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Corporate Governance

Chairman's introduction and statement of compliance

The Board is committed to high standards of corporate governance. Good governance engenders better decision-making and enhances the Company's reputation with all its stakeholders.

The following report, together with the Audit Committee report on pages 31 to 33 and Directors' remuneration report on pages 37 to 53 describe how the Board applies the main principles of good governance and best practice as set out in the UK Corporate Governance Code 2012 issued by the Financial Reporting Council ("the Code"), available on its website, www.frc.org.

I am pleased to report that throughout the financial year under review, the Board considers that the Company has complied fully with all applicable provisions recommended in the Code.

The information required under Rule 7.2.6 of the Disclosure and Transparency Rules of the Financial Conduct Authority is included in the Report of the Directors on pages 34 and 35.

The Board

The Board of Directors is collectively responsible and accountable to shareholders for the long-term success of the Company. The Board provides leadership within a framework of prudent and effective controls designed to enable risk to be assessed and managed.

The Board regularly reviews the operational performance and plans of the Company and determines the Company's strategy, ensuring that the necessary financial and human resources are in place in order to meet the Company's objectives. The Board also sets the Company's values and standards mindful of its obligations to shareholders and other stakeholders.

The Board currently comprises the Chairman, three Executive Directors and three Non-Executive Directors. The Board regards K G Edelman, M P George and D J Houghton as being independent as set out in the Code.

All Board members receive agendas and comprehensive papers prior to each Board meeting. All Directors have access to the services of the Company Secretary who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are adhered to. The Board maintains a register of potential conflicts of interest with its Directors and confirms that no such conflicts exist. The register is reviewed and updated as necessary throughout the financial year. Directors may also obtain further information from any manager or employee of the Company and there is a procedure for Directors to obtain independent advice from external advisers, consultants or any such further professional individual or entity at the Company's expense. The Company maintains appropriate liability insurance for the benefit of its Directors. New appointments to the Board receive an appropriate induction to gain an understanding of the Company's business, which includes meetings with Senior Management.

The Chairman conducts a formal appraisal process for the Board, its Committees and individual Directors, including Directors due to offer themselves for reappointment at the AGM, through use of a questionnaire and or one-to-one meetings which facilitates a Board discussion and, where appropriate, agreed actions for improvements. The Executive Directors are also included in the Company's annual performance appraisal arrangements, which include development and training requirements.

The Chairman meets at least annually with the Non-Executive Directors without Executive Directors present and the Non-Executive Directors, led by the Senior Independent Director, K G Edelman, meet annually to consider the Chairman's performance, taking into account the Executive Directors' views.

All Directors are subject to reappointment by shareholders at the first Annual General Meeting ("AGM") following their appointment and thereafter at intervals of no more than three years. Notwithstanding the Company's current status outside the FTSE 350, the Board has determined that all Directors will retire and offer themselves for reappointment by shareholders on an annual basis.

Director attendance

Attendance by Directors at meetings for which they were eligible during the financial year ended 28 June 2014 was as follows:

Director Board Audit
Committee
Nominations
Committee
Remuneration
Committee
P N Wilkinson 9/9 n/a 1/1 n/a
B Bloomer 9/9 n/a n/a n/a
K G Edelman 8/9 3/3 1/1 3/3
M P George 9/9 3/3 1/1 3/3
J D Hart 9/9 n/a n/a n/a
D J Houghton 9/9 3/3 1/1 3/3
M D Killick 9/9 n/a n/a n/a

Role of the Chairman and Chief Executive

The Chairman and Chief Executive both have clearly defined roles and responsibilities which are set out in writing and approved by the Board.

Chairman's key responsibilities

  • Responsible for the leadership and the effective running of the Board including setting the agenda
  • Ensures that a fixed schedule of matters covering key areas of the Group's affairs, including strategy, annual budgets, significant capital expenditure and major litigation, is exclusively retained for the Board's review and approval
  • Ensures that a framework exists to allow the clear dissemination of relevant and timely information to all Directors for such discussion to occur
  • Responsible for ensuring effective communications with shareholders and effective contributions from the Non-Executive Directors

The Chairman has commitments outside of the Company as detailed in his biography on page 26.

Chief Executive's key responsibilities

  • Responsible for the day-to-day running of the Group's business
  • Leads the development of the Group strategy and overall commercial objectives with input from the rest of the Board
  • Leads the business and Senior Management team in accordance with the strategy approved by the Board
  • Ensures the implementation of the Group's strategy and decisions of the Board and its Committees
  • Ensures matters of particular significance or risk are discussed with the Chairman and consideration by the Board as appropriate
  • Leads the communication programme with shareholders

The Executive Directors and Senior Executives of the business meet under the chairmanship of the Chief Executive on a weekly basis to discuss operational matters and ensure that Board decisions are implemented.

Non-Executive Directors

The Non-Executive Directors bring complementary skills to the Board and ensure constructive debate and robust challenge to Board discussions from an independent perspective.

The terms and conditions of appointment of the Non-Executive Directors are available during normal business hours at the Company's Registered Office and will be available for inspection at the AGM.

The Senior Independent Director is available to shareholders if they have any concerns that contact through the normal channels of the Chairman, Chief Executive or Finance Director has failed to resolve or for which such contact is inappropriate.

Given the skills and experience of the Non-Executive Directors, their general training requirements are left to their own discretion but the Company makes the necessary resources available to meet any identified requirements.

Board Committees

The Board delegates its authority for certain matters to its Audit, Remuneration and Nomination Committees. The Board approves and reviews the terms of reference of each of the Committees which are available on the Company's website, www.thorntons.co.uk. In addition to formal Committee meetings, ad hoc decisions of the Committees are taken after discussion throughout the financial year as necessary through the form of written resolutions.

Audit Committee

The Audit Committee throughout the financial year comprised the three independent Directors and was chaired by D J Houghton. It meets three times each financial year with the external auditors and considers any issues that are identified during the course of their audit work. The Board is satisfied that the Committee members have recent and relevant financial experience.

Full details of the work, responsibilities and governance of the Audit Committee are set out in its report on pages 31 to 33. D J Houghton, Chair of the Committee, will be available at the AGM to respond to any shareholder enquiries in relation to the Committee's report.

Nomination Committee

The Nomination Committee is chaired by P N Wilkinson and includes the independent Directors, K G Edelman and D J Houghton, who both served on the Committee throughout the year, and M P George, who was appointed to the Committee on 23 May 2014. The Committee meets at least once a year and is responsible for reviewing the structure, size and composition of the Board and for considering and making recommendations on new appointments. It also considers succession planning, recognising the need to balance the skills, knowledge, expertise and experience on the Board necessary to meet the challenges and opportunities facing the business in the future. When appointments are being considered, the Committee uses professional external recruitment specialists as and when appropriate as well as contacts of its Directors and the Company's advisers. The Committee also reviews the contribution of those Directors offering themselves for reappointment by shareholders at the AGM.

The Committee is committed to the principle of valuing diversity, recognising the benefits that can be secured through a diverse workforce where equality, fairness and respect enable all to be treated in the same way. The Board and Committee do not currently consider it appropriate or necessary to set specific targets regardless of gender, ethnicity, religious beliefs or other matters, believing that rather all appointments, external or internal, should be made on individual merit based on skills, experience and knowledge to fulfil the role.

Remuneration Committee

The Remuneration Committee comprises the three independent Directors and was chaired by K G Edelman. M P George will succeed K G Edelman as Chair of the Committee on 3 October 2014 when K G Edelman leaves the Board. The Board has delegated authority to the Committee for setting the Chairman's, the Executive Directors' and the Company Secretary's remuneration and performance-related awards. Further details of the Committee and Directors' remuneration are set out in the Directors' remuneration report on pages 37 to 53.

Shareholders

Communications with shareholders are given high priority. Following the announcement of the Company's half-year and full-year results, the Directors, normally represented by the Chief Executive and Finance Director, make detailed business presentations to institutional shareholders and investment analysts. The Chairman meets or has contact with major shareholders as necessary. In addition and on request, the Senior Independent Director is also available to all shareholders. Feedback directly from shareholders and via the Company's advisers after these regular analyst and shareholder meetings ensures that the Board understands shareholder views. The Directors between them hold a significant number of shares in the Company which also ensures that their interests are fully aligned with those of other shareholders. Finally, the Company's investor website, http://investors.thorntons.co.uk/, allows shareholders to view Company results, stock exchange announcements and other relevant information.

The Board uses the AGM to communicate with both private and institutional investors and welcomes their attendance. Each year the Board reviews any governance and voting guidelines issued by representative bodies of its shareholders. The Directors present a business review similar to the analyst presentations referred to above and welcome questions from all those attending. The Chairman aims to ensure that the chairpersons of the Board Committees are available. All Code provisions regarding constructive use of the AGM are complied with.

09 September 2014