POLB 14(3"4)
POLB 14/31-14/48
Present:
Alice Perkins
Neil McCausland
Tim Franktin
Virginia Holmes
Alasdair Marnoch
Paula Vennells
Chris Day
Susannah Storey
In Attendance:
Alwen Lyons
Richard Callard
Chris Aujard
Minutes of a Board meeting held on 26 March 2014
Angela Van Den Bogerd
Christa Band
Lesley Sewell
Neil Hayward
Kevin Gilliland
Tom Moran
Martin George
Jeremy Woodrow
Vicky Hampshire
POLB 14/34
POLB 14/32
(a)
(b)
Post Office Limited — Strictly Confidential
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
at 148 Old Street, London EC1V 9HQ
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive (except minute 14/35)
Chief Financial Officer (except minute 14/35)
Non-Executive Director (minutes 14/31-14/38)
Company Secretary
Non-Executive Director designate, Shareholder Executive
General Counsel (minute 14/32)
Network Change Operations Manager (minute 14/32)
Linklaters LLP (minute 13/32)
Chief Information Officer (minute 14/33)
Group People Director (minutes 14/33 and 14/36)
Network & Sales Director (minute 14/36)
Head of Industrial Relations and Network Strategy (14/36)
Chief Marketing and Commercial Officer (minute 14/44)
Head of Telecoms Acquisition and Strategy (minute 14/44)
Mobile Product Manager (minute 14/44)
INTRODUCTION
A quorum being present, the Chairman opened the meeting.
The Chairman reminded the Board that this was to be Susannah
Storey’s last meeting as a Non-Executive Director and thanked
Susannah for her contribution to the Board.
PROJECT SPARROW
The CEO reminded the Board of the background to Sparrow and the
Initial Complaint Review and Mediation Scheme (‘the Scheme’), and
introduced the work which Linklaters had been asked to undertake to
clarify the Company's legal position.
Chris Aujard, General Counsel, Angela Van Den Bogerd, Network
Change Operations Manager, and Christa Band from Linklaters LLP
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joined the meeting.
(c) Christa Band presented the legal advice to the Board, which dealt
with the Company's contractual relationship with sub-postmasters
and the Company's right under the contract to recover losses. She
emphasised that the advice focussed on the legal issues, not
questions of fact or individual cases. Christa Band questioned the
approach taken by Second Sight with respect to the work produced
by them to date. In particular she would have expected them to:
(i) produce a review of the system as a ‘baseline’ before
considering any specific complaints; and
(ii) cite hard evidence to back up any conclusions made.
(d) The Board discussed the Scheme and possible compensation
payments. Christa Band explained that, because of the terms of the
contract between sub-postmasters and the Post Office, the Company
would not be required to pay compensation and that if compensation
were given this would not give sub-postmasters outside the scheme
any legal right to demand such compensation although it may lead to
claims of ‘unfairness’.
(e) Christa Band explained that English Law did not allow for
compensation for distress as claimed by many of the cases in the
Scheme.
(f) The Board thanked Christa for her report covering the legal aspects
of the claims against the Business. Christa Band left the meeting.
ACTION: (g) The Board agreed to set up a Sparrow Board Sub Committee which
Company the Chairman would Chair and would involve the CEO, Alasdair
Secretary Marnoch (Chairman of the Audit Committee) and Richard Callard.
Other NEDs were invited if they wished to join.
(h) The CEO reported on other work underway. She noted that the
quality of the work undertaken by Second Sight had been challenged
by Sir Anthony Hooper, Chairman of the Working Group, who was
now insisting on more evidence based reports.
{i) The CEO had met the CEO of the Financial Ombudsman Service to
understand the principles they would recognise as good practice for
goodwill payments.
(j} The CEO, General Counsel and Angela Van den Bogerd had also
attended an MPs meeting, called by James Arbuthnot, at which a
couple of the MPs with cases in the Scheme were pushing for
compensation for their constituents.
({k) The Board agreed that they needed to commission a piece of work,
to complement that undertaken by Linklaters, to give them and those
concerned outside the Business, comfort about the Horizon system.
The Business was asked to revert with the terms of reference and
timescale for the work which should cover:
e The work undertaken by Angela Van Den Bogerd explaining
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how the system works
e A review of the data integrity aspects of the system
e Areference to all audits and tests carried out on the system
e Aresponse to the most significant thematic issues raised by
Second Sight.
ACTION: () These terms of reference should be tested with Linklaters to ensure
Chris Aujard that this work would satisfy them as evidence that Horizon is reliable
and then agreed by the Board Sparrow Sub Committee.
(M) The Board noted the update on the Scheme.
(n) After due consideration, and in the interest of regularising Second
Sight's engagement, the Board authorised the execution of the draft
ACTION: engagement letter. Chris Aujard was asked to try to extend the time
Chris Aujard period restricting Second Sight from acting against the Company
beyond a 12 months period.
ACTION: (0) The Board requested a one page lessons learned covering 3 or 4
Belinda Crowe areas by the next Board meeting.
(P) Chris Aujard and Angela Van Den Bogerd left the meeting.
POLB 14/33 BUSINESS TRANSFORMATION PROGRAMME
(a) Tim Franklin declared an interest in two of the Companies who may
be involved in this work. It was noted that he is a strategy advisor for
Firstsource, and a member of the advisory board at L&T Infotech,
both interests had been previously logged with the Company
Secretary.
(b) The Board welcomed Neil Hayward, Group People Director, and
Lesley Sewell, Chief Information Officer, to the meeting and received
an update on the Business Transformation Programme.
(c) The CFO explained the changes since the last Board meeting and
the decision to spend more time on the design phase of the plan. He
acknowledged that the effect of this delay would be to produce a gap
ACTION: in the strategic plan in 2014/15 of circa £10-15million which the
Chris Day Business would need to find more radical options to cover. Supply
Chain was one of the areas being considered, which would be
presented at the May Board.
ACTION: (d) The Board asked the CFO to model the scenario where revenue
Chris Day remained flat next year, to show the cost savings which would be
required to hit the strategic plan profit target.
(e) The CEO explained the recruitment process for an_ interim
Transformation Director and that additional consultant assistance
was being sought, so that the business would be fully supported.
(f) Lesley Sewell assured the Board that the base case now being
considered included a model where TUPE applied.
POLB 14/34
POLB 14/35
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(9)
()
()
(e)
(a)
(b)
The Board noted the update and the next steps regarding the design
phase, risk management activity and communications and
stakeholder planning.
Neil Hayward and Lesley Sewell left the meeting.
APPROVAL OF 2014-15 BUDGET AND SCORECARD TARGETS
Further to previous discussions, the Board received a request to
approve the 2014-15 budget.
The Board recognised the challenge in the revenue budget and were
concerned by the level of growth required as compared to this year's
performance. The CFO reported that the Commercial team were
committed to delivering these numbers and that they recognised the
importance of hitting revenue targets to help achieve breakeven for
the Crown network.
The CEO explained that she had set up a Commercial Committee,
which is chaired by Martin George, to drive the revenue and ensure
that the Business have the right incentives in place. The commercial
team would be presenting their plans at the April Board.
The Board:
e noted the actions being taken in response to the
challenges given on the Board conference call on 10
March 2014;
e on the basis of these actions, approved the 2014-15
budget; and
e noted the development of the Key Performance
Indicators for 2014-15.
Paula Vennells, CEO, and Chris Day, CFO, left the meeting.
Irrelevan
ACTION: All
ACTION: CEO
ACTION:
Martin George
POLB 14/36
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Irrelevant
- Irrelevant
(0) I
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POLB 14/37
POLB 14/38 FINANCIAL PERFORMANCE UPDATE
(a) The Board received a financial performance update for February
2014.
(b) The CFO recognised the pressure that the shortfall in revenue was
ACTION: putting the Business under and suggested that he produce some
Chris Day analysis to further understand the underlying quality of earnings.
(c) The Board appreciated the new Network Transformation reports but
were concerned that the Locals model did not appear to be working
as expected. The CFO assured the Board that work was underway
to understand this trend and that the Business recognised that the
Locals required more support after converting.
(d) The Board asked the CFO to explain the reduction in customer
ACTION: sessions in the Mains Branches that have been open for 12-24
Chris Day months.
(e) The CFO recognised that an additional page of narrative to explain
ACTION: the remedial actions being taken by the Business and his views and
Chris Day any concerns on performance would enhance the report and
promised to include this from next month.
POLB 14/39 CORPORATE GOVERNANCE REVIEW
(a) The Board received an update on corporate governance from Alwen
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Lyons, Company Secretary.
(b) The Board:
e noted the current level of compliance with the UK Corporate
Governance Code;
e approved the terms of reference presented for the Board,
including a Schedule of Matters reserved for Board decision,
and the Board sub-committees;
© approved the definition of the roles of the Chairman and Chief
Executive;
e approved the matrix of Delegated Authorities and the
Delegated Authorities for Remuneration Matters; and
e authorised the Executive Committee to be permitted to use its
discretion to authorise delegates to approve contracts,
commitments of expenditure and implementation of change
that the Executive Committee would be authorised to approve
under the authority granted to the Executive Committee by
the Board. Such authority:
(i) may not exceed the limits of the authority granted by
the Board to the Executive Committee; and
(ii) must be in writing and specify any limits to the
authority.
e authorised any member of the Executive Committee to be
permitted to use his or her discretion to authorise delegates
to approve contracts, commitments of expenditure and
implementation of change that that member of the Executive
Committee would be authorised to approve. Such authority:
i) may not exceed the limits of the authority granted by
the Board to that Executive Committee member; and
(ii) must be in writing and specify any limits to the
authority.
POLB 14/40 MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
(a) The minutes of the Board meeting held on 26 February 2014 were
approved for signature by the Chairman.
POLB 14/41 COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the minutes of:
e the Audit, Risk and Compliance Committee meetings held on
19 November 2013 and 11 February 2014;
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e the Financial Services Committee meetings held on 27
January 2014 and 10 February 2014;
e the Pensions Committee meetings held on 20 November
2013 and 8 January 2013; and
e the Remuneration Committee meeting held on 11 February
2014.
POLB 14/42 STATUS REPORT
(a) The Status Report, showing matters outstanding from previous
Board meetings, including an Energy proposition update, was noted.
POLB 14/43 PROJECT SPARROW - INSURANCE
(a) The Board discussed the Professional Indemnity (Pl) insurance and
the Sparrow compensation risks. The CFO explained that PI
insurance could only cover incidents for which the Business was
legally responsible. Therefore any compensation paid outside that
legal requirement could not be covered by PI insurance.
(b) The Board asked the Business to consider enhancing its insurance
ACTION: expertise and to reconsider how it tracks events and near misses
CFO which should be reported to the insurers. The CFO was asked to
provide an update for the next ARC on his proposal for PI insurance.
(a) I I
(b) I
@
ACTION: i
Martin George
ACTION;
Martin George
ACTION:
Neil Hayward/
Martin George
POLB 14/45
POLB 14/46
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Post Office Limited — Strictly Confidential
@)I
(h)
(b)
(c)
(d)
(e)
(a)
(b)
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ITEMS FOR NOTING
The Board noted the Project Maypole update.
The Board noted the Significant Litigation report.
The Board noted the Health & Safety report.
The Board noted the update on Cyber Security and Information
Assurance.
The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents
set out against items numbered 1129 to 1140 inclusive in the
seal register was hereby confirmed,
CHANGE OF DIRECTORS
The Board approved the appointment of Richard Callard and noted
the resignation of Susannah Storey with immediate effect.
The Company Secretary was authorised to make all the necessary
filings with Companies House.
Irrelevant
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Irrelevant
POLB 14/48
ACTION: (a)
Virginia Holmes/ :
Company H i
Secretary ; i
ACTION: (b)
Company i
Secretary
POLB 14/48 DATE OF NEXT MEETING
(a) It was noted that the next Board meeting would be held on 30 April
2014.
Post Office Limited — Strictly Confidential
POST OFFICE LIMITED 26 MARCH 2014 BOARD ACTION LOG
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REFERENCE ACTION BY WHOM
Project Sparrow
March 2014 Set up a Sparrow Sub Committee with the Chairman as Chair and to involve the CEO, Alasdair I Company
POLB 14/32(q) Marnoch and Richard Callard Secretary
March 2014 Draft Terms of Reference for a piece of work to provide the Board and those outside the I Chris Aujard
POLB 14/32(I Business comfort about the Horizon system. These terms of reference should be tested with
Linklaters to ensure that this work would satisfy them as evidence that Horizon is reliable and
then agreed by the Board Sparrow Sub Committee.
March 2014 Try to extend the time period restricting Second Sight from acting against the Company beyond I Chris Aujard
POLB 14/32(n) a 12 month period.
March 2014 Prepare a one page lessons learned covering 3 or 4 areas by the next Board meeting. Belinda Crowe
POLB 14/32(0)
Finance
March 2014 Present on options to cover the gap in the strategic plan (Supply Chain) at the May Board CFO
POLB 14/33(c —
March 2014 Model the scenario where revenue remained flat next year, to show the cost savings which I CFO
POLB 14/33(d) would be required to hit the strategic plan profit target.
March 2014 Produce some analysis to further understand the underlying quality of earnings. CFO
POLB 14/38(b) —
March 2014 Explain the reduction in customer sessions in the Mains Branches that have been open for 12-24 I CFO
POLB 14/38(d) months.
March 2014 Include_an_ additional page of narrative to explain the remedial actions being taken by the I CFO
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POLB 14/38(e) Business and the CFO's views and any concerns on performance to be included in the financial
performance update from next month.
Strategy
March 2014 Provide a paper to explain the work underway to increase access points. Martin George
POLB 14/35(g
March 2014 Consider what it would take to deliver the results more quickly and achieve the targets in the I Martin George
POLB 14/44(e) strategic plan for Project Wave.
March 2014 Inform the Board when a single view of the customer was likely to be available. Martin George
POLB 14/44(f)
March 2014 A paper on ‘colleague offers’ to come to the next Board meeting. Martin George/Neil
POLB 14/44(q)
Hayward
Miscellaneous
March 2014 Revert back to the Chairman with any comments on the personal objectives for the CEO. All
POLB 14/35(f
March 2014 Circulate the objectives for the CFO. CE
POLB 14/35) —
March 2014 Provide an update for the next ARC on the CFO’s proposal for P] insurance CF
POLB 14/43(b)
March 2014 Discuss proposed draft Pensions Committee terms of reference at the next Pensions Committee I Virginia Holmes/
POLB 14/48(a) meeting. Company
Secretary
March 2014 Richard Callard to replace Susannah Storey on the Pensions Committee and Neil Hayward to I Company
POLB 14/48(b) replace the CFO. Secretary