POLB 14(2"4)
POLB 14/15-14/30
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 26 February 2014
Present:
Alice Perkins
Neil McCausland
Tim Franklin
Virginia Holmes
Alasdair Marnoch
Susannah Storey
Paula Vennells
Chris Day
In Attendance:
Alwen Lyons
Richard Callard
Neil Hayward
Lesley Sewell
Brian Deveney
Tim Lloyd
Chris Aujard
Belinda Crowe
Mark Davies
Kevin Gilliland
Nick Beal
Nicholas Kennett
Hugh Flemington
POLB 14/15
(a)
(b)
POLB 14/16
(a)
at 148 Old Street, London EC1V 9HQ
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive
Chief Financial Officer
Company Secretary
Non-Executive Director designate, Shareholder Executive
Group People Director (items 14/16 and 14/21)
Chief Information Officer (item 14/16)
Business Transformation (item 14/16)
Alsbridge (item 14/16)
General Counsel (items 14/17-14/19)
Programme Director for Project Sparrow (items 14/17-14/19)
Communications Director (items 14/17- 14/20)
Network & Sales Director (item 14/21)
Head of Network Development (item 14/21)
Financial Services Director (item 14/29)
Head of Legal (item 14/29)
INTRODUCTION
A quorum being present, the Chairman opened the meeting and
welcomed Richard Callard, Non-Executive Director designate,
Shareholder Executive, who would be attending this and the March
Board before taking over from Susannah Storey.
Neil Hayward, Group People Director, Lesley Sewell, Chief
Information Officer, Brian Deveney, Business Transformation, and Tim
Lloyd, Alsbridge, joined the meeting.
BUSINESS TRANSFORMATION PROGRAMME
The Board received an update on the progress made to date with the
Business Transformation programme. The CEO thanked Lesley for
the work completed and explained to the Board that this was work in
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progress and the Business would welcome their input to help shape
the final Business Case which would return to the March Board.
(b) Lesley Sewell explained the cost reduction target already embedded
in the 2020 strategic plan and size of the potential opportunity
(excluding areas which were considered out of scope). The Board
challenged the Business to be more ambitious and asked Tim Lloyd
from Alsbridge to estimate the potential for further cost reduction. Tim
Lloyd explained that the current work had looked at the outsourcing
potential, but had yet to quantify the re-engineering opportunity. In his
view this opportunity could reduce the cost base by an additional 30 to
40 per cent. (c.£60-£80million).
(c) The Board agreed that outsourcing was feasible but that off-shoring
could be more difficult. The Board was concerned about the handling
of the staff consequences of outsourcing. They would need to
understand the size of the opportunity before taking any decision.
ACTION: (d) The Board asked the Business to be ambitious and return in March
Lesley Sewell with a paper outlining the options for discussion, showing: the different
cost reduction scenarios; the full cost of implementation; the possible
political ramifications of each scenario; and a timeline showing the
critical path for procurement.
(e) Brian Deveney informed the Board that the Business had sought legal
advice to confirm that it was fully caught by public procurement
regulations. The advice reaffirmed this position and the procurement
of a Transformation Partner would therefore take 9-10 months as a
minimum.
{f) The Board discussed the use of a consultant to undertake Business
Process Mapping (BPM) and establish a Target Operating Model
baseline from which the Transformation Partner would work.
(g) The Board asked the Business to clarify the future CORE business
ACTION: processes before this work progressed. The CFO was asked to
CFO/ Lesley Sewell ensure the future supply chain strategy and how it related to the
Business Transformation was included in the work which would report
again to the March Board.
(h) The Board noted the progress made to date.
(i) Lesley Sewell, Brian Deveney and Tim Lloyd left the meeting.
(j) Neil Hayward updated the Board on the search for a Transformation
Director and agreed to circulate the job specification to the Board. He
explained that he had spoken to Lesley Sewell who had understood
ACTION: why the Business was looking for an experienced person, but had
Neil Hayward asked to be considered if no other candidate was found.
(k) Neil Hayward left the meeting
POLB 14/17 REVIEW OF THE CURRENT PROSECUTION POLICY
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(a) Chris Aujard, General Counsel; Mark Davies, Communications
Director; and Belinda Crowe, Programme Director for Project Sparrow
joined the meeting.
(b) The Board received a report reviewing the Company's current
prosecution policy, which had been discussed at the Audit, Risk and
Compliance Committee (“ARC”) on 11 February 2014 and by the
Executive Committee (“ExCo”) on 13 February 2014.
ACTION: (c) The Board agreed that any communication regarding the changes in
Mark Davies approach to prosecutions should be reactive. The Business needed to
revise its key communication messages and be ready with them.
(d) The Board noted the summary of the discussions that had taken place
at ARC and ExCo.
(e) The Board approved the implementation of Option B as a new
Prosecutions Policy as detailed in Appendix A to the paper.
POLB 14/18 INITIAL COMPLAINT REVIEW AND MEDIATION SCHEME
(a) The Board received a report on the challenges facing the Initial
Complaint Review and Mediation Scheme (“the Scheme’), and the
steps being taken to address them.
(b) The CEO explained that the paper set out the worst case scenario as
the Board had requested. The Board were concerned by the potential
costs of the scheme and the level of possible compensation.
(c) The CEO agreed with the Board’s concerns, and reported that she
had met both Sir Anthony Hooper, the independent Chairman of the
Working Group, and Second Sight, the forensic accountants working
on the mediation scheme, to try and ascertain their opinions on how to
progress matters more quickly.
(d) The CEO informed the Board that Second Sight had yet to produce
their first written report for the mediation scheme, and that, until such
time as a number of reports had been produced, which would be over
the next four weeks, Sir Anthony Hooper felt unable to form a view on
the best way to manage the scheme going forward. He strongly
advised against taking any precipitous action at this stage. Sir
Anthony offered to meet the Board at a later date if that would be
helpful.
(e) The Board discussed the mediation scheme and possible support for
Second Sight to enable a more efficient process.
(f) It was noted that, in respect of each individual application, the project
team were taking extensive advice about the Post Office’s potential
legal exposure. However, it was acknowledged that, in light of the
facts now available, and the projected level of legal claims and costs,
it would be sensible to commission more generic legal advice on the
overall level of legal and financial exposure (taking account of the
ACTION: possibility of class actions). This advice should consider the steps
Chris Aujard that could be taken to mitigate any exposure including considerations
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of alternative structures that might be available to deal with the
mediation cases. Such advice should have regard to alternative
dispute resolution mechanisms, such as the Financial Ombudsman
Service.
ACTION: (g) The Board asked for an update to be circulated on the position with
Chris Aujard/ the Business’ insurance underwriters and asked the Business to
CFO revisit the legal advice on insurance to ensure it was robust and that
the correct disclosures had been made. The Board requested that all
future documentation consider potential insurance claims and
disclosure.
(h) The Board thanked the team for its candid report and noted the report
on the Scheme.
POLB 14/19 BRANCH SUPPORT PROGRAMME
(a) The Board received and noted the report on the Branch Support
Programme.
(b) Chris Aujard and Belinda Crowe left the meeting.
POLB 14/20 MUTUALISATION ~ STATEMENT OF PUBLIC PURPOSE
(a) The Board received an update on the preparation of the Statement of
Public Purpose of the Post Office.
ACTION: (b) Mark Davies reminded the Board of the work instigated by Sue
Mark Davies Barton, Strategy Director, on ‘why does the Post Office exist’ and
promised to circulate the comments received from the Board.
(c) The Board discussed the Public Purpose Statement and agreed to
ACTION: feed their comments into Mark Davies. The resultant changes would
All! Mark Davies be made and the final statement agreed with the Chairman and CEO.
This final statement would be circulated to the Board for information.
(d) Mark Davies updated the Board on the Post Office Advisory Councit
and circulated a list of the proposed membership. He reported that the
inaugural meeting would take place on the 19" March, to be preceded
by a dinner the evening before. The Board thanked Mark Davies and
Jane Hill in his team for an excellent result.
(e) Mark Davies left the meeting.
POLB 14/21 NETWORK AND CROWN TRANSFORMATIONS/INDUSTRIAL
RELATIONS UPDATE
(a) Kevin Gilliland, Network & Sales Director, Neil Hayward, Group
People Director, and Nick Beal, Head of Network Development, joined
the meeting.
(b) The Board received an update on the Network and Crown
Transformations, along with an update on Industrial Relations.
(c) Kevin Gilliland expressed his confidence that the Business would
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reach its year end targets for Network Transformation contracts
signed and branches opened. He explained that the retail surveys
teceived enabled the Business to produce a proposal on next year's
targets, which would be completed within the next couple of weeks.
(d) Kevin Gilliland reported that over a thousand branches were now open
on a Sunday. Mains branches were performing well against target;
however, Locals were seeing a downward trend in mails products.
(e) The Board discussed the change in Locals which could lead to a more
transactional relationship with the customer and a move away from
the traditional community spirit. Kevin Gilliland acknowledged that this
was a risk but still felt that more could be done through initial training
to enhance the Locals offer.
(f) The Board sought assurance that the Memorandum of Understanding
(MoU) with the NFSP would ensure support for Network
Transformation (NT), especially if a ‘cliff’ had to be used. Nick Beal
explained that the MoU included specific requirements for the NFSP to
support the delivery of NT to the whole network by 2018, so the ‘cliff’
was understood. He also reassured the Board that NFSP payments
would not commence until after the MoU was signed which would be
after the May NFSP conference, a timescale which the Business
supported.
ACTION: CFO/ (g) The Board asked Kevin Gilliland and the CFO to make the NT report
Kevin Gilliland in the performance pack clearer for the Board.
(h) The Board noted the update on the Network and Crown
transformations and the current Industrial Relations situation.
(i) Neil Hayward, Kevin Gilliland and Nick Beal left the meeting.
POLB 14/22 CHIEF EXECUTIVE’S REPORT
(a) The Board noted the Chief Executive's report.
(b) The CEO reported that she and the Chairman had a meeting with the
Secretary of State, Vince Cable, where they would explain the plan
through to March 2015 and discuss any risks and opportunities. She
would also be meeting the interim Minister before the NFSP
conference in May.
POLB 14/23 FINANCIAL PERFORMANCE UPDATE
(a) The Board received a financial performance update for January 2014.
(b) The CFO explained that there may be some small upside in this year’s
profit which would be used, if possible, to de-risk next year's target.
(c) The CFO reported that the Budget Book for 2014/15 had been
circulated and that the shape of the budget had not changed from that
ACTION: CFO previously discussed with the Board. The Board agreed to feed in
ALL questions to the CFO and indicate if a conference call was required to
discuss the detail.
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POLB 14/24 POLICY ADOPTION
(a) The Board received a report on new policies recently adopted by
ExCo, which covered Anti-Bribery, External Data Protection
(Information Security) and Data Sharing (Information Security)
ACTION: (b) The Board asked that the gifts and hospitality procedures be aligned
Chris Aujard to ensure permission is obtained for hospitality and retention of gifts.
(c) The Company Secretary confirmed that once confirmed the policies
would be cascaded through the organisation.
(d) Subject to this one change the Board noted and confirmed the
adoption of the Anti-Bribery, External Data Protection (Information
Security) and Data Sharing (Information Security) policies with
immediate effect.
POLB 14/25 MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
(a) The minutes of the Board meeting held on 21 January 2014 were
approved for signature by the Chairman,
POLB 14/26 COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the minutes of the Nominations Committee meeting
held on 6 November 2013; and the Remuneration Committee meeting
held on 6 November 2013.
ACTION: (b) It was agreed that future Board Sub Committee draft minutes would
Company be circulated before approval by the Sub Committee to ensure a
Secretary timely update for the Board.
POLB 14/27 STATUS REPORT
(a) The Status Report, showing matters outstanding from previous Board
meetings, was noted.
POLB 14/28 ITEMS FOR NOTING
ACTION: (a) The Board noted the status of the procurement of a Data Centre
Chris Aujard Tower and asked for a further paper after the lessons learned have
been considered by the ARC.
ACTION: (b) The Board noted the update on Cyber Security and Information
Company Assurance. It was proposed that an industry expert be invited to a
Secretary future Board to present on Cyber Security.
(c) The Board noted the Significant Litigation report.
(d) The Board noted the Health & Safety report.
(e) 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 1118 to 1128 inclusive in the seal
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register was hereby confirmed.
POLB 14/29 MONEYGRAM CONTRACT
(a) Nicholas Kennett, Financial Services Director and Hugh Flemington,
Head of Legal, joined the meeting.
(b) The Board was notified of a request from MoneyGram, as part of their
new contract due diligence, to allow certain person checks against
Board directors and responsible executives. The information provided
would already be available at Companies House, and initial checks
would only include negative media, sanctions and watch list checks.
However, signing the form would enable MoneyGram to make further
checks in the future.
(c) The CEO explained that she knew the CEO of MoneyGram and
agreed to explain to her, next time they spoke, that the Board were
concerned by this requirement.
(d) The Board asked for legal opinion to give them comfort that dealing
with MoneyGram, a US corporate managing overseas payments, did
ACTION: Chris not open the Post Office up to any risk of recourse from the US
Aujard Government.
(e) Subject to that legal opinion, the Board agreed to the disclosure.
POLB 14/30 CLOSE
(a) _ It was noted that the next Board meeting would be held on 26 March
2014.
Post Office Limited — Strictly Confidential
POST OFFICE LIMITED 26 FEBRUARY 2014 BOARD ACTION LOG
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REFERENCE ACTION BY WHOM
Strategy
February 2014 The Business to return in March with a paper outlining the options for discussion, showing: the Lesley Sewell
POLB 14/16(d)
different cost reduction scenarios; the full cost of implementation; the possible political
ramifications of each scenario; and a timeline showing the critical path for procurement.
February 2014 The Business to clarify the future CORE business processes before this work progressed. CFO I Lesley Sewell/CFO
POLB 14/16(g) to ensure that the future Supply Chain strategy and how it related to Business Transformation
was included in the work which would report again to the March Board.
February 2014 Circulate the job description for the Transformation Director position to the Board. Neil Hayward
POLB 14/16(j)
February 2014 Further paper on the Data Centre procurement to be brought to the Board after the lessons Chris Aujard
POLB 14/28 (a) learned have been considered by the ARC.
Project Sparrow & Prosecuting Authority
February 2014 Business to revise its key communication messages regarding the change in approach to the Mark Davies
POLB 14/17(c) prosecutions policy and be ready with them in case questions arose.
February 2014 Commission more generic legal advice on the overall level of legal and financial exposure I Chris Aujard
POLB 14/18(f) (taking account of the possibility of class actions) under the Initial Complaint Review and
Mediation Scheme. This advice should consider the steps that could be taken to mitigate any
exposure including considerations of alternative structures that might be available to deal with
the mediation cases. Such advice should have regard to alternative dispute resolution
mechanisms, such as the Financial Ombudsman Service.
February 2014 An update to be circulated on the position with the Business’ insurance underwriters and the I Chris Aujard/CFO
POLB 14/18(g)
Business to revisit the legal advice on insurance to ensure it is robust and that the correct
disclosures had been made. All future documentation to consider potential insurance claims and
disclosure.
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