Corporate governance

Good corporate governance from the Board down through the business units ensures the right decision-making processes, controls and information to drive strategy and deliver long-term shareholder value. 

The principal governance framework applying to Rentokil Initial plc ("the Company") is the UK Corporate Governance Code ("the Code"), most recently published in September 2014 (‘the Code’). The Corporate Governance Report within the 2015 Annual report and accounts has further details of how we have applied the main principles of the Code during 2015. The Company has complied throughout 2015 with the requirements of the Code. The Code is published by the Financial Reporting Council and the full text is available at www.frc.org.uk.

On this page you will find further information on the company's Corporate Governance policies and procedures.

1 – The Board

The role of the Board

The Board is collectively responsible for the long-term success of the Company by creating value for shareholders and always acting in their interests. It assesses whether the necessary financial and human resources are in place to enable the Company to meet its objectives as well as ensuring that it takes into account safety, environmental and social factors when reviewing operations and taking decisions.

Specifically the Board must:

  • provide entrepreneurial leadership
  • understand and monitor risk
  • develop the business model, consider and approve strategy, approve annual operating plans and major transactions
  • ensure the adequacy of management resources and make executive appointments including that of Chief Executive
  • challenge and support executive management, oversee the governance process and the control framework
  • report to shareholders and be accountable to them.

A schedule of the matters reserved for the Board's attention is reviewed annually and was most recently reviewed in December 2016. The schedule sets out the Board's ultimate responsibility for the group's strategy, operations and risks and reserves to the Board power to approve a range of decisions of a significant nature. 

The schedule can be downloaded here.

Key Board roles

The division of responsibilities between the Chairman and Chief Executive is set out in writing and is summarised in the Annual Report for 2015 together with the primary responsibilities of the Senior Independent Director and those of the Company Secretary. Non-executive Directors have regular opportunities to meet with members of Executive management and also hold discussions under the leadership of the Chairman without Executive members present. At least once a year Non-executive Directors meet under the leadership of the Senior Independent Director without the Chairman being present.

Composition of the Board

Click here for details of our Board of directors.

Appointments to the Board and composition

A Nomination Committee comprising independent Non-executive Directors and chaired by the Company Chairman has responsibility for managing the appointment process to ensure a formal, rigorous and transparent procedure for appointing Directors.

In order for the Board to discharge its duties and responsibilities effectively, it must comprise a diverse group of individuals whose skills and experience are gained in a variety of backgrounds.  Successful candidates must demonstrate independence of mind and integrity, and must enhance the overall effectiveness of the Board.  Appointments are considered objectively, regardless of gender, ethnicity or other personal characteristics, and are made on merit. Pro-forma letters of appointment and employment contracts are available for public inspection in the sections below.

At the date of this report the Board has eight members: the Chairman, five Non-executive Directors, and two Executive Directors. The names of the Directors serving throughout and at the end of 2015 and their biographical details are set out above.

Balance and independence of Board members
 
The Board considers that it and its Committees have an appropriate composition to discharge their duties effectively and to manage succession issues. The Board keeps its membership and that of its Committees under review to ensure that an appropriate balance is maintained.

All Directors may serve on a number of other Boards, provided that they can demonstrate that any such appointment will not interfere with their time commitment to the Company and that they obtain the agreement of the Chairman before proceeding. This also ensures that any potential conflicts of interest are considered and addressed. The major commitments of the Directors are shown in their biographical information on pages 44 and 45 of the 2015 Annual Report. Currently Non-executive Directors are obliged to commit at least 20 days a year and the Chairman is obliged to commit at least two days a week to the Company.
 
The independence of Directors is reviewed as part of the individual Director performance evaluation process, to ensure that all Non-executive Board members retain the necessary independence of judgement. This continues to be reflected in constructive challenge to the Executive team and senior management at Board and Committee meetings, and during informal interaction outside those meetings. 

The Board considers that an individual’s independence cannot be determined arbitrarily on the basis of a particular period of service. In the case of Alan Giles, who has served as a director for ten years (eight years following the change in executive management in 2008, and less than two years as Senior Independent Director) the Board benefits from his considerable experience and knowledge resulting from the length of his service as well as from his wider business experience.

All Non-executive Directors (other than the Chairman) have been determined by the Board to be independent, having retained their independence of character and judgement. In making this determination the Board has taken into account indicators of potential non-independence as set out in the Code. No Director took part in the Board’s consideration of their own independence.

Board performance evaluation, training and succession

The Board ensures that the Directors continue to provide suitable leadership for the Company through a regular performance evaluation process, training processes, Board succession planning and annual re-election by shareholders.
 

Performance evaluation

This involved an external independent facilitator, Lintstock, engaging with the Chairman and Company Secretary to set the context for the evaluation. Lintstock is a specialist corporate governance consultancy and has no commercial dealings with the group, other than for the provision of corporate governance services to the Board. The performance evaluation was positive with all responses indicating continued high or increased performance.  Actions taken following the 2014 evaluation and the 2015 evaluation can be found in the Corporate Governance section of the Annual Report and Accounts 2015.

Succession planning 

The Board is ultimately responsible for succession planning for Executive and Non-executive Directors. The Nomination Committee has conducted a performance evaluation of each Non-executive Director seeking re-election and concluded that their performance (individually and in aggregate) continues to be effective and that each demonstrates commitment to the role. 

Training

Where appropriate, Directors participate in peer group discussion forums and seminars related to the commercial environment and targeted at specific needs, for example relating to executive remuneration, financial reporting or risk management. Training also covers the group, its business sectors and governance matters more generally, including individual experiences with frontline staff. Further information on the induction process for new Directors is included in the Nomination Committee Report.

Annual re-election

In accordance with the Code, the Directors are subject to annual re-election by shareholders. To enable shareholders to make an informed decision, the 2016 AGM notice includes biographical information and a statement as to why the Company believes the Directors should be re-elected. The Board recommends to shareholders the re-appointment of all Directors retiring at the meeting on the basis that they are all effective Directors of the Company and demonstrate the appropriate level of commitment to the role. Peter Bamford, who joined the Board in July 2006, will be stepping down from the Board at the 2016 AGM and so will not be put forward for re-election. The terms of the Directors’ service and a pro-forma of the letters of appointment of the Non-executive Directors can be found in the sections below. 

Board Committees and Board support

In addition to a clear statement of the matters reserved to the Board, each Board Committee has written terms of reference, approved by the Board, summarising its objectives, remit and powers and membership of the principal Board Committees is shown in the section below. Agendas, papers and minutes of Committee meetings are provided to all Board members, save for the private sessions of Committee members. Chairmen of Committees update the Board following each Committee meeting. Chairman, supported by the Company Secretary, ensures that the Board receives appropriate information to allow full preparation for meetings and to carry out its responsibilities effectively. All Directors are able to make further enquiries of the Executive Directors, Company Secretary or management whenever necessary. The Company Secretary is responsible for advising the Board through the Chairman on corporate governance matters, and there is also a procedure in place for Directors to take independent legal advice, if they judge this to be necessary, at the Company’s expense.

Managing conflicts of interest

The Directors have a statutory duty to avoid a situation where they have, or could have, a direct or indirect interest that conflicts or might possibly conflict with the interests of the Company. The Board is permitted (under powers from shareholders contained in the articles of association) to authorise actual or potential conflicts of interest. The Company has a procedure in place to deal with the situation where a Director has a conflict of interest and as part of the process the Board considers each potential conflict situation on its merits. The Board maintains a register of authorisations granted and the scope of any approvals given. These potential conflicts are not material either to the Company or, the Directors believe, to the other companies that are the subject of the potential conflict. The register of authorised conflicts is reviewed by the Board regularly. All of the approvals given have been 
situational and no transactional conflicts have occurred. No Director has had a material interest in any contract of significance in relation to the Company’s business at any time during the year ended 31 December 2015.

Activities of the Board during 2015
.

  • Safety, Health & Environment (SHE) performance and governance
  • Operational and financial performance, including review of the annual operating plan and deep dive review of all five regional businesses and key functions
  • Visits to the Global Science Centre to review the innovation pipeline, to France to review the French and European business and Workwear business, and to the UK Sales Academy to review the training and career development arrangements for frontline staff
  • Preparation of the Annual Report and Accounts, and quarterly and half year financial results, and associated investor relations activity
  • M&A activity including the acquisitions of Eradico, Anderson Pest, Steritech and Oliver Exterminating
  • Reviews of key risks to the business, including material disputes
  • Governance arrangements and processes including conflicts of interest, Board evaluation, and Board governance
  • Strategy for the group and its businesses
  • Succession planning
  • Corporate responsibility

Accountability to shareholders

The Board fulfils its obligations of accountability to shareholders by clear and open reporting on current performance and plans for the future, engagement with shareholders and investor representative bodies and taking into account the views expressed by shareholders. The Company has a premium listing on the London Stock Exchange and an ADR programme that trades on the over-the-counter market in the United States. All ordinary shares carry the same rights and no shareholder enjoys any preferential rights, regardless of the size of their holding. Further information on the rights attaching to shares can be found in the 2015 Annual Report.


Formal reporting

The Company publishes a half yearly unaudited interim statement at the end of July/early August as well as audited financial statements which are announced in February and circulated to shareholders in early April.  In accordance with the changes implemented by the Financial Conduct Authority with effect from 7 November 2014, we now only provide simplified quarterly trading updates in May and November.  We will continue to keep under review our quarterly reporting practice, and seek shareholders’ views on the benefits of doing so.

The Board considers that the Annual Report and Accounts for 2015 meets the Code requirement to provide a fair, balanced and understandable assessment of the Company’s position and prospects in its external reporting.

Over 88% of shareholders obtained their primary information on the Company through electronic communications via this website. The Company strongly encourages shareholders to use electronic means for accessing shareholder communications, saving resources and cost that would be involved in distributing printed material (each printed copy of the Annual Report costs approximately £22 to produce). Shareholders who elect to receive electronic communications can revert to paper communications at a future time, if they so wish. The Company continue to canvass shareholders on how they wish to receive their shareholder communications and did so in February 2015 and January 2016.

Shareholder communications

The Board places great importance on communications with shareholders and also recognises the contribution made by other providers of capital and is open to hearing the views of such providers in so far as they are relevant to the Company’s overall approach to governance.

The following summarises the activities carried out by the Company to ensure that investors and other interested parties have a transparent and effective dialogue with the Company.

  • The Chairman, Chief Executive and Chief Financial Officer make themselves available to shareholders at all appropriate times
  • Regular dialogue with institutional shareholders through one-to-one and group meetings, formal investor and analyst conference calls as well as ad-hoc communications, where appropriate, and through exchanges with shareholder representative organisations
  • Formal presentations are held after full-year and half-year results, to which investors and sell and buy-side analysts are invited. These presentations are web-cast and any investor is able to hear the presentation and related questions and answers via the Company’s website. Slide presentations of results are hosted as are recordings of meetings
  • Investor road shows are conducted after full-year and interim results, involving extensive investor meetings on each occasion, as well as opportunities for private client investor presentations across the UK.  In May 2015 a highly successful Pest Control Investor Seminar was held to provide investors with additional information on the Pest category and our leading position within it globally
  • The Chief Financial Officer, supported by the Group Financial Controller and Treasurer, regularly meets with and hears the views of representatives of the debt capital markets
  • The Chairman, the Senior Independent Director and Committee chairmen are available to attend meetings with investors, as required, and will typically do so on a number of occasions annually
  • Dialogue with both private and institutional shareholders at the AGM; the Board and executive welcome this opportunity to engage with all our shareholders on the performance of the business they own
  • The Board is briefed on the Company’s investor relations programme through a regular report from the Head of Investor Relations as well as by periodic updates from the Chief Executive and the Chief Financial Officer
2 – Board committees

The principal board committees are:

Membership of the Audit and Remuneration Committee is reviewed by the Nomination Committee and recommendations are made by the Nomination Committee to the Board.

Audit Committee

Membership

Julie Southern (Chair)
Chris Geoghegan
Alan Giles

Role of the Committee

The Audit Committee assists the Board in its oversight and monitoring of financial reporting, risk management and internal controls. The committee's focus is to review and challenge in these areas both with management and with internal and external auditors. 

Other attendees

The Chairman, Chief Executive, Chief Financial Officer, external auditor Director of Risk and Internal Audit and Company Secretary. Other Company executives attend meetings periodically such as the Group Financial Controller and Treasurer, the Group Tax Director and the regional Finance heads who periodically update the Committee on control and reporting within their areas of responsibility.

Responsibilities

The Committee reports to the Board on its activities and minutes of meetings and material considered by the Committee is shared with the Board and it:

  • monitors the integrity of the annual and half-year results and interim management statements, including a review of the significant financial reporting judgements contained therein
  • keeps under review the Company's internal financial controls and internal control and risk management systems
  • provides the Board with an independent assessment of the group's accounting affairs and financial position
  • monitors and reviews the effectiveness of the Company's internal audit function
  • establishes and oversees the Company's relationship with the external auditor, including setting their fees, monitoring their independence and effectiveness and ensuring that the Company's policy relating to their engagement on non-audit matters is appropriate and observed
  • monitors matters raised pursuant to the Company's whistleblowing arrangements.

Activities of the Committee in 2015

In 2015, the Committee considered:

Internal controls and risk

  • The status of the control environment
  • The outcome of internal audit investigations and status of resolution of issues raised
  • Group risks and actions to enhance their measurement, monitoring and mitigation actions 
  • Review and enhancement of relevant policies and procedures including the group authority schedule, tax and treasury policies
  • Group reporting processes and the central control environment, including review of Group Risk Committee minutes
  • The conclusions and themes emerging from the internal audit investigations conducted during the year and approved the plans for 2016 in parallel with the Board’s strategic review and operating plan for the year
External audit

  • The terms and scope of the audit engagement for the annual, half-year and quarterly financial statements together with fees charged
  • The effectiveness of the external audit process
  • A review of the annual financial statements, consideration of principal areas of accounting judgement or materiality, further details of which are provided in this report, including discussions with the auditor without executives present
  • Compliance with the Company’s policy on the provision of non-audit services by the auditor 
  • The audit strategy for the 2015 audit including the key areas of focus, materiality levels, scope and coverage
  • An analysis setting out the basis on which KPMG LLP continued to meet the appropriate professional standards of independence as auditor to the Company
Accounting, financial reporting

  • The effectiveness of the internal control and risk management framework and consideration of the statement to shareholders on the control environment
  • The annual, half-year and quarterly financial statements together with the significant financial reporting judgements relating to each statement
  • A review of material litigation and claims
  • Reviews with regional finance directors including the control environment in their businesses
  • A review of and recommendation to the Board in relation to the going concern analysis and viability statement

Audit committee's terms of reference

Click here to download the audit committee's terms of reference.

Provision of non-audit services by the external auditors.

Click here to download the Group's policy for the provision of non-audit services by the external auditors.

Nomination Committee

Membership

John McAdam (Chairman)
Richard Burrows
Chris Geoghegan
Alan Giles
Angela Seymour-Jackson
Julie Southern

Role of the Committee

The Committee has delegated authority from the Board as set out in its terms of reference below. The primary purpose of the Committee is to ensure that a regular, rigorous and objective evaluation of the structure, size, composition, balance of skills, knowledge and experience of the Board is undertaken and to recommend any changes to the composition of the Board and its Committees and to instigate and manage recruitment processes.

Other attendees

All Non-executive Directors, the Group HR Director, Company Secretary.

Responsibilities

  • Review the structure, size, composition diversity and balance of the board and its principal committees and make recommendations to the board with regard to any adjustments that are deemed necessary
  • Evaluate the balance of skills, knowledge and experience on the board and in the light of such evaluation, prepare a description of the roles and capabilities required for a particular appointment and identify and nominate for the approval of the board, candidates to fill board vacancies
  • Planning for orderly succession of directors to the board
  • Review the policies and procedures which the board has in place for monitoring and authorising actual or potential conflict situations and make recommendations to the board with regard to any adjustments that are deemed necessary

In 2015 the Committee continued to review the development of the senior cadre of executives in the Company, and the Board programme in 2015 has enabled all Board members to meet over 90% of the members of the Senior Leadership Forum as well as senior executives in key operational and functional roles beyond that group. This has enhanced the depth of understanding of the succession plans within the Company. It has been encouraged by the improved stability and performance of the senior management team in 2015 compared to previous years.

Appointment process

Our policy on appointments to the Board is set out in the Corporate Governance Report within the Annual Report and Accounts 2015. All appointments are made on merit against objective criteria and the process is usually supported through the use of an external recruitment consultant. This process was followed most recently over the appointment of Julie Southern in 2014, and is also being followed for the current process to replace Peter Bamford in May 2016. The process typically commences with the selection of a suitable recruitment consultant, who will be briefed on the skill sets and candidate experience we were seeking to attract. The recruitment consultant (Korn Ferry in the case of Julie Southern and Odgers Berndtson for the recruitment of a successor to Peter Bamford in May 2016), then prepares a candidate specification for approval by the Committee. Thereafter potential candidates are identified, interviews take place with members of the Committee, with other Non-executive Directors and with Executive Directors, following which the Nomination Committee forms a recommendation for consideration by the Board. 

A similar process is undertaken when external candidates are under consideration for Executive Leadership Team roles, such as the appointment of Vanessa Evans as Group HR Director following the retirement of Martin Sawkins at the end of 2015.

Diversity

The Board remains of the firm view that in order to secure the best talent for the Board, or within the business, it is essential to draw on the widest possible talent pool, and our diversity policy requires selection from diverse, objective and purely merit-based shortlists. Diversity enriches debate and problem solving at Board level and enhances operational performance as well as governance processes. The Board meets the Davies Report’s targets for more balanced gender representation.

We continue to focus on encouraging diversity and business skills and experience throughout the group, recognising that Directors and leaders in our businesses with diverse skill sets, capabilities and experience gained from different geographic and cultural backgrounds enhance the effectiveness of the organisation. The gender breakdown for the group as a whole (31,442 colleagues at the end of 2015) and for the senior management population (1,451 colleagues) can be found within the 2015 Corporate Responsibility Report.

Activities of the Committee in 2015

Matters considered by the Committee in 2015 included:

  • A review of the Committee’s report within the 2014 Annual Report and recommended approval to the Board
  • A review of Board succession planning, including key skills and experience to prioritise in the search for new Directors, and formulation of a forward multi-year succession plan
  • A review of the Committee’s effectiveness which was externally facilitated by Lintstock, an independent corporate governance consultancy
  • A review of the potential conflicts of interest authorised by the Board and a review of the processes in place to ensure that potential conflicts are properly considered
  • A review of the performance of individual Directors, utilising the output from the Board evaluation process, and making recommendations to the Board over the re-election of Directors at the AGM

Nomination committee's terms of reference

Click here to download the nomination committee's terms of reference.

Remuneration committee

Membership

Alan Giles (Chairman)
Richard Burrows
Chris Geoghegan
Angela Seymour-Jackson

Role of the Committee

In summary, the role of the committee is to determine and agree with the Board the policy, individual remuneration packages and performance targets (where appropriate) for the remuneration of the Chairman of the Company, the Executive Directors and other members of the Company's Executive Leadership Team giving full regard to the matters set out in the UK Corporate Governance Code (‘the Code’). When determining policy, the committee shall consider the pay and conditions across the rest of the Company. The Committee's role also includes ensuring that contractual terms on termination affecting Executive Directors and senior Executives, and any payments made, are fair to the individual and to the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.

Other attendees

The Chairman, the Chief Executive, the Chief Financial Officer (when required), the Group HR Director, the Company Secretary, the Committee's independent advisors, Deloitte. The Group Reward Director also periodically attended meetings. No individual is present during any discussion relating to their own remuneration.

Responsibilities

The committee's main responsibilities are:

  • To develop and settle group remuneration policy and oversee its application
  • To determine and agree the Executive remuneration policy with the Board
  • To determine and agree with the Board the Executive remuneration strategy and policy
  • To settle individual remuneration arrangements for the Chairman, Executive Directors and members of the Executive Leadership Team, including arrangements relating to those leaving the business
  • To review executive performance and ensure that remuneration structures align the interest of management with those of shareholders
  • ensuring that contractual terms on termination affecting Executive Directors and Senior Executives, and any payments made, are fair to the individual and to the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised
  • To oversee the Company’s incentive schemes including the operation and effectiveness of performance measures and targets in both annual bonus plans and in long-term incentive schemes
  • to consider major changes in employee remuneration in the group
  • To report to shareholders on remuneration matters
  • To select and appoint advisors to the Committee

Activities of the Committee in 2015

  • Initiated a full shareholder consultation on proposed changes to remuneration policy
  • Approval of the following for Executive Directors and the Executive Leadership Team:
    • Base salaries for 2015
    • Bonus outcomes for 2014 and bonus structure for 2015
    • Proposed 2015 long-term incentive awards and targets
  • Approval of the Directors’ Annual Remuneration Report 2015
  • Consideration of reward arrangements for key executives below executive level, and appointment terms for Executive Leadership Team appointments
  • Review of Executive Leadership Team colleague reward arrangements
  • Review of group targets in light of the sale of the Initial Facilities business
  • Finalise changes to the structure of the PSP following engagement with shareholders
  • Review of malus policy and design of clawback policy to be implemented in 2016
  • Approval of a Proposed Remuneration Policy to be subject to shareholder vote at the 2016 AGM 
  • Approval of the part vesting of the 2012 PSP award as a result of performance targets being met
  • Review of the provision of professional advice to the Committee
  • Annual performance review of the Committee
Remuneration Committee's terms of reference

Click here to download the remuneration committee's terms of reference.

Directors' Remuneration Policy 
The current Directors' Remuneration Policy was approved by shareholders at the company's AGM on 11 May 2016.

Click here to download a copy of the policy.

3 – Memorandum and Articles of Association

Click here for a PDF of the Memorandum and Articles of Association.

4 – Non-Executive Director Letter of Appointment Proforma

Click here for a PDF of the Non-Executive Director Letter of Appointment Proforma.

5 – Executive Directors' service agreements

Click here for a PDF of the Chief Executive service agreement.

Click here for a PDF of the Chief Financial Officer service agreement.

6 – Chairman's Letter of Appointment

Click here for a PDF of the Chairman's Letter of Appointment.