions brought by or against the Group above certain thresholds; and
• The scope of delegations to Board Committees, subsidiary boards and executive management of the Group.

The Board received regular updates from the Chairmen of the Audit, Remuneration and Nomination Committees on activities during the year.

During the year a separate meeting was held by the Non-executive Directors in March 2010. Whilst no major issues were discussed we believe that it is essential that the Non-executive Directors are given this opportunity to formally review current business issues and discuss matters amongst themselves privately.

How Did the Board Review Its Performance?

Alan Wiseman, Chairman, led the 2009/10 Board review. Consistent with previous years each director had a one to one discussion with the Chairman, enabling him to highlight particular issues or themes to be reviewed.

The 2009/10 review has confirmed that all of the Directors’ performances have continued to be effective, and the Directors’ offering themselves for re-election or election at the AGM continue to demonstrate commitment to the role of Director.

Individual Performance

The Chairman has reviewed the performance of the Executive Directors individually against set objectives. Remuneration is directly linked to these reviews and is determined by the Remuneration Committee.

The Board has determined that each Non-executive Director demonstrates commitment to the role, including giving sufficient time to Robert Wiseman Dairies meetings and matters. Each Non-executive Director is independent in character and judgement; and every Director makes an effective and valuable contribution to the Board.

What is the Board’s Focus Going Forward?

We consider that once you have implemented good governance practices, these need to be rigorously monitored and maintained. Like all of our business processes this is a matter of continuous development and improvement. We shall continue to monitor our performance in the business and invest in additional controls and more efficient processes whenever we identify such a need.

Attendance at Board and Committee Meetings from 4 April 2009 to 17 May 2010

1 B Hodson retired from the Board on 31 March 2010.
2 JS Perry was appointed to the Board on 1 March 2010.

In addition, the Chairman of the Audit Committee also held 2 meetings with the external auditors during the period 4 April 2009 – 17 May 2010 covering the audit planning and an evaluation meeting towards the end of each year’s audit process.

The terms of reference of the principal Committees of the Board - Audit, Remuneration and Nomination - are available below. Those terms of reference have been reviewed in the current year and are reviewed at least annually. The work carried out by the Audit and Nomination Committees in discharging their responsibilities is summarised below. The work carried out by the Remuneration Committee is described within the Directors' Remuneration Report of the 2010 Annual report

Nomination Committee

Alan Wiseman (Chairman)
Norman L Murray
Andrew R Dare
Ernest J Finch
Jack S Perry (joined 11 March 2010)

The Committee leads the process for making appointments to the Board; ensures that there is a formal, rigorous and transparent procedure for the appointment of new Directors to the Board; reviews the composition of the Board through a full evaluation of the skills, knowledge and experience of Directors; and ensures plans are in place for an orderly succession for appointments to the Board, and to other senior executive management positions.

In the current year the Committee considered the appointment of Jack Perry to the Board and the succession planning measures detailed in the Chairman’s statement.

Audit Committee

Norman L Murray (Chairman)
Andrew R Dare
Ernest J Finch
Jack S Perry (joined 11 March 2010)

The Audit Committee consists entirely of Non-executive Directors who are considered to be independent by the Board and is chaired by Norman Murray who has recent and relevant financial experience. As can be seen from the Directors’ biographical details of this website, the other members of the Committee bring to it a wide range of appropriate experience. The Terms of Reference of the Committee include all matters indicated by the Combined Code.

The Committee meets with Executive Directors and management, as well as privately with the external auditors. The Company Secretary attends the meeting as Secretary of the Audit Committee; however, as and when required, he will exit the meetings to ensure the independence of the meetings. In the current year the Committee has:

• Reviewed and advised the Board on the Group’s interim and annual financial statements;
• Discussed and agreed the nature and scope of the work to be performed by the external auditors and internal audit departments;
• Reviewed the results of this audit work and the response of management;
• Reviewed the activities, resources, organisational structure and operational effectiveness of the Group’s internal audit departments as discussed in more detail below;
• Reviewed and approved the scope of the Risk Committee, chaired by the Risk Management and Strategic Planning Director of the operating company, Robert Wiseman & Sons Limited;
• Reviewed the effectiveness of the Group’s system of internal control (including financial, operational, compliance and risk management), as well as the appropriateness of whistleblowing procedures;
• Made recommendations on the appointment, re-appointment and remuneration of the external auditors and monitored the performance of the auditors; and
• Reviewed the non-audit services provided to the Group by the external auditors and monitored and assessed the independence of the auditors.
  

The Committee has ensured that both the Board and the external auditors have safeguards in place to prevent the compromise of the auditors’ independence and objectivity. The external auditors have also reported regularly to the Committee on the actions that they have taken to comply with professional and regulatory requirements and current best practice in order to maintain their independence. This report included details of the rules regarding the rotation of key members of the audit team to ensure independence. The Committee reviews the auditors’ independence annually and ensures that they comply with the Auditing Practices Board’s Ethical Standards.

Deloitte LLP has acted as auditor since 2002. The Committee evaluates Deloitte LLP’s tenure annually and is not restricted by any contractual obligations in its choice of auditors. In accordance with best practice independence guidelines the audit partner is required to rotate off the audit engagement every five years. Last year the Audit Committee undertook a process with Deloitte LLP to select the audit engagement partner for the 2009/10 year. This process was designed to be in accordance with the recommendations of the Auditing Practices Board, to ensure that any incoming partner had appropriate experience and skills and that the Audit Committee were satisfied that there were no conflicts of interest. In 2009/10 James Baird succeeded Colin Gibson, who had been in place since 2003/04, as lead audit engagement partner. The Committee has recommended to the Board that Deloitte LLP be proposed for reappointment by shareholders at the AGM on 8 July 2010.

The Audit Committee has established a policy in relation to the supply of non-audit services by the external auditors. The Company will engage an external adviser to provide non-audit services on the basis of the skills and experience required for the work and where benefit will be derived as a result of the third party’s knowledge of the Company and cost.

On occasions, the nature of non-audit advice may make it more timely and cost-effective to select Deloitte LLP, who already have a good understanding of the Group. In other situations Deloitte LLP may be considered for non-audit services for a restricted list of services, although, before the engagement commences, the Company shall carry out rigorous checks, including competitive tender, to confirm they are the best provider. In addition the Group must be satisfied that the auditors’ objectivity and independence would not be compromised in any way as a result of being instructed to carry out those services. Deloitte LLP is also subject to professional standards which safeguard the integrity of the auditing role performed on behalf of shareholders.

If the fees to be paid to the external auditor for the provision of non-audit services are below £50,000, the adviser may be engaged in accordance with the Company’s financial delegations of authority after a quotation has been received. If the fees payable are expected to exceed that level, the engagement must be approved by the Audit Committee in advance. The Committee keeps under review the independence and objectivity of the external auditors and the effectiveness of the audit process. It has reviewed and updated the Auditor Engagement Policy which requires prior Committee approval for certain engagements.

At the year end meeting to review the Annual report and Accounts the Audit Committee formally considers the level of non-audit services and fees provided by the Group’s auditors. The detail and level of fees are fully discussed and the Committee is satisfied that there is no risk to the objectivity and independence of the external audit arising from the level of non-audit fees. Details of the amounts paid to the external auditors during the year for audit and other services, in addition to fees paid to other accountancy firms during the year, are set out in the Notes to the Financial Statements - Notes 9 of the 2010 annual report.

The Audit Committee meets on at least two occasions during the year end audit process in March and May. Issues likely to impact the financial statements are raised at the initial meeting by both the senior management and the external auditors. The auditors will also present their audit plan. Audit Committee guidance is sought on accounting policies and assumptions to be adopted in preparing the financial statements. After discussing any issues raised, the Audit Committee will recommend the policies to be adopted or direct senior management to produce further information if deemed necessary and take advice from the auditors on best practice. At the final meeting, the external auditors report their audit results to the Audit Committee including a summary of any significant accounting and auditing issues, internal control findings and a summary of any audit adjustments identified. The Audit Committee would consider any disagreements in accounting treatment between management and the auditors, should any arise.

At the beginning of each year, an internal control plan is developed by the relevant departments based on the significant risks in the Group Risk Matrix and identified mitigation measures. The Audit Committee receives updates on the internal control workplan on an ongoing basis. The external auditors do not place any direct reliance on the work undertaken by the Group’s internal control functions due to the nature of the scope and the timing of their work.

In addition to the standing members of the Audit Committee and representatives from the external auditors, William Keane, Group Finance Director, Gerard Sweeney, Company Secretary and Finance Director of Robert Wiseman & Sons Limited and Douglas Laing, Risk Management and Strategic Planning Director of Robert Wiseman & Sons Limited, routinely attend and are invited to give presentations at meetings of the Audit Committee.

Nomination Committee Terms of Reference
Audit Committee Terms of Reference
Remuneration Committee Terms of Reference

The Board has overall responsibility for the Group’s system of internal control and annually reviews its effectiveness, including a review of financial, operational, compliance and risk management controls. The implementation and maintenance of the risk management and internal control systems are the responsibility of the Executive Directors and other senior management. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and to provide reasonable, but not absolute, assurance against material misstatement or loss. This process has been in place for the year under review and up to the date of approval of the Annual Report and Financial Statements, and is in accordance with the Revised Guidance.

The Board has reviewed the effectiveness of the internal control system, including controls related to financial, operational and reputational risks identified by the Group, in accordance with the Code for the period from 5 April 2009 to the date of approval of this Annual Report. No significant failings or weaknesses were identified during this review, however had such failings or weaknesses been identified then the Board would have taken the action required to remedy them.

At the Board meeting on 11 March 2010, following a review and evaluation of the controls and systems in place, the Board concluded that the Group has a sound system of internal controls in place. There have been no significant changes to the system of internal controls since that date.

The Operational Board is the senior executive team of the Group and has mechanisms for monitoring the risk management practices approved and adopted by individual business areas. They confirm that there is an ongoing process, embedded in the Group’s integrated internal control system, allowing for the identification, evaluation and management of significant business risks, as well as a reporting process to the Board. The Board requires the departments within the trading company to undertake at least an annual review to identify new or potentially under-managed risks. The results of these reviews are reported to the Board via the Audit Committee. This process has been in place throughout the current year and up to the date of the approval of this Annual Report, and it accords with best practice guidelines. The main elements of the Group’s internal control system, including risk identification, are as follows:

1. Board

The Board has overall responsibility for the Group’s system of internal control and exercises this through an organisational structure with clearly defined levels of responsibility and authority as well as appropriate reporting procedures. The Board meets regularly and has a schedule of matters that are brought to it, or its duly authorised committees, for decision aimed at maintaining effective control over strategic, financial, operational and compliance issues. This structure includes the Audit Committee, which, with the Group Finance Director, reviews the effectiveness of the internal financial and operating control environment of the Group.

2. Risk Committee

Whilst the Board of Robert Wiseman Dairies PLC remains responsible for determining the strategic direction of the Group and reviewing operating, financial and risk performance, the Risk Committee has established policies for identifying all major operational, financial and reputational risks within the strategy set by the PLC Board.

In the current year the Risk Committee has:

• Continuously monitored the risks affecting the business, including ‘horizon-gazing’ to try to identify new risks to strategy before they manifest themselves to the business;
• Ensured that risk management is considered throughout our activities and is embedded in the culture and business processes of the Group;
• Reviewed the controls over all of the risks identified as potentially of impact to the business, to assess whether they mitigate the risk, taking into consideration operational, financial and/or commercial limitations;
• Ensured that key controls identified are appropriately and regularly tested by independent personnel; and
• Liaised on a regular basis with the Board through the Audit Committee.

3. Operational Board

The Operational Board reviews business risks, processes and procedures in all the departments of the trading company, agreeing with the relevant management plans to mitigate those risks and improve internal controls and processes. It monitors progress in implementing recommendations and provides regular reports on its findings, as appropriate, to executive management and, via the Audit Committee, to the Board. Annually the Risk Management and Strategic Planning Director specifically reviews and reports on business risks to executive management and, via the Audit Committee, to the Board.

4. Trading Company Controls

The identification and mitigation of major business risks is the responsibility of the trading company management. Each department maintains controls and procedures appropriate to its own business environment while conforming to Group standards and guidelines, including procedures to identify and mitigate all types of risk. To this end the departments within the trading company undertake risk reviews, at least annually, to identify new or potentially under-managed risks.

5. Financial Reporting

There is a comprehensive strategic planning, budgeting and forecasting system with an annual operating plan approved by the Board of Directors. Monthly financial information, including trading results, cash flow statements and indebtedness, is reported with corrective action outlined by trading company executives as appropriate. Throughout the year, Group senior management hold formal meetings with trading company management to review their business and financial performance against budget and forecast. Informal meetings of Group senior management and trading company management are held most weeks.

6. Audits and Reviews

The key internal and external risks identified in the Group are all subject to regular audits or reviews by suitably trained and qualified personnel. With the addition of an Internal Compliance Manager and the introduction of the Risk Committee in the prior year, the Group considers that it has in place a structure which manages all of the risks, ensuring that reviews and audits are carried out in an independent manner and reported throughout the Group. The review by the Audit Committee and monitoring procedures in place ensure that the audits and reviews performed by these departments are independent. Audits and reviews are carried out by personnel who are independent of the location being visited. As this structure has now been in place throughout the year under review the Group considers that it has an independent internal audit function in the year under review.

The risk management framework and internal control system detailed above provides the control environment in which the Company operates in compliance with the Combined Code provisions on Internal Control. Having considered all of the controls and systems in place and their operation throughout the year the Board considers that the Group has an effective internal control environment which is appropriate for the business and which has operated effectively throughout the year.