Board Composition & Operation
The Board is accountable to shareholders for the proper conduct of the business and its long-term success. It is ultimately responsible for the activities of the Group including its overall direction, strategy, risk management, governance and performance. In order to meet that responsibility it ensures that the necessary financial and human resources are in place, and that it is supported in its activities by its various Committees, Executive Management Board (‘EMB’) and senior managers. The authority delegated by the Board to the Audit, Remuneration and Nomination Committees, to carry out certain tasks, are defined in those Committees’ terms of reference.
The Board has a formal schedule of matters reserved for its decisions which includes
- the Group’s business strategy;
- Group-wide business and financial reviews;
- major capital expenditure, acquisitions and disposals;
- review of the internal financial control and risk management systems;
- the approval of interim and annual financial statements; and
- treasury management.
The Board currently consists of eight members, the Chairman, the CEO, the CFO and five non-executive directors. During the year Andrew Heath joined the Board as a non-executive director. The Nomination Committee followed a rigorous procedure which evaluated the skills, experience and knowledge required of the new non-executive which led to the successful appointment of Andrew Heath.
Role of the Chairman
In accordance with the Code there is a clear division of responsibilities between the Chairman and CEO which have been set out in writing and agreed by the Board. The written roles are available to view on the Company’s website.
Bert Nordberg has led the Board as Chairman since 2015. The Chairman is responsible for the leadership of the Board and ensuring its effectiveness on all aspects of its role. He sets the agenda for the Board and ensures that the Board receives accurate, timely and clear information giving sufficient time to review all agenda items thoroughly including strategic issues. He promotes a culture of openness, debate and facilitates constructive relations between executive and non-executive directors. He is also responsible for ensuring that the views of shareholders are communicated to the Board as a whole. In order for him to effectively discharge his duties he works closely with the Company Secretary.
Role of the Chief Executive Officer
Interim Chief Executive Officer, Andrew Heath, is the key driver for proposing, developing and implementing the Group’s strategy and commercial targets as agreed by the Board. He is responsible for the day-to-day management of the business. He carries out his duties in consultation with the Chairman, the Board and EMB which in turn are responsible for the commercial and operational activities of the Group. He holds weekly meetings with the CFO and EMB to ensure the Group are actively managing the overall strategy of the business. He is also responsible, with the EMB team, for implementing the decisions of the Board and its Committees.
Role of the Senior-Independent Director (‘SID’)
The SID acts as a sounding board for the Chairman and serves as an intermediary for the other directors when necessary. He also makes himself available to shareholders if they have concerns which contact through the normal channels of Chairman, CEO or CFO have failed to resolve or for which such contact is inappropriate. During the year no requests from shareholders were received. The SID meets with the non-executive directors annually without the Chairman present to appraise his performance. David Anderson took over this role from Ian Pearson during the financial year.
Role of the Company Secretary
The Company Secretary under the direction of the Chairman ensures good flow of information within the Board and its Committees and to senior management. He is also responsible for advising the Board on all governance matters and is on hand to offer advice and services should any director require it. The Company Secretary attends all Board and certain Committee meetings. The Board as a whole decides on the appointment or removal of the Company Secretary.
Role of a Non-Executive Director
The non-executive directors have a wealth of experience, business knowledge and are appointed to constructively challenge senior management and provide input to meet agreed goals, objectives and to ensure the integrity of financial information. The role is described in more detail within the FRC’s Code.
During the year the Board considered the independence of each of the non-executive directors against the criteria specified in the Code and took particular care to assess the independence of both Ian Pearson and David Hurst-Brown. Ian and David were appointed as non- executive directors of the Company in 1998 and 2000, respectively, and have therefore been connected with the Group for more than nine years. The Board acknowledged that they do not meet the independence criteria specified by the Code but agreed that both directors continue to contribute significantly through their individual skills and considerable knowledge of both the Group and the industry. The Board agrees that the remaining non-executives meet the independence criteria specified in the Code.
Induction and professional development
There is a formal induction procedure in place for all new appointments to the Board designed to enhance the directors’ knowledge of the industry in general and their understanding of the Group’s operations/performance, and importantly the Group culture.
The induction programme consists of the following
- one-to-one meetings with the Chairman, CEO and CFO and meeting with the remaining Board members;
- meetings with EMB and senior management to discuss Group operations;
- attendance of strategy meetings; and
- visiting regional and international offices.
In accordance with the Code the Chairman regularly reviews and discusses the development needs with each director though each director is fully aware that they should take responsibility for their own individual needs and take the necessary steps to ensure they are wholly informed.
Activities of the Board
The Board holds regular scheduled meetings throughout the year which are supplemented by unscheduled ad hoc meetings. Irregular meetings are held when urgent business decisions are needed, such as, acquisition activity.
At each meeting certain regular reports are presented which are, as follows
- CEO delivers a full business update with focus on the semiconductor market, a business summary for each division, the Group’s relationships with current and potential partners, licensing updates, units shipped, Pure, potential acquisitions and key business issues and actions;
- CFO gives the year to date financial results, latest financial projections, investor and analysts forecasts; and
- Company Secretary provides updates covering governance, share price data and shareholder analysis.
In addition, the Board meets periodically with senior management from the Group’s Technology and Pure divisions in order to review the strategic direction of the business on an annual basis. The main objectives are to assess and decide upon the key technologies/ products/markets for the business to exploit by assessing the potential returns against the risks. The result is a common vision of the future aspirations of the business and an understanding of the function and goals that each division has within the strategy. Divisio nal business plans are built around executing the strategic plan. The CEO and CFO attend weekly and monthly meetings of the EMB, where each member provides an up to date operational report in which progress against plan is reviewed to ensure that this is in line with the Group’s strategic and business targets. They will then provide feedback to the Board at the next scheduled meeting on any areas of significant interest.
Activities during the year
During the year in addition to the above the Board
- guided the successful acquisition of MIPS and was involved in reviewing and developing the strategy to integrate MIPS into the Group. The Board was also involved in the acquisitions of Nethra Imaging and Paragon, while fully supporting the opening of a new Head Office in Kings Langley, together with new regional offices in Australia, India and Poland;
- reviewed the existing risk management processes within the operating businesses to document and report on significant areas of business risks and their controls and that the process accords with the Turnbull guidance. There is an on-going process for the effective identification, evaluation and management of significant risks faced by the Group. This process was in place throughout the year and as at the date of approval of the annual report and financial statements. Under this process the Board receives a detailed report outlining all the main risks associated with both the Technology and Pure divisions, the report is reviewed thoroughly to consider if any necessary action is required to address these risks. If the Board concludes that action is required, it is given regular updates on progress and is also made aware of any new risks that are identified throughout the year; and
- reviewed and approved a comprehensive budget for the forthcoming year. Expenditure is controlled against formal authorisation limits. Major items of capital and revenue expenditure, and all treasury matters are reserved for members of the Board alone.
The Board undertakes a formal evaluation of its performance and that of its committees each financial year. The Board recognizes the recommendations that an externally facilitated evaluation is performed every three years and will report back on this in due course.
During the year an internal review was facilitated by the Company Secretary and led by the Chairman. The review focused on a number of key areas such as Board processes and their effectiveness, Board composition, content of discussions and focus at Board meetings, succession planning, arranging institutional shareholder meetings and relations with shareholders. Each director provided input and the results concluded that the Board and its Committees continue to operate effectively but highlighted a number of areas that will need further action and improvement which include:
- increasing dialogue with shareholders and institutional investors;
- more timely provision of information in advance of both Board and Committee meetings; and
- increased discussion required on the composition of the Board and Committees.
The non-executive directors, led by the SID, also considered the performance of the Chairman without the Chairman present. They confirmed that the Chairman’s leadership, performance and overall contribution were of a high standard.
Relations with shareholders
The Group actively encourages open and constructive dialogue with shareholders.
This is primarily achieved through:
- regular meetings between institutional investors and the CEO/CFO to discuss business performance; and
- presentations to institutional investors/analysts by the CEO/CFO post release of the interim and full year financial results. The results are made available on the Company website on the day they are announced and shareholders can register through the Company website www.imgtec.com to automatically receive these.
The non-executive directors have access to independent feedback from shareholders after results presentations which, supported by periodic attendance at analyst and shareholder presentations, provides them with an understanding of the views of major shareholders. The Chairman is available to meet with major shareholders to discuss governance and strategy if required and the SID is also available to listen to their views to ensure a clear understanding of concerns or issues.
The investor relations department also manages an online forum which is geared towards private shareholders. The forum allows private shareholders to post any comments or concerns they have which are then circulated to management on a weekly basis. It is essential to understand the views and opinions of investors.
Another key tool used to communicate to both institutional investors and private investors is the Annual General Meeting (AGM) which is held at the Group headquarters in Kings Langley. Shareholders are given a minimum of 21 days’ notice of the meeting and are provided with details of each substantially separate issue which will be raised for voting at the meeting, the results of which will be made available immediately after the meeting. The key event of the day will be the full presentation to shareholders made by the executives to explain recent and future developments in the business followed by an open question and answer session. The Board, EMB and senior engineers will be available for discussion after the formal proceedings and shareholders will also be invited to visit demonstration rooms displaying technology in Group or partners’ products with senior employees on hand to give in-depth detail of the Group’s technologies and products.
Conflicts of interest
All directors have a duty under the Companies Act 2006 to avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Group. The Group has put in place procedures for the disclosure and review of any conflicts or potential conflicts of interest which the directors may have and for the authorisation of such conflict matters by the Board. In deciding whether to authorize a conflict, or potential conflict, the directors have regard to their general duties under the Companies Act 2006. The authorisation of any conflict matter, and the terms of authorisation, may be reviewed at any time and are reviewed formally by the Group on an annual basis. There have been no conflicts of interest in the year.