Corporate governance

The Company's corporate governance procedures have met the requirements of Section 1 of the Combined Code on Corporate Governance ("the Code"), with the one exception that no meetings were requested or held between shareholders and the Chairman and the senior independent non-executive director during the year. However, the Board considers that arrangements are in place to ensure a balanced understanding of the issues and concerns of major shareholders.

The Board

The Board consists of the non-executive Chairman, three executive directors and four non-executive directors. The Board considers all of the non-executive directors including the Chairman to be independent. The Board has approved the below Chairman/Chief Executive Division of Responsibilities statement. The Board meets between eight and ten times a year and its objectives are below. The Board reserves a formal schedule of matters for its approval which includes Group strategy, approval of budgets and major capital expenditure projects. All directors have access to external advice at the expense of the Company. Mr H Mann acts as the Company's senior non-executive director. Any shareholder who has a concern about the affairs of the Company should contact, in the first instance, the Chairman, the Chief Executive or Mr H Mann. A summary of Directors' Service Agreements and Terms of Engagement is below.

  • Download Chairman/Chief Executive Division of Responsibilities statement (65KB) Download
  • Download Board objectives (60KB) Download
  • Download schedule of matters for approval (75KB) Download
  • Directors' Service Agreements and Terms of Engagement (60KB) Download

The Audit Committee

The Audit Committee comprises four non-executive directors and is chaired by Mr Andrew Carr-Locke. Its terms of reference are below. The Committee normally meets at least twice a year to review the Company's interim and annual financial statements before submission to the Board for its approval, to review the adequacy of the Group's accounting systems and controls and to monitor the relationship with the external auditors, considering their independence and advising the Board on auditors' fees. It also considers the Group's compliance with the Combined Code.

  • Download the Audit Committee's terms of reference (85KB) Download

The Nomination Committee

The Nomination Committee comprises four non-executive directors and the non-executive Chairman and its terms of reference are below. It is responsible for making recommendations to the Board on all director appointments and the Committee is chaired by Mr H Mann.

  • Download the Nomination Committee's terms of reference (60KB) Download

The Remuneration Committee

The Remuneration Committee comprises five non-executive directors and the non-executive Chairman and is chaired by Mr N Monnery. Its responsibilities are to determine, within remuneration principles agreed with the Board, the salaries, bonuses and pension rights of the executive directors. Remuneration and benefits are designed to be set at a level appropriate to the Company's circumstances having regard to market information provided by outside agencies. The Board itself determines the remuneration of non-executive directors.

  • Download the Remuneration Committee's terms of reference (61KB) Download

Relations with shareholders

Communications with shareholders are given high priority. Major announcements are made available to shareholders and the general public through the London Stock Exchange and through the Dairy Crest Group plc website www.dairycrest.co.uk. There is regular dialogue with institutional and other major shareholders. The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation. The chairmen of the Audit, Remuneration and Nomination committees are available at Annual General Meetings to answer questions.

Internal control

The Board is responsible for the Group's system of internal control and risk management and for reviewing its effectiveness. As required by the Code, the Board has established an ongoing process, in accordance with the guidance of the Turnbull committee on internal control, to identify, evaluate and manage the risks faced by the Group. This process has been in place for the year under review and up to the date of approval of the Annual Report. The main elements of the process applied in reviewing the effectiveness of the systems of internal control include:

  • Board - the Board exercises its responsibilities through an organisational structure with clearly defined levels of responsibility and rules relating to delegated authorities. The Board meets regularly throughout the year and receives oral and written presentations to maintain effective control over strategic, financial, operational and compliance matters.
  • Financial reporting - there is an annual budget approved by the Board and monthly financial reporting to the Board. The monthly financial information includes trading results, balance sheet and cash flow information by business unit with comparison against prior year and budget.
  • Control environment - the identification and mitigation of business unit risks is the responsibility of the executive directors in conjunction with the senior management of each business. Each business unit operates and maintains controls appropriate to its own activities and conforms to group policies and procedures. On a quarterly basis, each business unit is required to complete a self-assessment controls questionnaire that requires the approval of business unit management. In addition, the Audit Committee receives reports from the internal audit function summarising audit issues noted and corrective action plans as well as reports from the external auditors on the conclusions of their interim review and final audit.

The directors have reviewed the effectiveness of the Group's system of internal control which is designed to manage rather than eliminate risk of failure to achieve the Group's strategic objectives and to provide reasonable, but not absolute, assurance against material misstatement or loss.