Last updated 5th January 2021
Statement of Compliance with the QCA Corporate Governance Code
Chairman’s Introduction
The Chairman is responsible for leading the Board, facilitating the effective contribution of all members and ensuring that it operates effectively in the interests of the shareholders and customers. The Chief Executive Officer is responsible for the leadership of the business, evolution and implementation of the strategy.
Our values are based on acting in the best interests of our shareholders and customers. The Board of Directors are responsible for the governance of the company and regularly meet to review the performance of the business, discuss strategy and ensure senior management are conducting operations in a responsible, transparent and ethical manner.
The Directors recognise the importance of good corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’). The QCA Code was developed by the QCA in consultation with a number of significant institutional small company investors, as an alternative corporate governance code applicable to AIM companies. The underlying principle of the QCA Code is that “the purpose of good corporate governance is to ensure that the company is managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the longer term”. The Directors anticipate that whilst the Company will continue to comply with the QCA Code, given the Group’s size and plans for the future, it will also endeavour to have regard to the provisions of the UK Corporate Governance Code as best practice guidance to the extent appropriate for a company of its size and nature. Further information on compliance with the QCA Code will be provided on our website and annual report.
Tim Sheffield
Non-executive Chairman
Changes to corporate governance regime
The Board has made the decision to adopt the Quoted Companies Alliance (QCA) Corporate Governance Code in line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code. This report sets out in broad terms how we comply at this point in time. We will provide annual updates on our compliance with the code.
Principle 1: Establish a strategy and business model which promotes long term value for shareholders
The company is a digital and technology recruitment specialist with employees, clients and candidates in the UK, Australia and Asia. Our aim is to be the best quality digital and technology recruitment partner in each of our markets.
We do this by providing permanent, temporary and contract recruitment services to large multinationals, creative agencies, start-ups and SMEs in need to digital talent.
We believe in:
· Industry expertise – our consultants are immersed in their chosen area of focus, with a deep understanding of what drives their candidates and clients.
· Relationship building – with clients, candidates and each other to ensure seamless provision of services.
· Insights and technology – utilising our collective knowledge and technology infrastructure enabling us to operate proactively and adapt to new challenges as they arise.
Our model measures performance across each business unit allowing us to focus on the areas where we have most impact for success and to move away from areas where value is diminished.
The Board periodically reviews strategy and budgets at regular Board meetings with an aim to delivering on its strategic goal of delivering long term value to shareholders.
Our strategy and business operations are set out more fully in the Strategic Report, Key Risks of the Group and Corporate Governance sections of the Group’s 2019 Annual Report (pages 7 – 10; and 13 - 15), which can be found here: https://www.nakamagroupplc.com/media/nakama-group-plc/client/Nakama Group Annual Report 2019.PDF.
The Group’s principle risks and uncertainties and the systems and internal controls developed to mitigate them are set out in the disclosure to Principle 4 below.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Board is open to communicating with its shareholders to share information on its strategy and business model, as appropriate. The CEO and Company Secretary go to additional lengths to identify and communicate with major shareholders and encourage both voting and attendance at the Company’s AGM.
The AGM remains the main forum for dialogue with shareholders and the Board. The Notice of Annual General Meeting is sent to shareholders at least 21 days before the meeting. The chair of the Board and all committees along with all other Directors attend the AGM and are available to answer questions raised by shareholders.
Institutional shareholder relationships are primarily managed by the Chairman supported by the CEO as appropriate. However, as Nakama is such a small business we are currently not active with investor roadshows or conferences.
Principle 3: Take into account wider stakeholder and social responsibility and their implications for long term success
Stakeholder engagement is an important part of our business model and much focus is given to strengthening relationships with our candidates and clients through regular meetings, feedback sessions and the sharing of market insights. Ongoing, consistent and open communication is a cornerstone of the company’s model. We train and encourage our consultants to use more face to face communication with our stakeholders and we will continue to monitor the improvements in this area.
Aside from our clients and candidates our employees are one of the most important stakeholder groups. We have developed an interactive intranet forum that improves engagement across the group. This intranet was designed by our employees so that we could ensure maximum engagement and providing for open and honest communication in order to encourage cross-fertilisation of ideas.
In addition, the group intends to implement a global employee engagement survey and also to consider the use of corporate social responsibility programmes that would help the company improve staff engagement and retention.
Principle 4: Embed effective risk management, considering both opportunities and threats throughout the organisation
The company has an established framework of internal financial controls, the effectiveness of which is regularly reviewed by the executive management and the Board in conjunction with an ongoing assessment of significant risks facing the company.
· The Board is responsible for reviewing and approving the overall company strategy, approving revenue, budgets and plans, and for determining the financial structure of the company. Monthly results and variances from plans and forecasts are reported to the Board.
· The Audit Committee assists the Board in discharging its duties regarding the financial statements, accounting policies and the maintenance of proper internal business, operational and financial controls.
· There are clear procedures for budgeting and planning and for monitoring and reporting to the Board the business performance against those budgets and plans. In addition, we will implement new procedures for forecasting expected performance over the remainder of the financial period in order to more accurately track company performance. These reports cover profits, cash flows, capital expenditure and balance sheets. Monthly results are reported against budget and compared with the prior year, and forecasts for the current financial year are regularly revised in light of actual performance.
The Board has ultimate responsibility for the Group’s internal controls and for reviewing their effectiveness. The Board considers that the current internal controls in place are appropriate for the size and risk profile of the Group. Elements of the internal controls include:
· An organisational structure with defined levels of responsibility
· Annual budgeting process producing profit and loss, balance sheet and cashflow, approved by the Board
· Monthly reporting of performance against budget
· Controls over capital expenditure authorisation and banking facilities
The Group reviews its internal control systems to ensure best practice, while having regard to its size and the resources available.
Key risk areas are regularly reviewed and reported on in the Annual Reportandfurther details of the Company’s risk management procedures are set out int the Corporate Governance section of the Group’s 2019 Annual Report and Accounts (page 14), which can be found here:
https://www.nakamagroupplc.com/media/nakama-group-plc/client/Nakama Group Annual Report 2019.PDF.
The Board intends to keep its risk control procedures under review, particularly with regard to the need to embed internal control and risk management procedures further into the operations of the business, both in the UK and overseas, and to deal with areas of improvement which come to management’s and the Board’s attention.
Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chair
The Board comprises of the Non-Executive Chairman, one Executive Director and one Non-Executive Director. During 2019 the Board went through some changes which saw the appointment of Robert Thesiger as CEO. The Board also accepted the resignations of Andrea Willams (NED) and Patrick Meehan (Group Finance Director) in October 2019. The Company intends to appoint a permanent Finance Director in the near future.
Executive directors work on a full-time basis for the company. Non-executive directors are expected to spend a minimum of one day per month on company activities in addition to preparation for and attendance at board and sub-committee meetings. The Chairman will spend an additional day per month although in practice this is usually exceeded.
The Board is satisfied that it has a suitable balance between independence and knowledge of the company to enable it to discharge its duties and responsibilities effectively, and all Directors are encouraged to use their independent judgement to challenge any business matters.
Key Board activities in 2019 have included:
· Appointment of Robert Thesiger as CEO
· Discussed strategic priorities
· Discussed the Group’s financial structure, advising on the changes required to improve the quality of financial reporting and control
· Discussed internal governance processes
· Reviewed the Group risk register
The Board is updated each month with a comprehensive Board Information Pack outlining all the financial controls, results and measures of the group as well as individual business unit reports where a clear understanding is gained about each location’s challenges and successes.
The company believes it has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience including in areas of recruitment, finance, international business management, marketing and business turn-around and growth. All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. The business reports monthly on its headline performance against its agreed budget, and the Board reviews the monthly update on performance and any significant variances are reviewed at each meeting.
All Directors retire by rotation at regular intervals in accordance with the company’s Articles of Association, which can be found here: https://www.nakamagroupplc.com/media/nakama-group-plc/client/Highams-SSG-plc-Arcticles.pdf.
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the company’s expense.
Further details of the Board, the directors’ roles, committees and performance are set out in the Corporate Governance section of the Group’s 2019 Annual Report and Accounts (pages 13 - 15), which can be found here: https://www.nakamagroupplc.com/media/nakama-group-plc/client/Nakama Group Annual Report 2019.PDF.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
Tim Sheffield was appointed as Chairman of the Board and the other Board members are also relatively newly appointed. The Chairman will be assessing the individual contributions of the members as we progress through 2019/20 to ensure that their contributions are relevant and effective, that they are committed to the company and that they remain independent, where required.
Appraisals are carried out each year for all Executive Directors and to assess overall Board composition. The appraisal process is an ongoing consideration of the Board as a whole.
Over the coming year we also intend to review the performance of the Board as a unit and the committees to ensure that they perform in an efficient and productive manner. This includes considering a succession plan for the future make-up of the Board.
Principle 8: Promote a culture that is based on ethical values and behaviours
The company has operated with the core values of expertise, communication, drive and collaboration for the past few years. The hiring decisions that were made were always mindful of these values and the company made every effort to recruit new team members with the right attitudes and skills in order to deliver on these values.
Whilst we consider these values to be important the CEO is undertaking a review and refresh of the company’s values to ensure that they remain relevant today and in line with the requirements of our people, who are our greatest assets.
In addition, the CEO also intends to implement new corporate responsibility initiatives that are designed to strengthen employee engagement and deliver on giving back to the communities around us.
The company will update its efforts on cultural engagement and the promotion of its values each year and details will be found on the company’s website as these initiatives develop and grow.
The Group conducts its business with integrity and openness. Human rights, diversity and inclusiveness and social responsibility are important considerations for management and all local laws on labour standards, environmental protection and anti-bribery are adhered to. Regulations of the local government agencies and market regulators are closely followed in a timely manner. Integrity and high moral standards are expected from all Board members and staff, with the help of guidelines like the Company Dealing Code on share dealing requirements imposed by the MAR and the staff handbook.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board
The aim of the Board is to function at the head of the Company’s management structures, leading and controlling its activities and setting a strategy for enhancing shareholder value. It also approves the annual and interim results, annual budgets and Board structure as well as monitoring key risks. Regular strategy meetings are held to review the Group’s forward planning - vital in a rapidly changing market and technology environment. The Board currently consists of one Executive Director and two Non-Executive Directors.
The Board meets at least 8 times per annum and the Board and its committees receive timely information prior to each meeting including a formal agenda. Any Director may challenge the company’s proposals and final decisions are taken democratically after discussion. If a Director’s concerns remain unresolved after discussion they may ask for that concern to be noted in the minutes of the meeting, which are circulated to all Directors.
Directors receive regular information on the company’s financial and operational performance, in advance of any meetings. The company produces monthly reports on its performance against budgets which is reviewed by the Board and any significant variances are discussed. On occasion, the Board will invite a senior executive, below Board level, to attend the meeting in order to gain deeper understanding of a specific business unit.
A formal schedule of all matters reserved for Board decision is maintained and reviewed regularly covering:
· Setting and Review of Strategy and Performance.
· Structure and Capital.
· Maintenance of Financial Reporting and Controls.
· Maintenance of Internal Control and Risk Management systems.
· Material Contracts.
· Investor Relations and Regulatory communications.
· Constitution of Board Membership and other appointments.
· Setting of Directors and Senior Management Remuneration.
· Delegation of Authority amongst the Board and its Committees.
· Implementation of Corporate Governance.
· Approval of Policies.
The Chairman and the Chief Executive Officer
The function of the CEO role is carried out by Robert Thesiger and the Chairman is Tim Sheffield. They each have a clear understanding of the division of responsibilities between them and they meet and communicate regularly so that each is aware of the ideas and actions of the other. The Chairman is responsible for running the business of the Board and for ensuring proper strategic focus. The Chief Executive is responsible for formulating the strategic focus and implementing it once it has been approved.
Internal control
The Board has overall responsibility for ensuring that the Group maintains systems and internal financial controls that provide them with reasonable assurance regarding the financial information both for use within the business and for external publication, and that the assets are safeguarded. A Risk Register is updated and regularly reviewed by the Board.
Audit Committee
The Board collectively undertakes the functions of the Audit Committee which is chaired by Michael Clelland. The Audit Committee meets at least twice in each financial year and has unrestricted access to the Company's auditors.
The terms of reference for the Audit Committee are to assist the Board in the discharge of its responsibilities for corporate governance, financial reporting and internal control. Its duties include maintaining an appropriate relationship with the Company’s auditors, keeping under review the scope and results of the audit and its effectiveness. The Audit Committee has sole responsibility for assessing the independence of the external auditors. The committee has had due regard to the document published in November 2003 by the Institute of Chartered Accountants in England and Wales (ICAEW) “Reviewing Auditors Independence: guidance for audit committee”. Each year the committee undertakes to seek reassurance that the external auditors are independent.
Remuneration committee
The members of the Remuneration Committee are Michael Clelland, who acts as chairman of the committee, and Tim Sheffield. The Remuneration Committee meets at least twice a year.
The remuneration committee reviews the performance of the Executive Directors and selected senior executives below Board level and makes recommendations to the Board on matters relating to their remuneration and terms of employment.
The committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time.
Nomination committee
The Company does not have a Nomination Committee; the Board collectively undertakes the functions of such a committee.
The Company proposes to keep its systems and controls under review to ensure compliance with best practice, while also having regard to its size and the resources available.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The main communication avenues with shareholders are through the Annual Report and Accounts, the full year and half year announcements, the Annual General Meeting (AGM) and through the Regulatory News Service mechanism. Corporate information, including announcements, is available on the corporate website, https://www.nakamagroupplc.com
The company has an open dialogue with employees through its newly developed intranet and intends to further improve its communications through implementing an engagement survey.
The result of voting in the 2019 annual general meeting will be presented on the company website after the AGM has been completed. They can be found at https://www.nakamagroupplc.com/announcements-and-notifications