Corporate governance
The Board of ITV plc is committed to business integrity and high ethical values across the Group’s operations. As an essential part of this commitment, the Board supports high standards of corporate governance and has a policy of seeking to comply with the recommendations of the Combined Code and voting guidelines of our major institutional investors where appropriate.
Compliance
As required by the Listing
Rules issued by the Financial Services Authority, this report
describes how the Company has applied the principles set out in
Section 1 of the Combined Code on Corporate Governance during 2007.
It also discloses the extent to which the Company has complied with
the Code’s provisions.
The Board considers that, throughout the year, the Company complied with the provisions of the Combined Code with the exception of code provision A.2.1. The Board remains of the view that the appointment of Michael Grade as Executive Chairman provides the Company with a strong and creative leadership which is important at this time of rapid change in the media industry.
John Cresswell is Chief Operating Officer and Finance Director, and the executive team report directly to him as shown below. The balance of creative leadership and media management skills promotes an acceleration in the improvement of the Company’s business. Sir James Crosby is the senior independent director and Chairman of the Nomination Committee and helps to provide an appropriate level of governance control. It is planned that Michael Grade will step down from his executive role in 2010 and remain as non-executive Chairman and a Chief Executive will be appointed at that time.
The Board
Non-executive
directors
How the Board operates
Board effectiveness
Internal Control
Relations with
shareholders
Board Committees
Contacts for corporate
governance
The Board
Composition: The Board currently comprises 12 members, the
Executive Chairman, the Chief Operating Officer and Finance
Director, two other executive directors and eight non-executive
directors. Biographical details for each of the directors are set
out in the Board and Management section of this website.
Executive Chairman: Michael Grade is Executive Chairman and is responsible for leadership of the Board, ensuring its effectiveness and setting its agenda.
Deputy Chairman: Sir George Russell is Deputy Chairman.
Chief Operating Officer and Finance Director: John Cresswell is Chief Operating Officer and Finance Director and has responsibility to the Board for leadership and management of the day-to-day operations of the Group.
Senior independent director: Sir James Crosby was appointed as senior independent director on 19 February 2007. His role is designed to provide an effective level of governance control and to ensure there is an appropriate division of responsibilities to avoid excessive concentration of power while Michael Grade is Executive Chairman. His responsibilities include the following, amongst others:
- to act as a conduit to the Board for communication of shareholder concerns when other channels of communication are inappropriate;
- to ensure the performance evaluation of the Executive Chairman is conducted effectively;
- to ensure the outcomes of performance evaluations of the Executive Chairman and other non-executive directors are acted upon; and
- to convene and chair meetings of the non-executive directors.
Details of his professional commitments are included in his biography in the Board and Management section of this website. The Board is satisfied that these do not interfere with the performance of his duties for the Company.
The job descriptions of the Executive Chairman, the Chief Operating Officer and the senior independent director are set out in writing and have been agreed by the Board.
Job Description - Executive Chairman (PDF, 14 kb, opens in a new window)
Job Description - Chief Operating Officer (PDF, 15 kb, opens in a new window)
Job Description - Senior Independent Director (PDF, 21 kb, opens in a new window)
Election and re-election: All directors are required by the Company’s Articles of Association to be elected by shareholders at the first Annual General Meeting following their appointment by the Board. Subsequently, all directors are subject to re-election by shareholders at least every three years.
External directorships: With the specific approval of the Board in each case, executive directors may accept external appointments as non-executive directors of other companies (but only one FTSE 100 company) and retain any related fees paid to them. Details of fees received during 2007 can be found in the Remuneration report in the 2007 Report and Accounts.
Non-executive
directors
The non-executive directors constructively challenge and help
develop proposals on strategy. They bring strong, independent
judgment, knowledge and experience to the Board’s
deliberations. The non executive directors are of sufficient
calibre and number that their views carry significant weight in the
Board’s decision making.
Independence: The Combined Code recommends that at least half of the Board, excluding the Chairman, should comprise “independent” non-executive directors. The Board considers each of its current non-executive directors to be independent.
Meetings: The non-executive directors meet regularly as a group. They met without the executive directors present on one occasion in 2007 and have done so again in 2008.
Terms of engagement: Subject to the Company’s Articles of Association, the Companies Act and satisfactory performance evaluation, non-executive directors are appointed for an initial period of three years from commencement of appointment. At the third anniversary of appointment the director will discuss with the Board whether it is appropriate for a further term to be served, subject to the Board succession planning framework (explained in the Nomination Committee below which provides that any further term may be adjusted in length should that be in the interests of an orderly succession of non-executive directors to the Board. The re-appointment of directors who have served for more than nine years will be subject to annual review.
Baroness Usha Prashar completed three years as a non-executive director in February 2008. It was agreed that she should serve a further term subject to the Board succession planning framework.
Terms of Engagement (PDF, 23 kb, opens in a new window)
Time commitment: The time commitment expected of the non-executive directors as set out in their standard terms of engagement is 12 to 18 days per annum, including attendance at Board meetings, Board committee meetings, the Annual General Meeting, an annual strategy away day and an annual strategy dinner. The Board is satisfied that each of the non-executive directors commits sufficient time to the business of the Company.
Company Secretary
The Company Secretary, James Tibbitts, is responsible for advising
the Board on all governance matters. The directors have access to
the advice and services of the Company Secretary. The
Company’s Articles of Association and the schedule of matters
reserved to the Board for decision provide that the appointment and
removal of the Company Secretary is a matter for the Board. The
Company Secretary acts as secretary of the Board and all its
Committees and in addition is responsible for a number of the head
office central services functions.
How the Board
operates
Board meetings: The Board is scheduled to meet ten
times in 2008 (including two meetings devoted to discussion of
strategic matters) and may meet at other times as and when
required. The Board approves annually a schedule of matters to be
considered at each meeting and at each meeting of the Audit,
Nomination and Remuneration Committees.
In 2007, the Board focused on the following areas of strategic importance to the Company, amongst others:
- the development and implementation of the Turnaround strategy, providing the Company with a clear strategic focus up to 2012;
- the Company’s preparations for digital switchover and the development of a new free-to-view satellite proposition, Freesat, a joint venture with the BBC;
- the circumstances surrounding the premium rate services issues, including the Deloitte report into failings, and the actions the Company was taking to restore trust and improve enterprise risk management;
- the launch of the extensively redeveloped itv.com complete with video-on-demand (“VOD”) services, and the development of further VOD services with the BBC and Channel 4;
- the Company’s submission to the Competition Commission following the acquisition by BSkyB of an 17.9% stake in the Company; and
- refining and implementing a succession planning framework for the Board and senior executives.
Attendance: Attendance of directors at board and strategy meetings and the Annual General Meeting during 2007 is set out below. Board members receive all papers tabled at meetings even if they are unable to attend.
| 1| | 2| | 3| | 4| | 5| | (AGM) 6| | 7| | 8| | 9| | Strategy day| |
Strategy dinner| | |
| Michael Grade |
 |
|
|
|
|
|
|
|
|
 |
|
| Sir George Russell |
|
|
|
|
|
|
|
|
|
|
|
| Mike Clasper |
|
|
|
|
|
|
|
|
|
|
|
| John Cresswell |
|
|
|
|
|
|
|
|
|
|
|
| Sir James Crosby |
|
|
|
|
|
|
|
|
|
|
|
| Heather Killen(1) | n/a | n/a | n/a | n/a | n/a | n/a |
|
|
|
n/a | |
| John McGrath |
|
|
|
|
|
|
|
|
|
|
|
| Sir Robert Phillis(2) |
|
|
|
|
|
|
n/a | n/a | n/a | |
n/a |
| Sir Brian Pitman |
|
|
|
|
|
|
|
|
|
|
|
| Baroness Usha Prashar |
|
|
|
|
|
|
|
|
|
|
|
| Agnès Touraine(1) | n/a | n/a | n/a | n/a | n/a | n/a |
|
|
|
n/a |
|
Notes:
(1) Appointed to the Board on 8 August 2007
(2) Resigned from the Board on 2 October 2007
Non attendance has been due to unavoidable prior commitments
Responsibility and delegation: The specific responsibilities are set out in a schedule of matters reserved to the Board. These include:
- setting long-term objectives and corporate strategy and approving an annual budget;
- approving major acquisitions;
- approving major divestments and capital expenditure;
- approving appointments to the Board;
- reviewing systems of internal control and risk management; and
- approving policies relating to directors’ remuneration.
Matters reserved for the board (PDF, 114 kb, opens in a new window)
The Board has delegated certain responsibilities to board committees, the key committees being the Audit Committee, Nomination Committee, Remuneration Committee and the Management Committee. Further information is provided below.
Information flow: Regular reports and papers are circulated to the directors in a timely manner in preparation for board and committee meetings. These papers are supplemented by other relevant information when applicable or if requested.
The non-executive directors receive monthly management accounts and regular management reports including financial and non-financial KPIs which enable them to scrutinise the Group’s and management’s performance against agreed objectives. They also receive a weekly information pack which includes key performance data, information about the Company and other corporate governance matters. This information is also made available on a secure website which can be accessed by all directors at any time.
Independent professional advice: Directors are given access to independent professional advice at the Company’s expense when the directors deem it necessary in order for them to carry out their responsibilities.
Guidelines for seeking independent advice (PDF, 13 kb, opens in a new window)
Insurance: The Company maintains liability insurance for its directors and officers with a cover limit of £75 million.
Indemnities: The Company has entered into deeds of indemnity with its directors.
Directors' indemnity (PDF, 49 kb, opens in a new window)
Board effectiveness
Performance evaluation: The Board has established a formal
process for the annual evaluation of the performance of the Board,
its committees, and individual directors with particular attention
given to those who are due for re-election, in accordance with the
requirements of the Combined Code. The directors are made aware, on
appointment, that their performance will be subject to an annual
evaluation.
Some of the actions taken during the year resulting from the 2006 evaluation included:
- ensuring appropriate mix of experience and expertise; and
- more detailed reviews on board and management succession planning.
In November 2007 independent consultants, Boardroom Review, carried out an evaluation of the effectiveness of the Board and its committees, individual directors and the Executive Chairman.
The evaluation process included a written questionnaire and an interview with each director and the Company Secretary. The questions covered a range of issues such as board processes, board roles and responsibilities, board agendas, committee processes, individual effectiveness, training and continuing professional development.
The independent consultant also attended the November board and committee meetings, and reviewed associated papers.
Feedback from the evaluation process was provided to the Board in the form of a presentation at a board meeting and a written report.
The review made the following suggestions, amongst others, for enhanced effectiveness:
- Nomination Committee membership could be expanded to include all non-executive directors to improve co-ordination of information;
- the Board should consider stakeholder mapping to analyse and review stakeholder priorities on a regular basis; and
- the programme of board meetings scheduled for the year and meetings of non-executive directors without the executives should be kept under review.
The Board and its committees were found to be operating effectively and the Board has accepted the recommendations made as a result of the review process and will make changes to reflect them.
Induction and continuing professional development: The company has a policy and programme for induction and continuing professional development, which is reviewed annually.
On appointment, each director takes part in a comprehensive induction programme where they:
- receive information about the Group in the form of presentations by executives from all parts of the business and on the regulatory environment;
- meet representatives of the Company's key advisers, such as the Company's auditors and solicitors;
- receive information about the role of the Board and the matters reserved for its decision, the terms of reference and membership of board committees and the powers delegated to those committees;
- receive information about the Company's corporate governance practices and procedures and the latest financial information about the Group; and
- are advised of their legal and other duties and obligations as a director of a listed company.
The above is supplemented by visits to key locations, including studios and regional sites, and meetings with key senior executives and with major shareholders where appropriate.
During their period in office, the directors are continually updated on the Group's businesses and the competitive and regulatory environments in which they operate. They receive regular updates on:
- corporate responsibility matters;
- changes affecting the Group and the markets in which it operates through written briefings and meetings with senior executives across the Group and from meetings with key advisers; and
- changes to the legal and governance requirements of the Group and in relation to their own position as directors.
During 2007 the directors were fully briefed by independent advisers on certain of the provisions of the Companies Act 2006 with particular emphasis on directors' duties.
Board performance programme (PDF, 48 kb, opens in a new window)
Internal
control
The Combined Code requires the Board to
review, at least annually, all material internal controls including
financial, operational, compliance controls and risk management
systems. In October 2005 the Financial Reporting Council issued
revised guidance to directors in respect of compliance with the
internal control requirements of the Combined Code. In the opinion
o f the Board the Company has complied with this guidance
throughout the year, maintaining an ongoing process for
identifying, evaluating and minimising risk.
A section on the Company’s approach to internal control is included in the Audit Committee report on page 105 of the Report and Accounts 2007. The Board has conducted a review of the effectiveness of the Group’s systems of internal controls for the year ended 31 December 2007.
Relations with
shareholders
The Board attaches a high priority to communications with
shareholders. In addition to the preliminary and interim
results presentations and the Annual General Meeting, a series of
meetings between institutional shareholders, the Executive
Chairman, the senior independent director and the Chief Operating
Officer and Finance Director are held throughout the year. In
fulfilment of the obligations under the Combined Code, the
Executive Chairman gives feedback to the Board on issues raised
with him by major shareholders.
In line with best practice the Board commissioned an Investor Audit during 2007 to assess investor and wider market perceptions of the Company over time and, in particular, following the announcement of the new strategy in September 2007. The audit included both quantitative analysis and a qualitative assessment based on interviews with a number of leading shareholders.
The Company maintains a corporate website containing a wide range of information of interest to institutional and private investors. The Company has frequent discussions with institutional shareholders on a range of issues affecting its performance. These include meetings following the announcement of the annual results with the Company’s largest institutional shareholders. In addition, the Company responds to individual ad hoc requests for discussions from institutional shareholders.
Save in exceptional circumstances, all members of the Board will attend the Annual General Meeting and shareholders are invited to ask questions during the meeting and to meet with directors prior to and after the formal proceedings. At the meeting the Executive Chairman reviews the Group’s current trading. Notice of the Annual General Meeting, together with any related documents, is made available to shareholders on our website or mailed to them if they have elected to receive hard copies about seven weeks before the meeting and separate resolutions are proposed on each substantially separate issue. At the meeting all resolutions are taken on a poll. The level of votes lodged on a resolution is announced to the meeting following voting and is made available on a regulatory news service and on this website the following day.
Board committees
The Company Secretary acts as secretary to all of the Board
committees and minutes of meetings are circulated to all Board
members. The terms of reference for each committee are reviewed
annually.
Current committee membership:
| Status| | Nomination| | Remuneration| | Audit| | Management| | |
| Dawn Airey |  |
 | |||
| Mike Clasper |  |
|
 |
||
| John Cresswell | |
| |||
| Sir James Crosby | |
|
|
||
| Michael Grade | |
| |||
| Rupert Howell | |
| |||
| Heather Killen | |
|
|
||
| John Ormerod | |
|
|
||
| Sir Brian Pitman | |
|
|
||
| Baroness Usha Prashar | |
|
|
||
| Sir George Russell | |
|
|
||
| Agnès Touraine | |
|
|
Audit Committee
Composition and attendance: During 2007 the Audit
Committee comprised:
| Appointed | Resigned | |
| John McGrath (Chairman) | 17 January 2008 | |
| Mike Clasper | ||
| Sir James Crosby | 19 February 2007 | |
| Baroness Usha Prashar | 1 September 2007 | |
| Sir George Russell | 1 September 2007 | |
| Agnès Touraine | 8 August 2007 |
John McGrath resigned from the Board on 17 January 2008 and Mike Clasper became Chairman of the Committee. John Ormerod became a member of the Committee on 18 January 2008.
Attendance during 2007:
| 1| | 2| | 3| | 4| | |
| John McGrath |
 |
|
|
|
| Mike Clasper |
|
|
|
|
| Baroness Usha Prashar |
|
|
|
n/a |
| Sir George Russell | n/a | n/a | n/a | |
| Agnès Touraine | n/a | n/a | n/a |
|
The Combined Code requires the Board to be satisfied that at least one member of the Audit Committee has recent and relevant financial experience. The Board considered this requirement during 2007, and concluded that the wide range of business and financial experience of the Committee members as a whole, gained at the highest level of UK FTSE 100 companies and other blue-chip organisations, was sufficient to enable the Committee to fulfil its terms of reference in a robust and independent manner. The appointment of John Ormerod in January 2008 will strengthen the position further. Biographical details of the members of the Committee are set out in the Board and Management section of this website.
Terms of reference: The Committee’s main role and responsibilities include to:
- monitor the integrity of the consolidated and parent company financial statements;
- review the effectiveness of the Group’s internal control and risk management systems;
- review the Group’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters;
- monitor and review the effectiveness of the Group’s internal audit function; and
- consider and make recommendations to the Board in relation to the appointment, re-appointment, replacement and remuneration of the Company’s external auditor.
Audit committee terms of reference (PDF, 104 kb, opens in a new window)
Activities in 2007: Please see the Audit Committee report on page 104 of the 2007 Report and Accounts.
Remuneration Committee
Composition and attendance: During 2007 the Remuneration
Committee comprised:
| Appointed | Resigned | |
| Baroness Usha Prashar (Chairman) | 1 September 2007 | |
| Sir James Crosby | 19 February 2007 | |
| Heather Killen | 29 November 2007 | |
| Sir Robert Phillis | 2 October 2007 | |
| Sir Brian Pitman | ||
| Sir George Russell | 1 September 2007 |
Attendance during 2007:
| 1| | 2| | 3| | 4| | 5| | 6| | 7| | |
| Baroness Usha Prashar | n/a | n/a | n/a | n/a | n/a |
|
|
| Sir James Crosby | n/a | n/a |
|
|
|
|
|
| Heather Killen | n/a | n/a | n/a | n/a | n/a | n/a |
|
| Sir Robert Phillis |
|
|
|
|
|
n/a | n/a |
| Sir Brian Pitman |
|
|
|
|
|
|
|
| Sir George Russell | |
|
|
|
|
n/a | n/a |
Terms of reference: The Committee’s main role and responsibilities include to:
- determine and agree with the Board the framework or broad policy for the remuneration of the Company’s executive directors, the Company Secretary and other senior executives;
- review the ongoing appropriateness and relevance of the remuneration policy;
- approve the design of, and determine targets for, any performance related pay schemes operated by the Company and approve the total annual payments made under such schemes;
- review the design of all share incentive plans for approval by the Board and shareholders;
- ensure that contractual terms on termination recognise that failure is not rewarded; and
- oversee any major changes in employee benefits structures throughout the Company and Group.
Remuneration committee terms of reference (PDF, 90 kb, opens in a new window)
Deloitte terms of engagement (PDF, 25 kb, opens in a new window)
Activities in 2007: Please see the Remuneration report on page 106 of the 2007 Report and Accounts.
Nomination Committee
Composition and attendance: During 2007 the Nomination
Committee comprised:
| Appointed | Resigned | |
| Sir James Crosby (Chairman) | ||
| Mike Clasper | ||
| John McGrath | 5 March 2007 | |
| Sir Robert Phillis | 2 October 2007 | |
| Sir Brian Pitman | 5 March 2007 | |
| Baroness Usha Prashar | 29 November 2007 | |
| Sir George Russell |
Heather Killen, John Ormerod and Agnès Touraine were appointed to the Committee on 4 February 2008. Sir Brian Pitman was reappointed on 5 February 2008.
Attendance during 2007:
| 1| | 2| | 3| | 4| | 5| | |
| Sir James Crosby | |
|
|
|
|
| Mike Clasper | |
|
|
|
|
| Sir Robert Phillis | |
|
|
n/a | n/a |
| Baroness Usha Prashar | n/a | n/a | n/a | n/a | |
| Sir George Russell |
|
|
|
|
|
Terms of reference: The Committee’s main role and responsibilities include to:
- review the structure, size and composition of the Board;
- identify and nominate for board approval, candidates to fill board vacancies;
- evaluate the balance of skills, knowledge and experience on the Board; and
- consider succession planning for directors and other senior executives.
Nomination committee terms of reference (PDF, 91 kb, opens in a new window)
Activities in 2007: The Committee led the search for the three new non-executive directors who were appointed to the Board during the year or shortly thereafter: Heather Killen, Agnès Touraine and John Ormerod. The search was conducted with the help of a professional search firm. The Committee considers the composition of the Board on an annual basis to ensure that it comprises the appropriate balance of skills and experience.
During the year the Committee formalised a succession planning framework for the Board. The objectives of the framework are to ensure:
- board tenure is appropriate and encourages fresh thinking and new ideas;
- the Board has the appropriate mix of generalist and specialist skills for the Company’s changing requirements; and
- non-executive directors have the appropriate level of independence, from the executive and from each other.
Implementing these objectives will involve a continuous process of refreshment of the Board with new appointments and with rotation of membership of board committees. Directors may normally expect to serve for approximately six years, though a longer term may be appropriate in some instances.
The Committee also reviewed succession planning for key executives throughout the Group. This has involved both internal promotion and external recruitment. In 2007, five members of the senior team (with a range of skills and experience) joined the Executive Board from other organisations.
Management Committee
The Management Committee comprises the executive directors. The
Committee meets as required to conduct the Company’s business
within the clearly defined limits delegated by the Board and
subject to those matters reserved to the Board.
Management committee terms of reference (PDF, 86 kb, opens in a new window)
Contacts for corporate governance
| Executive Chairman | Michael Grade |
| Senior Independent Director | Sir James Crosby |
| Chief Operating Officer and Finance Director | John Cresswell |
| Company Secretary | James Tibbitts |
| Telephone: 020 7156 6000 | |
The following documents are available to download:
- Job descriptions for:
- Executive Chairman (PDF, 14 kb, opens in a new window)
- Chief Operating Officer (PDF, 15 kb, opens in a new window)
- Senior Independent Director (PDF, 21 kb, opens in a new window)
- Terms of Engagement (PDF, 23 kb, opens in a new window)
- Guidelines for seeking independent advice (PDF, 13 kb, opens in a new window)
- Directors indemnity (PDF, 49 kb, opens in a new window)
- Board performance programme (PDF, 48 kb, opens in a new window)
- Matters reserved for the board (PDF, 114 kb, opens in a new window)
- Schedule of Matters Reserved for the Board (PDF, 114 kb, opens in a new window)
- Terms of Reference for:
- Audit committee (PDF, 104 kb, opens in a new window)
- Remuneration committee (PDF, 90 kb, opens in a new window)
- Deloitte terms of engagement (PDF, 25 kb, opens in a new window)
- Nomination committee (PDF, 91 kb, opens in a new window)
- Management committee (PDF, 86 kb, opens in a new window)