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Strictly Private & Confidential
Delivering the business strategy and operating model required to
achieve our 2020 vision and create a sustainable business
March 2014
Lesley Sewell
Post Office®
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Contents i)
&
4) Business Transformation and the 2020 Strategy
6 The Operating Model
3) Delivering Business Transformation
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Business Transformation will impact our entire change and 2
cost landscape (£1bn cost base)
Crown Transformation
&
NT Transformation
IT Transformation
*
Product, Channel &
Customer Strategy
* Agents Pay
Customer Management/Insight
&
Single View of Customer
*
Supply Chain Strategy
*These activities will be updated at the June Board away day and are not currently
embedded in any business case assumptions
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The business strategy will drive the design of our target operating
model
Target Operating Model
(People, Process, Technology)
Transformation Execution
+ New transformation activities
Re-alignment of existing activities
Stop some activities which do not align
Join-up between 2020 Strategy and
Target Operating Model
* We’re currently developing a more
granular, customer-based view of the 2020
Strategy — what will the Post Office look
like in 2020
These will be based around elaboration of
our Customer, Product and Channel
strategies for 2020 (This work will be
presented to the June Board)
This detail will drive the Target Operating
Model. Providing guidance on the type of
business that we will need in 2020
This will feed into the TOM design and
partner procurement between now and
June. Providing ourselves and our
Transformation partners with a clear view
of what our transformation must achieve
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The target operating model needs to be grounded in a clear vision
of the customer-facing organisation we want to be in 2020
* Our commercial environment will evolve rapidly over the next six years, with intensifying competitive pressures.
We will need to think boldly if we want to remain relevant to our customers and safeguard our commercial
sustainability in the service of our public purpose.
* Between now and June we will therefore be translating our strategy into a vision of the distinctive and compelling
roles that we believe we can play for our customers in 2020, such as those set out below. This will then give us
a clearer view of the channels, capabilities and cost base needed to support these propositions.
Offering convenient access to the growing parcels market through an extended network of
access points, enabling us to take control in our relationship with Royal Mail and stay ahead I
of the competition like Collect+.
The default access
point for parcels
A challenger bank and leading provider of home services, using our assisted sales I
mctvalleniger harm capabilities and community presence to build deeper relationships with customers that help
and mere them through key life stages such as buying a home.
I
A hub for small The only UK-wide one-stop shop for SMEs, providing access to the suite of services they I
business need to set-up and grow their business. ,
I
The trusted The leading name in the burgeoning identity assurance market for both government and sd
starting point for I commercial online services, which we will use as the hook for a wider range of digital
online journeys services (e.g. digital mailboxes to manage people’s online lives) I
SS BS kk SS a Ge MR Ss 8 Se BD Fa kg SN gs a eS aM Oe Ue ts i se Se Gy
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Post Office®
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®
Agents’ pay is within scope for this programme and there are a
number of options that we will look at to address this issue
% of sales by branch size*
100% Packets and Parcels Special Delivery Lottery
Bill Payments ——Bus Banking —Saving
" ——Car& Home Insurance —— Cred Card, Mortgages and Life Travel Money
90% Travel insurance ——Passport Car Tax
——POCA —— ID Services (Mainly AE!) HomePhone
80% +
% of There are a number of levers that we can use to address the issue of agents pay. Some examples of these are:
sales 7”) \
by C4) Reducing costs through automation
branch 6%
size (2) Extracting greater returns from our footfall value to retailers
50%
(3) Extending the network and lowering agents pay to retailers in the extended network
40% -
C4) Investing in sales capability to selected agency branches
30%
20%
10%
0% + . =
1K 2K 3K 4K 5K 6K 7K 8K 9K 10K 11K
Largest 1k branch Smallest 1k branch
Branch size 6 )
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
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As part of Business Transformation, we will develop a lower-
cost Supply Chain operating model that meets future needs
"Two models are being assessed, which will provide the business with the most optimal future Supply Chain model
ACTIVITIES
= Staff and non-staff cost reductions totalling £3.4m and an uplift in revenue of £1.5m targeted in 14/15
= An internal team analysing ways in which Branch Network dependency for Supply Chain could be reduced,
including:
OPTIMISATION
= significantly reducing branch network demand for Supply Chain
= moving Agents, on a large scale, to a self-funding model for notes and coin
= using less secure means of delivering value stock the network, which is currently fulfilled through CViT
PA Consulting have been commissioned to review and recommend on alternative Supply Chain models,
including:
OUTSOURCED = feasibility of future outsourcing options including partial outsource
= potential partnerships with organisations with a view to leveraging assets and capabilities which could lead to cost-
savings
The outputs of this analysis, which will be completed by the end of April, will help us better understand whether an
outsourced / partnered Supply Chain model is achievable. An outline roadmap will be developed for moving our Supply
Chain to an external model.
If the output is that in the medium to long-term outsourcing is not a commercially sustainable approach we will continue
(and increase) our focus on the optimisation route, developing a roadmap of ongoing optimisation / cost-reduction for
Supply Chain, taking account of the work activities mentioned above.
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Post Office®
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Early indications of some Core Capabilities we will require to
operate the Post Office of the future
CAPABILITY
Customer
relationship
Franchise/retail
expertise &
capability
Value chain
ownership
nel
Commercial
relationship
management
Stakeholder
engagement
CAPABILITY REQUIRED
Customer insight, analytics and Customer Value Propositions (CVPs) will help us
build relationships
Designing products and overall franchise propositions that are attractive to
retailers, making us the preferred service provider for each retail channel
Find ways to claim more of the profit from the products we sell which means going
further down the supply chain from White Label towards Owner Operator
From a service and sales point of view there is seamless integration between all
channels, delivering value through innovative use of technology
Aligning our partners & clients towards a profitable Post Office service delivery
model, through better contract management and service standardisation
Making a reality of mutual ways of working through mature and effective
mechanisms for engaging our internal and external stakeholders, like the POAC
Post Office®
(7)
Sr
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We have also started to consider the current state operating model
issues which are fundamentally constraining our profitable growth
The current organisation consists of multiple internal and 3" party white label product
& channel silos
Issue 1 Network Digital
Customer Data
Fragmented
Data dispersed
across internal
silos and 3% party
product providers,
limits customer
relationship and
cross / up-sell
Issue 4
__ eee © Customer
HR Experience
Fragmented
eka Product & Channel
silos internally and
across our 34
party product
providers, hinder
customer
relationships and
income growth
Accounting
Issue 2 - Duplication of functions
Many business functions duplicate or overlap,
resulting in high costs and inefficiency
Issue 3 — Process inefficiencies
Many processes are manual and complex, and we
lack standardisation & automation internally and
in how we interface with our product providers.
Adds cost which grows as our income grows
Post Office®
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From the 2020 strategy we have started to elaborate the target
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operating model to consider the key capabilities and levers we will
employ
Lever 1
Centralise
Functions currently
fragmented or
duplicated, to be
brought together &
shared. Most
relevant to us
when we retain
Corporate
Governance
Customer Centre
Market to Customer
Customer Value Customer c Client Account
Propositions Experience Design Ma Management
be: Product Management Customer
Cus Cus on
Lever 5
Stop
Some functions or
activities will no
longer be justified
or aligned, and will
need to be
stopped
Lever 2 - Standardise
Activities which can be simplified or
standardised, can precede outsource
Includes our 3" party interface
standards & protocols. Mainly
Service Delivery functions
Lever 3 - Digitise
Automation, cloud, self service, mobile
Digital service standards and Open
APIs will substantially optimise and
simplify our 3 party product
provider interfaces
Post Office®
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The Delivery will align all elements of the Strategy, Operating
Model design, new transformation activities and in-flight activities
March April May June Sept Dec March June
2014 2014 2014 2014 2014 2014 2015 2015
Who and what? Timely transition to “How?”
depends on strong.answers to
“Who?” and “What?”
rN a*
March June Board I
Board Away day '
2020 Customer, Product & Channel strategy '
Govern.
Translate the 2020 Customer, Product & Channel
strategy to understand what it means for 3 year
operating plans
T
Lean workstream / quick wins to begin before Transformation partner
Agents’ Pay
Brand Promise Strategy
Wider Existing activities will align into an Programme
business integrated Business Transformation Transformation
program Programme as part of a phased Stop, Programme Waves
mes Start, Continue assessment Programme = S
Co
Post Office®
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POST OFFICE LIMITED
AUDIT, RISK AND COMPLIANCE COMMITTEE
TERMS OF REFERENCE
1. Purpose
The purpose of the Audit, Risk and Compliance Committee (“ARC” or the “Committee”) is to assist the
Board of Directors in fulfilling its fiduciary responsibilities by:
e Contributing an independent view on the accounting, financial control and financial reporting
practices of the Company.
e Taking all reasonable steps to ensure accurate and informative corporate financial reporting and
disclosures which meet appropriate accounting and corporate governance standards.
e Providing oversight of the company’s risk management systems, operational controls and key
systems.
e The responsibilities undertaken by the ARC under delegated authority from the Board will be
subject always to the powers and duties of the Board, as set out in the Articles of Association.
2. Composition, Terms of Office and Governance.
21 Composition and Terms of Office
e The Committee shall serve as a standing committee of the Board. Its Chairman and members
will be appointed by the Board. It shall consist of at least two independent non-executive
directors.
e Only non-executive directors shall be eligible for membership of the Committee. Members of the
Committee will normally serve for a period of three years. Their appointment may be renewed
on an annual basis thereafter with the consent of the Chairman of the Committee but no
director shall serve for more than six years.
e The quorum shall be two directors, of whom one will have recent and relevant financial
experience.
¢ The Committee shall meet as often as required but at least three times per year.’
e = The Company Chairman and executive directors may be invited to attend any meeting, or any
part of any meeting, by the Committee Chairman.
! The Financial Reporting Council recommends a minimum of 3 meetings but suggests that more will be usually
required.
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e The CFO, the General Counsel, the Head of Risk Governance and the Head of Internal Audit (or
those holding positions with responsibility for such roles, howsoever named) will be permanent
invitees.
e The Company Secretary shall act as Secretary to the Committee and shall attend all meetings to
keep minutes and record actions.
e The Committee Chairman will report regularly to the Board. Minutes of each Committee
meeting will be circulated to all members of the Committee and, once agreed, to all members of
the Board
e The External Auditors may attend all or part of any Committee meeting at the invitation of the
Committee Chairman. As a minimum the External Auditors will attend to present their external
audit plan for approval and to present their reports.
e = The Company will provide current and new Committee members with any training, briefings or
induction required. The Company Secretary, Head of Internal Audit and the External Audit
Partner will keep members informed of relevant published guidance as necessary.
2.2 Governance of Auditing Services
The Committee will:
e — Review and recommend to the Board the nomination or discharge of the independent external
auditors, the proposed fees (in consultation with management) and the acceptance of the scope
and general extent of the engagement.
e Formally review, challenge and approve the agreed annual external audit plans and approach.
e Periodically review the scope, resourcing and capabilities of the Internal Audit function
e Review and re-approve the Internal Audit Charter on an annual basis.
e Approve each year in advance the Internal Audit plans and review both resources and any
proposed amendments that may occur through the following year. The review should include
methods employed by the internal auditors to assess risk and to prioritise the various audit
proposals identified in the annual plan.
e Assume a primary role in the appointment, assessment and if necessary the discharge of the
Head of Internal Audit.
e — Ensure the independence of the external and internal auditors including an annual review of any
non-audit services provided by either.
e — Ensure free and effective communication between the Committee, external auditors and internal
auditors and hold separate sessions, or informal meetings and contact as required.
These meetings may discuss matters that any of these groups believes should be discussed
privately with or without management.
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« — Ensure lines of communication are maintained with the Board.
2.3 Governance - Meetings
e Any member of the committee or the Company Secretary may convene a meeting. The External
and Internal auditors may request a meeting with or without management present.
e Meetings may be held in person or by telephone or other electronic means, so long as all
participants can contribute to the meeting simultaneously.
e Notice of each meeting shall be given to all those entitled to participate at least 2 working days
before the meeting.
e Meetings shall be planned in accordance with key reporting and financial planning dates.
2.4 Governance - Other
The Committee will:
e Review and update its terms of reference annually.
e = Conduct an annual evaluation of the performance of its duties and responsibilities and of its
effectiveness, and discuss the results with the Board of directors.
e Prepare an annual report on its activities for inclusion in the Annual Report and shall review and
approve on behalf of the Board statements to be included in the Annual Report concerning
financial controls, internal control and risk management.
e In the absence of express authority from the Board, the Committee will not, without the
concurrence of both management and the auditors, have either the responsibility or authority
for altering the financial statements or the accounting procedures of the Company.
3. Accounting, Financial Control and Financial Reporting and Disclosure
The Committee will:
e — Review, discuss and consider with the external auditors their approach to risk assessment and
the scope and plan of their audits.
e Review the annual financial statements which are to be submitted to the Board, including
Management's explanatory notes. The review may include:
e Reports from the external auditors as to the results of their examination to date.
e Discussion of any problems regarding financial reporting which may need to be reported in
the annual report to the shareholders including any disagreements that may have arisen
between the auditors and management in any area.
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e Meeting(s) with the senior financial executives who shall outline any problems as to financial
policies, financial reporting or matters relating to internal control and any matters in
contention with or under consideration by the external or internal auditors;
e The appropriateness of existing accounting principles being employed and any change in
accounting policies or practices which the corporate auditors may refer to in their report to
the shareholders, and the impact on the Company's financial statements.
e Any proposed changes in the presentation of the financial statements or accompanying
notes which the auditors may recommend.
¢ Other matters related to the conduct of the audit communicated to the Committee under
generally accepted accounting standards.
e The Management Letter
e The Committee shall review with management any half yearly trading statements or
financial reports and the contents of any press release concerning the Company's financial
performance or situation, before release to the public or to shareholders.
4. Risk Management, Operational Controls and Policies
4.1 Risk Management Framework
The Committee will:
° Review the overall risk management framework in place for the Company including its
appetite for risk.
. Oversee the Risk and Compliance Committee activities and receive summary reports as
appropriate
e Review the Company's overall risk position and periodically invite management to outline
risk management strategy and status within their specific business units.
° Review management's assessment of the degree of risk the Company prudently incurs in
achieving a reasonable balance between the cost of managing risk and control systems and
the benefits derived
. Consider and review areas of specific risk as highlighted by the Risk and Compliance
committee. This should include, but is not limited to, sufficient coverage of strategic risk,
financial risk, operational risk, technology risk, reputation, regulatory, major change
initiatives and people risks
° Review legal, regulatory and any other matters that may have a material impact on the
financial statements, related Company compliance policies, and programmes and reports
prepared to manage and monitor Company compliance policies.
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4.2 Controls and Policies
The Committee will consider and review with the external auditors and the internal auditors:
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The adequacy of the Company's internal controls;
Recommendations for the improvement of the Company's internal controls, processes and
systems.
Significant findings (the “management letter” from external auditors) and recommendations
together with management's responses.
Any reportable restrictions experienced regarding scope or access to required information
by either external or internal audit.
4.3 Fraud, Theft and Ethics
The Committee will
Review with management their fraud assessment, detection measures and their
investigation of illegal acts, as appropriate.
Review any summary of frauds, thefts and other irregularities of any size.
Review with the internal auditors and the external auditors the results of any review of the
compliance with the Company's codes of ethical conduct and similar policies including
whistleblowing.
4.4 Risk Management - Other
The Committee shall have the power to conduct or authorise investigations into any
company matters within the Committee’s scope of responsibilities. The Committee shall be
empowered to obtain independentlegal advice, and engage counsel, accountants, or others
to assist it in the conduct of any investigation
The Committee shall perform such other functions as may be assigned or delegated to it by
the Board, and may review other items of an internal control or risk management nature
which may from time to time be brought before the Committee.
5. Committee timetable.
A timetable shall be produced each year showing the current membership of the Committee and the major
annual activities of the Committee, in a similar format to that set out in the appendix.
6. Review
These terms of reference were last reviewed in November 2013
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APPENDIX?
ARC Membership November 2013
Chairman Alasdair Marnoch
Members Tim Franklin, Neil McCausland, Susannah Storey
Company Secretary Alwen Lyons
External Audit Ernst & Young
Head of Internal Audit Malcolm Zack
Annual Timetable
April
June
Nov
Feb
1. Governance items
Annual review of terms of reference and IA
charter.
External Auditor
review/appointment/reappointment
Minutes and actions of previous meeting
Evaluation (annual)
Private meetings with auditors/management
NAN
2. Financial reporting and disclosure
Review and approve external audit plan
Financial statements full year
Financial statements - half year
External audit management letter
Approval of Committee report for inclusion in
Annual Report
3. Risk management and control
Internal Audit update report
Risk and Compliance activity and highlights
Strategic risk update
Financial risk update
IT and systems risk update
Selected business risk review update
Insurance review
Annual Timetable
April
June
Nov
Feb
Other (Less frequent)
Fraud and Theft report
Security update
Ethics and Code of Conduct and Whistle-Blowing
policy
? The timetable sets out standing agenda items. It may be modified by the audit committee in light of specific
requests or actions arising from meetings. The months indicated are provisional and subject to change.
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Annex 1
Board Effectiveness Review
1. Process
The Chairman interviewed all the Board Directors and the Company Secretary on a one-to-
one basis using the Discussion Guidelines, attached at Annex 2, between 20 June and 3
July. A list of interviewees is at Annex 3. The Chief Executive had consulted her ExCo
colleagues and included their views in her feedback.
This report summarises all the points made. There were many common themes and where
the same points were made more than once, they have not been repeated. All the
suggestions made for improving how the Board works are included and brought together in
section 13.
The process included peer feedback for all members of the Board which the Chairman will
communicate separately on an individual basis. Concurrently, the SID has conducted a peer
review of the Chairman’s performance which is being fed back separately to her.
The Board will discuss this report at its July meeting and it will then be sent to the
Shareholder Executive.
2. Context
Alice Perkins took over the Chairmanship of the Post Office Board from Donald Brydon in
October 2011. At that time the CEO, CFO, SID and Company Secretary were all in their
present roles. The other NEDs joined the Board over the period from [March] to September
2012. So at the time of carrying out this evaluation, the Board has been in existence for less
than a year. It is early days in its life.
The creation of a new PO Board has gone remarkably well in a very difficult context and
challenging environment. The Board is maturing. It has come a long way since autumn 2011
and is operating very well (8 out of 10). We can be pleased with where it has got to and the
Shareholder should be pretty pleased. The issue now is how to make it even better.
This is a well-functioning Board. The Directors have a wide range of skills and experience
from different backgrounds. We have the key bases covered. We are working together
effectively; it's fun and really challenging.
This is a disparate set of Directors who have come together and are pointing in the same
direction most of the time; there is a sense of team work. We do listen to each other and can
agree to disagree or agree on what we are prepared to live with. It can feel uneven as
between the respective contributions of the Executives and the NEDs.
The Board has got better as it has matured. People have become feistier; they are
challenging but very respectful of each other and of the business. Board members come well
prepared; they are good at listening. They don’t always agree and sometimes issues get re-
opened when people thought they had been settled. The debate can be circular and hard to
close down but it is helpful if people speak up if they disagree.
The Board is quite different from a year ago. It is stimulating, vibrant, pro-active and
searching for solutions in its determination to fix the business. It is extremely positive and
helping the Executives to improve. It adds value.
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Annex 1
The Board provides a good balance between support and challenge -— it is giving clear
direction and has a clear mandate and has stopped diving into the detail. It feels like a team
which is great. ExCo feels very positive about it - should they and the Board meet a couple
of times a year?
The Board has been the most amazing improvement for the PO. The recruitment of the
NEDs has gone really well — they have very different skills and have the ability to
contemplate working in a different environment from what they are used to. The company
has adjusted well to the new Board. Thank goodness we went in that direction.
4. Organisation of the Board
Overall, this is very good. The Company Secretary, supported by Jorja Preston, provides
excellent support to the Board including looking after the hygiene factors, really well. The
electronic papers are great and one Director commented positively on the Reading Room
while another wondered whether it is as useful as it could be?
The meetings are held at the right frequency, for the right length of time and they run to time.
The quality of the papers has improved but there is further to go — some should be crisper
and they should always arrive in time for Board members to digest them properly before
meetings unless there is an emergency to report.
A common theme was that the Board could use its time even better. There is still a tendency
for Executives to repeat what is in the papers. The Board could get better at taking papers
as read if there are no issues to discuss. For instance, while retaining a paper on financial
performance and key indicators at each Board meeting, should the Board discuss this at
alternate meetings and without any introduction from the CFO unless it is to add something
new? This would release time which could be spent on the substance of the business such
as mails and financial services.
Several people commented on the nature of the debate. The Board does not need to be led
by the Executives to a conclusion - this is not a good use of the Directors’ expertise. It is
getting better at having a robust debate. One person commented that it is a very respectful
Board and another Director suggested that it should become more hard-edged and willing to
call a spade.
The Board is not a talking shop. It takes decisions all the time but the Chairman could be
even clearer about when decisions have been made and they could be recorded in a
decision log at the end of the minutes. This should flush out outstanding differences and the
Board would be able to decide explicitly how to handle these rather than finding that the
issues were being unexpectedly re-opened by one member of the Board to the surprise of
the others.
Should the Board make more use of the NEDs in creative ways so that they are generating
ideas rather than reviewing ideas which have come up from the Executives? (e.g. the
session on Outsourcing at the recent Awayday.)
The recent Awayday had been good (though the session on Mails had been a wasted
opportunity). How many of these should there be in a year (in the last year there have been
two — Shoreditch and Kingston)?
Should the Board meet outside Head Office more often e.g. at a large Crown or a call
centre?
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Annex 1
Should the Board meet the ExCo on a regular (but infrequent) basis? And what about the
SLT?
Should the Board have a dinner with partners?
One Director asked that dates for future Board meetings in 2014 and even 2015 should be
fixed now.
It was also suggested that the Board should have a regular opportunity to review the forward
programme of agendas as it has in the past.
There is sometimes an absence of follow-through (e.g. the delay in circulating the updated
Rothschild’s work). While this has got better, there is further to go.
5. Committee Organisation
The right Committees are in place. The Board has only just set these up so their roles should
be clear and they are.
The Committees have been feeling their way on the frequency and timing of their meetings.
There is a need to find a schedule which works and is more settled. This is especially true of
the ARC and the RemCom.
The RemCom is the Committee with the most difficult business in practice and it has not
always felt as though it is in control of it. This should improve with experience of the
interaction with the Shareholder, better forward planning and better professional support
from the business.
The ARC initially felt too much like the main Board but that is better now that membership
has been reduced to three NEDs. It is discharging its responsibilities properly and has
handled the two year-ends extremely well. One Director commented that it might be trying to
do too much and might need to be more flexible in its use of time. There is important and
urgent work for it to do on risk, which is in hand for the autumn. Several Directors
commented that that it was the next major priority after settling the strategy.
The Mutualisation Committee has been less effective than the Board although it has the
same membership. It should review its future programme in the light of the strategy.
6. Strategy
The Board has spent a great deal of time on the Strategy since it has been fully formed and
this has been helpful in terms of its understanding of the business and its development as a
team.
The Directors all think the Strategy has been well developed and are happy with the
substance of what they have agreed. At the time of writing, this is subject to negotiations
with the Shareholder.
However, the process got off to a shaky start at Shoreditch. Lessons were learned from that
and by the end the NEDs all felt satisfied that they had been able to make the contribution
they wanted to make. There was universal recognition that Sue Barton's role in this had
been invaluable.
One Director commented that there was further to go in articulating the vision of what the
Post Office would be in 2020.
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Annex 1
7. Board Composition
There is universal agreement that the Board has a great mixture of skills and experience.
Almost all the key aspects of the business are covered and several people commented that
whatever came up as an issue, there would be at least one member of the Board who had
the relevant experience to make a valuable contribution to its resolution. The areas where
additional expertise would be valuable were large-scale operations including change
management, industrial relations and IT.
Some people also commented on the mix of Directors in terms of their styles and
temperaments. There is a good balance between the entrepreneurial and the risk conscious
and between those whose glasses are half full and those whose are half empty. It would be
important in future to ensure that any changes in the Board did not result in the balance
being skewed too far one way or the other.
The Board is well balanced in terms of gender. In future it would be good if there were also a
greater diversity of ethnicity.
8. Board Involvement
The Directors’ knowledge of the business was generally thought to be sufficient for their
roles, though individual Directors raised areas which they it would be helpful for them to
understand better e.g. the economics of the network including SPMs’ pay.
There had been a tendency in the early days for NEDs to appear to “meddle” in the business
and dive down too much into the detail but this had diminished over time. This needs
watching as it is always tempting for NEDs to fall into that trap on any Board.
All the NEDs commented on how willing the Executives were to engage with them outside
Board meetings and were impressed by the extent to which most of them, and especially the
CEO, were open to challenge. In return, the Executives commented that the NEDs were very
generous with their time outside the Boardroom.
The relationship between the Chairman and the CEO appeared good, supportive but also
challenging with no obvious tensions.
One NED wondered whether they should become more involved by e.g. opening new PO
branches and/or developing relationships with key stakeholders (see next section). The CEO
wondered whether they could contribute to interviewing key candidates for ExCo positions.
9. Board Relationships with Key Stakeholders
There is general recognition that there is more to do here. The Board needs to understand
its shareholder's position better, especially that of the Minister concerned. The session with
Mark Russell had been extremely useful (“formative”/” an eye-opener’) in that context. It was
excellent that he had agreed to come again in the autumn and there should be more
sessions to help the Board understand this area.
It is also recognised that more time should be spent forging relationships with other key
stakeholders inside and outside the business. The Forum at the recent Awayday had been a
good use of time.
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10. Risk, Compliance, Financial Monitoring.
The Directors believe that they are carrying out their fiduciary duties appropriately overall.
Several people commented on the need to do more work on risk management as noted
above. More than one NED commented that the financial and performance report could be
improved further. Is there sufficiently robust reporting of the delivery of key projects,
including cost-cutting — is there a danger of the Board being lulled into a false sense of
security over these?
There is also a need to satisfy the Board that the right compliance measures are in place in
financial services as the company expands its business in this area. This is something for
the ARC in the first instance; there is a need to spend more time on this.
11, Looking Forward
Directors are concerned about the quality of the pipeline for the top posts, especially for the
CEO’s position. This is something which has already been identified and work is underway
under the direction of the NomCo to address it. Progress is being made in relation to the
ExCo positions and job specifications for new recruits to the ExCo are targeted at candidates
with the potential to be future CEOs. This is a real weakness which NomCo and the Board
need to keep actively under review.
The induction of the NEDs had been done well and everyone was satisfied with this. The
Board needed to decide now what additional development was needed, for example, visits to
branches (should each NED commit to visit a certain number every year?) or
workshops/Board sessions on particular issues?
It will be important to manage the tenure of the NEDs so that there is no bunching of
retirements.
12. Overall Board Effectiveness
The Directors thought that the Board got the balance right between fulfilling its fiduciary
duties and making a positive, substantive contribution to the business. Looking back over the
last year, one Director commented that the Board’s agenda had felt as though it had lurched
in an unplanned way but that once the Strategy was settled, it should be possible to get
more stability into the business and focus on key elements of its delivery.
The right balance has been struck between support and challenge. But the Board has now
“formed”. It has been “quite kind” to the business. It can now be more challenging and
expect more; it needs to be more demanding e.g. about cost-cutting, and tougher with
failure.
Generally the Directors were satisfied with the quality of the external advice received e.g.
the auditors, and Rothschild’s, but one Director commented that the business did not always
seem to be clear about what it was using advisers for, or doing that well.
13. Areas for Discussion and Action
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Discussion
What is the right balance amount of rigour and challenge? Does the Board agree that it
should be more forthright than it is now? How would that affect the balance between the
NEDs and the Executives?
Does the Board agree that time should be saved in meetings by moving more briskly through
agenda items and discussing financial performance and key indicators only every other
meeting (assuming things are on track?) If so, what would it like to spend more time on? Is
giving more time to our key stakeholders, including understanding the Shareholder better, a
key priority?
How could the NEDs be used more creatively?
What does the Board want to do outside Board meetings e.g. branch visits (an annual target
for NEDs?), workshops, meetings with key stakeholders, or with ExCo/SLT?
Are two Awaydays a year right?
Would the Board like a dinner with partners?
Should the Board meet outside Head Office more frequently e.g. at large Crowns or call
centres?
Is the Reading Room as useful as it could be?
Action
The Chairman to sum up discussions even more clearly. Board members to speak up if they
disagree or register clearly that they are willing to support the majority view despite
remaining reservations.
Executives to assume as a matter of course, that their papers have been read and not to
repeat material already covered unless asked to do so. The Chairman to move more swiftly
through each item unless there are questions or issued raised by the Board.
Company Secretary to fix Board dates for 2014 and if possible, 2015; to record decisions
taken in a “log” at the end of the minutes of each meeting; to continue to work with the
Executives to raise the standard of papers and ensure they are sent out in good time; to
ensure all follow-up action is taken timeously and circulate a forward programme of Board
agendas every 6 months.
All Committees to keep the cycle of their meetings under review and follow-up on the key
issues identified in this report e.g. succession planning for NomCo and risk for ARC.
Alice Perkins
July 2013
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Post OFFICE BOARD EVALUATION SUMMER 2013
DiscussiON GUIDELINE
1.
Overall impression of the Board
Shared understanding of the Board’s role
Dynamics of the Board
Culture and climate in the Boardroom
Sense of teamwork
Use of time
Quality of discussion and listening
Decision-making
Organisation of the Board
Agenda
Meeting frequency and length
Formal processes and duties
Informal processes
Information and support materials
Servicing of the Board
Committee organisation
Clear remits
Agendas
Meeting frequency and length
Membership, attendees and advisers
Information and support materials
Strategy
Development
Understanding
Agreement
Communication
Review
Peer reviews
Feedback on contribution of individual Board members
Executive Directors
Senior Independent Director/Committee Chairmen
Other Non-Executives
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Discussion GUIDELINE
6. Board composition
Balance of skills and experience, including diversity
Future requirements
7. Board involvement
Directors’ knowledge
Relationship Chairman and CEO
Relationships with management
Contact outside boardroom
8. Board relationship with key stakeholders
Shareholder relations
Employee/Franchisee relations
Other key stakeholder relations
9. Risk, compliance, financial monitoring
Identification
Monitoring
Openness
Balance with performance
Responsibility
10. Looking forward
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Succession planning for board members; non-executive and executive
Directors’ development needs
Future remuneration for non-executives
Induction and training
11. Overall Board effectiveness
Fulfilment of fiduciary duties
Contribution to business
Checks, balances and support
Short and long term health of business
Support/independent advice
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Neil McCausland
Tim Franklin
Virginia Holmes
Alasdair Marnoch
Susannah Storey
Paula Vennells
Chris Day
Alwen Lyons
List of Interviewees
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Financial Officer
Company Secretary
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Post Office Ltd — Strictly Confidential
POST OFFICE LTD BOARD
Board Effectiveness Review
The Chairman's Board evaluation report is attached as appendix 1. The areas proposed for
discussion at the Board and for action are covered in section 13.
Alice Perkins
July 2013
Board Effectiveness Review 10/07/2013 Page 1 of 1
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POST OFFICE LIMITED
BOARD TERMS OF REFERENCE
Including the Schedule of Matters reserved for Board decision
The Board of Post Office Limited is collectively responsible for setting the Company's primary business
objectives, for establishing a proper governance framework to manage and monitor risk and for ensuring
that the Company has the resources and leadership required to achieve its stated objectives. Directors’
statutory duties are set out in the Companies Act 2006. The primary duty of the directors is to promote
the success of Post Office Limited as a Company for the benefit of its Government shareholder and the
wider stakeholder community.
The Board remains accountable for performance to the Shareholder Executive within the Department for
Business, Innovation & Skills (“ShEx’). The Board is required to notify ShEx of certain activities and
capital commitments and to seek the consent of ShEx, as Shareholder, for certain actions, as set out in
the Articles of Association.
A. BOARD COMPOSITION
1. The Board is made up of two executive directors and five non-executive directors, including the
Chairman.
ROLE INCUMBENT
Chairman Alice Perkins CB
(Chairman of Nominations Committee)
Senior Independent Director Neil McCausland (retail expertise)
(Chairman of Remuneration Committee)
Non-Executive Director Virginia Holmes (pensions expertise)
(Chairman of Pension Committee)
Non-Executive Director Alasdair Marnoch (financial expertise)
(Chairman of Audit, Risk & Compliance
Committee)
Non-Executive Director Tim Franklin (financial services expertise)
Non-Executive Director Susannah Storey (Government appointee)
Chief Executive Paula Vennells
CFO Chris Day
2. The Company Secretary (Alwen Lyons) will act as Secretary to the Board.
3. The composition of the Board will be monitored by the Nominations Committee, which will make
recommendations to the Board for the appointment or retirement of directors, taking into account
the need for a diverse board membership with a range of appropriate skills and experience. All
appointments will be subject to the consent of the Shareholder.
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Non-Executive directors will form the majority of the Board. The term of office of each Non-
Executive Director will be set by the Shareholder. Non-executive Directors will usually be appointed
for a minimum period of three years. The initial term of office may be renewed for a further period
but no Non-Executive Director shall serve for longer than [6] years.
. BOARD MEETINGS
The Board shall meet as often as required. At least 8 Board meetings will be held each year.
In addition to regular Board meetings, separate Strategy sessions will be held twice a year.
The quorum for the transaction of business at a Board meeting shall be two directors (one
Executive, one Non-Executive).
The Board may meet in person, by telephone or by other electronic means, so long as each member
can contribute to the business of the meeting simultaneously.
Meetings may be convened by the Secretary, at the request of the Chairman, or by any director, at
any time.
Notice of each meeting shall be given to all directors and, unless there are special circumstances,
shall be given at least 3 working days before each meeting.
The Secretary (or a nominated deputy) shall attend all Board meetings and keep minutes and
records of all decisions and actions.
Other Post Office employees and/or external consultants may attend for part or the whole of any
Board meeting at the invitation of the Chairman.
The Secretary will be accountable to the Chairman for the provision of relevant and timely
information to the Board and for ensuring regular reporting from Board Committees and the
Executive Committee to the full Board.
. The Non-Executive Directors will meet twice at least once each year without the executive directors
being present.
DUTIES AND RESPONSIBILITIES
In addition to its legal duties, the Board has the following specific responsibilities:
e Setting the strategic direction of the Post Office
¢ — Establishment of the Post Office's vision and values
e — Setting the Company’s risk appetite and ensuring a proper framework exists for the
management of risk
e Maintenance of proper accounting and tax records, as required by the Companies Act 2006
e Maintenance of a sound system of internal control so that the Company can meet its statutory
and regulatory obligations
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e Maintenance of the reputation of the Post Office as a public institution, including consideration
of new products and activities which may attract public interest or have an impact on the value
of the Post Office brand
e — Ensuring regular and active communications with the Shareholder, particularly on the
Company's performance against the Strategic Plan and other key indicators
e Delegation of authority to Board Committees and to the Post Office Executive Committee,
according to their respective Terms of Reference
e Formal evaluation of the performance of the Board, Board Committees and individual directors
The Board may delegate authority to the Executive Committee or to any Board Sub-Committee to
deal with any particular matter or to complete a project or task on behalf of the Board. A Board
Sub-Committee shall include both standing committees such as the Audit, Risk and Compliance
Committee (ARC), the Nominations , Pension and Remuneration Committees and any ad-hoc sub-
committees. The Board shall set out clearly the terms of reference of all such committees and shall
receive reports on their activities, including copies of the minutes of committee meetings. Directors
of the Board shall constitute the majority of members of any Board Sub-Committee.
. SCHEDULE OF MATTERS RESERVED FOR BOARD DECISION
The following matters are reserved specifically for Board decision. Where indicated (*), the Board
may delegate authority to a Board sub-committee to bring forward a recommendation for approval
or to complete a project or task on behalf of the Board.
Section 1: Strategy and management
e — Approval of the annual operating plan and budget
e Approval of the Strategic Plan to be submitted to Government and any changes to it
e — Approval of the Funding Agreement with Government and monitoring of the achievement of
milestones contained within the plan
«Approval of the criteria for measurement of performance (Key Performance Indicators) and
annual review of such criteria
e — Ensuring that any necessary corrective action is taken in the light of reviews of performance
against budget and against the Strategic Plan and Funding Agreement
e — Setting the policy for diversity, talent management and succession planning within Post Office
e — Approval of any extension of the Group’s activities into new business areas or outside the UK
e — Any decision to cease to operate all or any material part of the Group's business
Section 2: Ownership, capital structure and constitution
* Consideration of any recommendations for major changes to the Group's ownership and/or
control structure” (Mutualisation Committee)
e Approval of changes to the Group's capital structure including any proposal to issue new
classes of shares, to redeem, consolidate or redesignate existing shares or to reduce the share
capital,
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e Proposals for changes to the Articles of Association or other constitutional docurnents
applicable to the Post Office from time to time
e Approval of the incorporation of any new Group company, partnership or joint venture entity,
including any subscription or application for allotment of shares
e Approval for the dissolution of any Group company, partnership or joint venture entity.
Section 3: Financial reporting and controls
e Approval of the annual report and accounts, including any corporate governance statement and
any specific reports required by Company law’ (Soard-appointed sub-committee )
¢ Approval of any half year financial report or trading statement for publication’ (Soard-appointed
sub-committee)
e Approval and declaration of any dividends or other proposed distributions, subject to the
Articles of Association and confirmation of the sufficiency of distributable reserves
« Approval of any significant changes in accounting policies or practices” (ARC)
e — Approval of treasury and banking policies, including methods of mitigating against foreign
currency exposure and any use of financial derivatives " (ARC)
* Monitoring of the independence of internal and external auditors * (ARC)
e — Approval of the appointment or removal of the external auditor” (ARC)
e — Ensuring that an effective risk management system is maintained as part of a sound system of
internal controls and internal risk management * (ARC)
Section 4: Financial commitments
¢ Approval of major capital projects (above £3m)
e Approval of material contracts in the ordinary course of business and included in the operating
plan (above £20m) and those arising which are not included in the operating plan (above
£10m)
e — Approval of all material contracts not in the ordinary course of business, including all strategic
acquisitions and disposals
e Proposals to enter into financial instruments, bank borrowings and any proposed loan facility
(above £20m).
e Any commitment involving the registration of a debenture, mortgage or charge against Post
Office Limited assets (above £3m).
© Approval of major asset disposals (above £1m)
e Consideration of any material changes to pension arrangements for Post Office employees, in
particular affecting the rate of contributions required to be made” (Pension Committee)
e Determination of the appropriate investment strategy for Post Office pension funds and
monitoring of performance by the investment managers” (Pension Committee)
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Section 5: Appointments and Senior Remuneration
« Recommendation of the appointment of any person as a Director * (Nominations Committee)
e Following receipt of consent from the Shareholder, formal appointment of any person as a
Director, including the designation of an individual to serve as Chairman, Senior Independent
Director, Chief Executive, CFO or Chair of any Board Sub-Committee
e — Confirmation of the division of responsibilities between the Chairman and the Chief Executive
e Appointment and any termination of appointment of the Company Secretary
e Recommendations to the Shareholder on changes to remuneration policy and packages for
Executive Directors * (Remuneration Committee)
e Recommendations to the Shareholder on fees to be paid to Non-Executive Directors
e — Introduction of any long term incentive scheme and approval of the performance criteria and
the amount of any awards to be made under any long term incentive scheme * (Remuneration
Committee)
¢ Approval of any annual bonus schemes involving participation by Directors’ (Remuneration
Committee)
e Confirmation of the terms of any suspension or termination of service of an Executive Director
as an employee of the Company, subject to the law and their Director's contract *
(Remuneration Committee)
e Appointments to the Boards of subsidiary and joint venture companies
* — Appointment of specified individuals to authenticate the Post Office Limited seal
e Appointment of the Group’s principal professional advisers
Section 6: Governance
e — Ensuring delivery of the obligations on the Post Office set by the Postal Services Act 2011,
including the publication of an annual Network Report and Postal Heritage Report
e Approval of the Group's overall corporate governance arrangements
¢ Performance evaluation of the Board, Board Sub-Committees and individual Board members
(or confirmation of why this has not occurred).
e Approval of Group policies including, but not limited to, the Health and Safety Policy, Anti-
Money Laundering Policy, Freedom of Information Policy, Whistle-Blowing policy and/or Code
of Conduct and Anti-Corruption Policy
e — Approval of the overall levels of insurance for the Group, including directors’ and officers’
liability insurance and any arrangements for indemnity of directors
e Decisions on the potential prosecution, defence or settlement of litigation involving potential
costs of more than £m or being otherwise material to the interests of the Group
e — Any proposal to make political donations
e Changes to the Schedule of Matters Reserved for Board decision.
January 2013
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Post Office Limited Governance Structure
Audit, Risk & Compliance Committee )
Remuneration Committee
(at least 3 meetings per year)
< (at least 3 meetings per year)
Pensions Committee )
Nominations Committee ‘
(2 or 3 meetings per year) (at least 3 meetings per year)
Financial Services Committee
(2 or 3 meetings per year)
(C
Neat
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Strictly Confidential
POST OFFICE LTD
Delegated Authorities for Remuneration Matters
(subject to Board approval)
1.0 Purpose
1.4 To confirm delegated authorities for decisions relating to remuneration for
Executive Directors and for Post Office employees below Board level.
1.2 This paper is predicated on the principle that the Remuneration Committee will
make recommendations on their responsibilities, the Board will approve the
decisions and ShEx will authorise their implementation.
2.0 Background
2.1 The Board will retain ultimate responsibility for approving the Post Office
remuneration strategy.
2.2 Remuneration decisions need to be made company wide and delegated
authorities therefore need to be updated to maintain fairness and to ensure that
responsibilities are clear at all levels.
2.3 Post Office will uphold the principle that no individual should be able to
determine his or her own remuneration.
2.4 For this reason, and in line with best practice in corporate governance, a
remuneration sub-committee of the Board (RemCom) has been formed to
recommend to the Board the remuneration strategy for the Senior Leadership’.
The latest version of the Committee’s terms of reference is attached as
Appendix 1.
25 The delegated authorities detailed in 3 and 4 below have been developed to
supplement the terms of reference agreed for the RemCom but not to replace
them.
3.0 RemCom Authorities
3.1 Membership of RemCom will be restricted to non-executive directors so that
the Executive Directors will have no part in determining their own remuneration.
The remuneration of non-executive directors will be set solely by ShEx.
3.2 RemCom will have unrestricted access to the HR team and to the Company
Secretariat in relation to remuneration matters with the authority to obtain
advice from independent remuneration consultants up to a financial level of
£50,000 pa, or as otherwise determined by the Board.
' The Senior Leadership is defined as the Chief Executive, Executive Directors and Executive Committee
positions which report directly to the Chief Executive.
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3.3 RemCom shall:
3.3.1. recommend the total remuneration strategy for the Chief Executive,
Executive Directors and Executive Committee members, taking into
account the remuneration policy generally set for other employees.
3.3.2 with the consent of the Secretary of State for Business, Innovation and
Skills, determine each element of the total individual remuneration
package (see 5.1) of the Chief Executive and other Executive Directors,
both existing and for new hires, including increases in salary resulting
from company pay increases, pension provision and the outturn of
performance related pay arrangements and incentive schemes.
The Remuneration Committee will be informed of each element of the
remuneration package and the total remuneration for any new hires and
internal appointments proposed to carry a salary above the level of the
lowest salary within the membership of the current Executive
Committee. Pay increases which would result in an individual receiving
remuneration above the level of the lowest Executive Committee salary
will also be reported to the Remuneration Committee, for information.
3.3.3. determine each element of the total individual remuneration package of
the Executive Directors and any Executive Committee members
reporting directly to the Chief Executive, both for existing and for new
hires (arrangements for new hires will be proposed in conjunction with
the Nominations Committee).
3.3.4 recommend to the Board the design of new incentive schemes for the
Executive Directors, Executive Committee and any other senior roles
eligible to be invited to participate in a Long Term Incentive Plan.
3.3.5 review and agree the total remuneration and the outturn of performance
related pay arrangements for the Senior Leadership and payments for
the Executive Directors and Executive Committee subject to ShEx
authorisation.
3.3.6 review the overall total remuneration packages for the Senior
Leadership.
3.3.7 approve any exit package for any Executive Director, Executive
Committee member and any other senior individual whose role carries a
salary above the level of the lowest salary within the Executive
Committee membership and where the exit package is in excess of
contractual obligations.
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4.0 ExCo and Executive Authorities
41 ExCo shall:
4.1.1 approve the remuneration strategy for all employees below the Senior
Leadership.
4.1.2 determine each element of the total individual remuneration
package of the Senior Leadership Population and all employees.
4.1.3 delegate to the appropriate level of management authority the
responsibility for base salary of their employees on recruitment,
promotion and any merit increases within the overall policies
determined by the Board
4.1.4 agree the outturn of performance related pay arrangements for all
employees below Senior Leadership Population and approve payments.
4.1.5 approve the settlement of pay mandates and collective bargaining
arrangements up to the limit of financial authority already delegated by
the Board
4.1.6 propose to the Board and, where required, seek Board approval to
propose to Shex, the adoption of longer term pay agreements outside
the limits of ExCo’s delegated authorities.
5.0 Total Remuneration Package
5.1 The elements that typically form an individual’s remuneration package include,
but are not restricted to:
Base salary
Short term incentive plan (annual bonus)
Long term incentive plan
Pension provision
Benefits such as car, private health, holidays
Contractual terms such as notice periods
6.0 Recommendation
6.1 The Board is asked to confirm the delegated authorities as described in 3 and 4
above.
Susan Crichton
January 2013
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Appendix 1
POST OFFICE LIMITED
REMUNERATION COMMITTEE
TERMS OF REFERENCE
PURPOSE
The purpose of the Remuneration Committee is to recommend to the board the remuneration strategy
and any changes to individual elements of the remuneration package for executive directors of Post Office
Limited, members of the Executive Committee who report directly to the Chief Executive and other
significant senior level appointments with comparable remuneration, as determined by the Board.
Any changes in remuneration for directors of Post Office Limited must be approved in advance by the
Shareholder. The remuneration of the Chairman and of non-executive directors will be set by the
Shareholder.
A. COMPOSITION AND GOVERNANCE
1. The Remuneration Committee is constituted as a sub-committee of the Board and its Chairman shall
be appointed by the Board. If considered independent at the time of appointment, the Chairman of the
Company may be a member of the Committee, but shall not chair it.
2. Members of the Committee shall be appointed by the Board, acting on the recommendation of the
Nominations Committee and in consultation with the Chairman of the Remuneration Committee.
3. The Committee shall be made up of at least two independent non-executive directors. Only non-
executive directors shall be eligible to be members of the Committee such that no individual shall be
involved in determining their own remuneration.
4. In the absence of the Chairman of the Committee at any meeting, the Committee members present
shall determine who shall chair the meeting.
5. Members of the Committee will normally serve for a period of three years. Their appointment may be
renewed for a further three year period but no director shall serve as a member of the Remuneration
Committee for a period of more than six years.
6. Only members of the committee have the right to attend Committee meetings. The Chief Executive
and the HR and Corporate Services Director (or the holder of any equivalent position) shall be
informed of the date of each meeting and may be invited by the Committee Chairman to attend all or
part of any meeting, as and when appropriate.
7. The Company Secretary shall not be a member of the Committee but shall act as Secretary to the
Committee and shall keep minutes and records of each meeting and ensure regular reporting by the
Committee to the full Board.
8. Minutes of each meeting will be circulated to all members of the Committee and, once agreed, to
those members of the Board who have no personal interest in the matters discussed. Where a conflict
of interest exists, the Company Secretary will provide sufficient information to the full Board to provide
an understanding of the matter(s) considered.
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9. If so requested by the Board or by the Shareholder, the Committee shall provide an annual report on
its activities.
10. The Committee shall have access to sufficient executive time and resources in order to carry on its
duties, including access to the Company Secretary and members of the HR team;
11. The Committee shall be authorised to seek any information it requires from any employee of the
Company in order to perform its duties.
12. The Committee shall have authority to appoint remuneration consultants and to obtain, at the
Company's expense, legal or other professional advice on matters within its terms of reference as
required, up to a financial limit determined by the Board.
13. If there should be disagreement between the Remuneration Committee and the full Board, the
Chairman of the Board shall make time available for discussion of the issue so that the matter may be
resolved. Where any such disagreement cannot be resolved, the Remuneration Committee shall
report the issue as part of any annual report on its activities required by the Shareholder.
14. Training will be provided by the Company for members of the Committee, as required. Such training
may take the form of internal briefings, attendance at formal courses and conferences and/or sessions
with external advisers.
15. Members of the Committee shall conduct an annual review of the Committee's performance.
B. MEETINGS
1. The Committee shall meet as often as required but not less than three times each year. The
Committee may meet in person, by telephone or by other electronic means, so long as each member
can contribute to the business of the meeting simultaneously.
2. The quorum necessary for the transaction of business shall be 2 members.
3. Meetings may be convened by the Secretary to the Committee, at the request of the Committee
Chairman, or by any member of the Committee, at any time.
4. Notice of each meeting shall be given to all members of the Committee and any other person
required to attend, at least 3 working days before each meeting.
C. DUTIES AND RESPONSIBILITIES
The main duties and responsibilities of the Committee are:
1. to recommend to the Board the remuneration strategy for the Chief Executive, executive directors
and those members of the Executive Committee who report directly to the Chief Executive, always
taking into account the remuneration policy set for other employees;
2. with the consent of The Secretary of State for Business, Innovation and Skills, determine each
element of the total individual remuneration package of the Chief Executive and other executive
directors, both existing and for new hires, including any increases in salary (whether or not resulting
from company-wide pay increases), pension provision and the outturn of performance related pay
arrangements and incentive schemes.
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Strictly Confidential
3. to determine the elements which will form the remuneration package for an individual in the above
group, which may include, but shall not be restricted to:
base salary
short term incentive (annual bonus)
Long Term Incentive Plan
pension provision
benefits such as car or car allowance, private health, holidays
contractual terms such as notice periods
4. to keep under review the contractual terms applicable to executive directors such that payments
made are fair to the individual and to the company, that success, rather than failure, is
rewarded and that the duty to mitigate loss is fully recognised;
5. to work with the Nominations Committee in respect of new hires, such that the Remuneration
Committee can recommend to the Board an appropriate level of remuneration which will attract
talent but not be excessive;
6. to receive information on each element of the remuneration package and total remuneration for new
hires and any internal promotions and appointments which are proposed to carry a salary in excess of
the lowest salary of any member of the current Executive Committee;
7. to review the overall total remuneration of the Senior Group (defined as the Chief Executive, executive
directors and members of the Executive Committee) compared both with external market
comparators and with the remuneration of other employees in the Group;
8. to review and recommend to the Shareholder the implementation of, or changes to, performance
related incentive schemes for the executive directors, Executive Committee members and senior
managers eligible to be invited to participate in the Post Office Long Term Incentive Plan;
9. to review and agree the criteria for, and the outturn of, performance related pay arrangements for
executive directors and Executive Committee members, subject to authorisation from the
Shareholder;
10. to review the total outturn of performance related pay arrangements across the business;
11. to approve any exit package for any individual with a salary above the lowest salary within the
Executive Committee membership, where the exit package would be in excess of contractual
obligations;
12. to undertake any other function delegated to the Committee by the full Board.
D. ANNUAL REVIEW
1. The Committee will undertake an annual review of the Terms of Reference and recommend to the
Board any necessary changes.
2. These Terms of Reference were last reviewed in January 2013.
Delegated Authorities for Remuneration Susan Crichton Page 6 of 6
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DELEGATED AUTHORITIES
Listed below are the delegated authorities for contract approvals, commitments of expenditure
and implementation of change on the part of Post Office Limited.
Value of
Indemnities or
Pianned Unplanned Potential Risk or brand impact
PI P /Contractual
Liabilities
Value Value Potential cost Description
>50m >50m
approval approval
required only I required only if
Shareholder if the value of I the value of
Executive the spend is the spend is - -
not in the not in the
ordinary ordinary
course of course of
business business
Carries significant risk
(ERM score 4)
Attracts public and media
interest
Board > £20m > £10m > £20m Risk of impact on brand value
New product
Is likely to attract the interest of
the Shareholder
Carries significant risk
(ERM score 3)
POE IC or I e5m-£20m I £3m-£10m I £10m-£20m I Attracts local public and media
Impacts on customer experience
Significant product changes
Chief Includes significant indemnities
Executive £3m-£5m £500,000-£3m £1m-£10m be gi a Post Office Ltd
or CFO to be given by Post Office Lt
Member of Consultancy and project work
Executive <£3m <£500,000 £500,000-£1m affecting more than one part of
Committee the business
Head of
Security’ - <250k . -
Stonaten? <50k <50k <50k Minimal impact on brand. Low
' Authority has been delegated to the Head of Security for financial spend of up to £250k for use in
security incidents where life is endangered. This is to be authorised by Chris Day or Chris Aujard if
time permits.
? Different limits apply to Procurement Authorised signatories, as per the below
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Procurement (supplier contracts and contract changes to supplier contracts only)
Potential or a A Authorised
Contractual Liability Description I Decision Maker Signatory
£1m- £3m Head of
With potential or Commercial Head of
contractual liability Finance and Procurement
under £500,000 Higher level Procurement
£172,000* -£1m Procurement.
With potential or Head of Band 4 or Head
care “ee of Procurement
contractual liability Category’ Signato
under £100,000 gnetory
contractual liability Band 4 4 Procurement
under £100,000 Routine Procurement Signatory
Procurements
<£50,000 below the EU Contract Change
With potential or PPR Control Manager,
contractual liability threshold. P Band 4 t Band 3A or Band
under £50,000 Frocuremen 4 Procurement
signatory
* Level intended to be the latest Sterling equivalent of the current EU PPR threshold of €207,000
** Contracts involving higher levels of potential or contractual liability will need to follow the Delegated Authorities
set out in Section3
“* Heads of Category are, as at the time of writing, Richard Boyce, Fay Chandler and Robert Copeland. Sujai
Jayaram is able to deputise for each in their absence.
Authority for Procurements and signature of binding commitments above these limits
will fall w the delegated authorities set out in Table A above.
Contractual
Liabilities
Refer to the risks assumed by the business by entering into the terms of a
contract. Such liabilities may be capped or limited to certain financial levels,
but in some cases they may be unlimited or implied, rather than explicitly
stated. Legal guidance should always be sought if there is any doubt.
There are certain categories of loss which cannot be limited by law and others
which, as common practice, are required for all contracts. These categories,
which are listed below, are therefore excluded from the stated liability limits.
However, the implications of these exclusions should be considered for all
contracts and again legal guidance obtained if there is any doubt:
Category A - Unlimited liabilities against certain categories of loss which cannot
be limited by law:-
Death, Personal Injury, Fraud, Fraudulent Misrepresentation
Category B - Unlimited liabilities against certain categories of loss which reflect
current market practice:-
Breach of Confidentiality, Wilful Abandonment, Breach of 3° Party Intellectual
Property Rights, Breach of Anti-Bribery & Corruption policy
Category B items will change from time to time.
them you must speak to Legal first.
If you wish to deviate from
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POST OFFICE LIMITED
NOMINATIONS COMMITTEE
TERMS OF REFERENCE
PURPOSE
The purpose of the Nominations Committee is to recommend the appointment of individuals to the Board,
to its sub-committees and to Executive Committee positions which report directly to the Chief Executive.
The Committee will also consider and, if necessary, recommend to the Board any proposals to remove or
replace individuals holding office as a Director or reporting directly to the Chief Executive. It is
acknowledged that the actions of the Committee will be subject always to the Articles of Association of the
Company, under which any proposal for the appointment or removal of a director of the Company
requires the consent of the Shareholder.
A. COMPOSITION AND GOVERNANCE.
1. The Nominations Committee is constituted as a sub-committee of the Board.
2. The Chairman and members of the Committee shall be appointed by the Board.
3. The Committee shall be made up of three members, including at least two independent non-executive
directors.
4. The Chairman shall chair the Nominations Committee except when the Committee is considering
succession to the Chairmanship; the Senior Independent Director shall chair any Nominations
Committee dealing with the appointment of a successor Chairman.
5. In the absence of the Chairman of the Committee at any meeting, the Committee members present
shall determine who shall chair the meeting.
6. Members of the Committee will normally serve for a period of three years. Their appointment may be
renewed for a further three year period but no director shall serve as a member of the Nominations
Committee for a period of more than six years.
7. Only members of the committee have the right to attend Committee meetings. The Chief Executive
and the Group People Director (or the holder of any equivalent position) shall be informed of the date
of each meeting and may be invited by the Committee Chairman to attend all or part of any meeting,
as and when appropriate.
8. The Company Secretary shall not be a member of the Committee but shall act as Secretary to the
Committee (or shall nominate an appropriate substitute) and shall keep minutes and records of each
meeting and ensure regular reporting by the Committee to the full Board.
9. Minutes of each meeting will be circulated to all members of the Committee and, once agreed, to
those members of the Board who have no personal interest in the matters discussed. Where a conflict
of interest exists, the Company Secretary will provide sufficient information to the full Board to provide
an understanding of the matter(s) considered.
10. If so requested by the Board or by the Shareholder, the Committee shall provide an annual report on
its activities.
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11. The Committee shall have access to sufficient executive time and resources in order to carry on its
duties, including access to the Company Secretary and members of the HR team;
12. The Committee shall have authority to appoint executive search consultants and to obtain, at the
Company's expense, legal or other professional advice on matters within its terms of reference as
required, up to a financial limit determined by the Board.
13. If there should be disagreement between the Nominations Committee and the full Board, the
Chairman of the Board shall make time available for discussion of the issue so that the matter may be
resolved.
14. Members of the Committee shall conduct an annual review of the Committee's performance.
B. MEETINGS
1. The Committee shall meet as often as required but not less than twice each year. The Committee
may meet in person, by telephone or by other electronic means, so long as each member can
contribute to the business of the meeting simultaneously.
2. The quorum necessary for the transaction of business shall be 2 members.
3. Meetings may be convened by the Secretary to the Committee, at the request of the Committee
Chairman, or by any member of the Committee, at any time.
4. Notice of each meeting shall be given to all members of the Committee and any other person
required to attend, at least 3 working days before each meeting.
C. DUTIES AND RESPONSIBILITIES
The main duties and responsibilities of the Committee are:
1. to keep under review the structure, size and composition of the board (taking account of the skills,
experience, knowledge and diversity of its members), to ensure that the key roles of Chairman, Chief
Executive, Chief Financial Officer and Senior Independent Director are filled and to recommend
changes to the Board’s composition as thought necessary.
2. to monitor the independence, and process for evaluation of, Board sub-committees and the skills and
experience available within the Board, in order to recommend new appointments to committees, or
the replacement of individuals on those committees, as required from time to time.
3. to review the results of the performance appraisal of executive directors and the results of any
committee evaluation process which may relate to the composition of the Board, any of its sub-
committees or the Executive Committee
4. to lead the process for identifying and nominating candidates for appointment to the Board, including
the formulation and approval of appropriate role descriptions and specifications which seek to attract
a wide range of talent and promote diversity within the organisation.
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12.
13,
14.
15,
16
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in the case of the proposed appointment of a new Chairman, to work with the Shareholder to prepare
a full specification which reflects accurately the personal qualities, skills and experience and time
commitment needed by the Business.
to consider for each proposed appointment the respective merits of open advertising and the use of
specialist advisers to facilitate the search for appropriately qualified candidates
to review the processes for the engagement of external search agents for senior appointments
to consider recommendations made by the Chief Executive on appointments to Executive Committee
positions which report directly to the Chief Executive and to ensure that a fair, open and transparent
process is followed in identifying and interviewing candidates for Executive Committee positions.
to ensure that the business puts in place plans for development of potential and succession plans for
key roles on the Board and on the Executive Committee, taking into account the challenges and
opportunities facing the company and the skills and expertise needed for leadership of the Post Office
in the future.
to review, on behalf of the Board, the progress of building talent and diversity within the Post Office
and to report to the Board progress against the targets set for performance measurement in this
area.
to ensure that any proposed appointee to the Board discloses other business interests and any
potential conflict of interest, in line with the recommendations of the UK Corporate Governance Code
and the precepts set by the Nolan Committee on Standards in Public Life.
to work with the Remuneration Committee in respect of new hires, to ensure that the proposed
package for new senior appointments reflects the responsibilities of the role and is designed to attract
talent but is not excessive.
to ensure that consent is sought from The Secretary of State for Business, Innovation and Skills for
the appointment to the Board of any new director on terms agreed between the Nominations
Committee and the Remuneration Committee.
to respond to any queries from the Shareholder on the processes for selection of candidates or the
contractual terms proposed for any senior appointment.
to consider on behalf of the Board any matters relating to the continuation in office of any director or
direct report of the Chief Executive, including the suspension or termination of any contract of
employment or contract for services, subject to the provisions of the law.
to undertake any other oversight function delegated to the Committee by the full Board.
ANNUAL REVIEW
The Committee will undertake an annual review of the Terms of Reference and recommend to the
Board any necessary changes.
These Terms of Reference were last reviewed in February 2014.
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POST OFFICE LIMITED
PENSION COMMITTEE
TERMS OF REFERENCE
PURPOSE
The purpose of the Pension Committee is to make recommendations to the Board in respect of pensions
and pre-retirement risk benefits provision within Post Office Ltd and to put into effect appropriate
investment strategies for the Post Office Pension Fund (currently managed and administered within the
Royal Mail Pension Plan (“RMPP”)) on behalf of the Board and in line with the Board's investment beliefs.
A. COMPOSITION AND GOVERNANCE.
1. The Pension Committee is constituted as a sub-committee of the Board.
2. The Chairman and members of the Committee shall be appointed by the Board.
3. The Committee shall be made up of three members, including at least two independent non-executive
directors.
4. The Chairman of the Committee shall have recent and relevant experience of pensions or investment
management.
5. In the absence of the Chairman of the Committee at any meeting, the Committee members present
shall determine who shall chair the meeting.
6. Members of the Committee will normally serve for a period of three years. Their appointment may be
renewed for a further three year period but no non-executive director may serve as a member of the
Pension Committee for a period of more than six years.
7. Only members of the committee have the right to attend Committee meetings. The Group People
Director (or the holder of any position(s) equivalent to those of General Counsel and HR Director),
nominated representatives of the Finance and HR departments and the external Pensions Investment
Adviser shall be informed of the date of each meeting and may be invited by the Committee Chairman
to attend all or part of any meeting, as and when appropriate. A representative of the Trustee will be
invited to attend at least one Committee Meeting each year to discuss investment management
performance.
8. The Company Secretary shall not be a member of the Committee but shall act as Secretary to the
Committee (or shall nominate an appropriate substitute) and shall keep minutes and records of each
meeting and ensure regular reporting by the Committee to the full Board.
9. Minutes of each meeting will be circulated to all members of the Committee and, once agreed, to
those members of the Board who have no personal interest in the matters discussed. Where a conflict
of interest exists, the Company Secretary will provide sufficient information to the full Board to provide
an understanding of the matter(s) considered.
10. If so requested by the Board or by the Shareholder, the Committee shall provide an annual report on
its activities.
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11. The Committee shall have access to sufficient executive time and resources in order to carry on its
duties, including access to the Company Secretary and members of the HR team;
12. The Committee shall have authority to appoint executive advisers and consultants and to obtain, at the
Company's expense, actuarial, legal or other professional advice on matters within its terms of
reference as required, up to a financial limit determined by the Board.
13. Members of the Committee shall conduct an annual review of the Committee's performance.
B. MEETINGS
1. The Committee shall meet as often as required but not less than three times each year. The
Committee may meet in person, by telephone or by other electronic means, so long as each member
can contribute to the business of the meeting simultaneously.
2. The quorum necessary for the transaction of business shall be 2 members
3. Meetings may be convened by the Secretary to the Committee, at the request of the Committee
Chairman, or by any member of the Committee, at any time.
4. Notice of each meeting shall be given to all members of the Committee and any other person
required to attend, at least 3 working days before each meeting.
C. DUTIES AND RESPONSIBILITIES
The main duties and responsibilities of the Committee are:
1. to keep under review the funding levels of the Post Office sections within the RMPP (the “ Fund”) and
the contribution rates required from the employer and employees to ensure that the Fund can meet
its liabilities and sustain the payment of benefits
2. to ensure that regular meetings are held with the Trustee and report to the Board on any significant
outcomes from those meetings
3. to provide regular reports to the Board on the financial position of the Fund, highlighting the need for
any changes to contribution levels, benefits or eligibility to participate and recommending strategies
for deficit recovery if required
4. to make recommendations to the Board on the design and structure of Post Office pension
arrangements and associated life assurance and income protection arrangements; specifically, the
introduction of new or significantly revised pension schemes will need to be investigated fully by the
Pension Committee before seeking Board approval
5. to review on behalf of the Board the strategic investment strategy for the Fund
6. to determine on behalf of the Board and review at least annually the preferred asset allocation within
the Fund and communicate any proposed changes of investment strategy to the Trustee
7. to communicate to the Trustee the Committee's aims in recommending any particular investment,
strategy, including any required rate of return objective and/or risk profile
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10.
11
12.
13,
14.
15.
16
17,
18.
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to review with the Trustee the reappointment and/or replacement of investment managers to
manage the assets of the Fund
to monitor investment performance on a six-monthly basis, net of investment management costs, for
the active part of the portfolio
to monitor fees for investment management, custodianship and administration and professional
advice, including actuarial and consultancy fees and to make adjustments as deemed appropriate,
including making recommendations to the Board for re-tendering of contracts
to recommend the appointment of pensions advisers and consultants and agree their remuneration
(up to a maximum annual limit of expenditure of £1 million)
with the benefit of independent pensions investment advice, to take such steps as may deemed
necessary to protect assets of the Fund from increases in liability which might prejudice its long term
sustainability
to investigate, on behalf of the Board, the implications of any proposed additional discretionary
benefits
to review and recommend to the Board the pensions accounting assumptions to be used in
preparation of the annual accounts of Post Office Limited
to review any proposed amendments to trust deeds affecting Post Office Limited or the Post Office
Fund(s)
to ensure that proper arrangements are made for issuing invitations to join the scheme or making
automatic enrolments where required by law, for nominating employee representatives to fulfil
statutory requirements and for proper administration of members’ records for the Fund
to consider on behalf of the Board and in conjunction with the Remuneration Committee any matters
relating to proposed pension provision for directors or direct reports of the Chief Executive or any
other senior appointments which may involve atypical pension arrangements
to undertake any other oversight function delegated to the Committee by the full Board.
ANNUAL REVIEW
The Committee will undertake an annual review of the Terms of Reference and recommend to the
Board any necessary changes.
These Terms of Reference were last reviewed in March 2014.
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®
Post Office Limited Board
Financial Services Sub-Committee
Terms of Reference
Summary
The Post Office Board Sub-Committee on Financial Services is a group, established by the Post Office
Limited Board, to provide guidance on, oversight of and authorisation to the development of the Post Office's
financial services programmes and activities, including those of First Rate Exchange Services Limited
(‘FRES”), a 50% joint venture with Bank of Ireland, within the strategic framework as agreed by the Post
Office Limited Board.
The Sub-Committee has the delegated authority of the Post Office Limited Board for Financial Services
matters.
1. Meeting Frequency:
e At least quarterly but can meet more frequently as required to facilitate effective and timely actions
and decisions
2. Chair:
¢ The Chair should be a non-executive director of Post Office Limited.
e Tenure should be for an initial term of 2 years
e The Chair is responsible for reporting to the Post Office Limited Board, including any escalation of
issues that require full Board approval
3. Members:
« Members of the Sub-Committee should be non-executive and executive members of the Post Office
Limited Board
e tis proposed that the Sub-Committee consists of three members:
- Virginia Holmes non-executive Director (Chair)
— Tim Franklin non-executive Director
- Chris Day executive Director (CFO of the Post Office)
e tis expected that the Director — Financial Services and the General Counsel will both attend but will
not be members
© Operational and finance management representatives may be invited to attend as required. Any ad
hoc attendees to be approved by the Chair prior to the meeting.
« Secretary
4. Secretariat:
e The Secretary will be provided by the Company Secretariat.
5. Quorum:
¢ Aminimum of 2 members
e Decisions need to be made by a majority of the members although it is not anticipated that matters
will be taken to a vote.
Post Office Limited Financial Services Sub-Committee Terms of Reference (Approved 27.01.14)
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®
6. Delegated Authorities
Value of Indemnities or
‘Spend, end Rotendal ‘Contractual Risk or brand impact
Liabilities
Value Value Potential cost Description
Carries significant risk (ERM
score 4)
Attracts public and media
interest
> £20m > £10m > £20m Risk of impact on brand value
New product
Is likely to attract the interest of the
Shareholder
7. Core Responsib'
St
e Review key activities of the Financial Services strategic programme, including those activities of
FRES, as presented and agreed at Post Office Limited Board
e Oversight of the Bank of Ireland (UK) plc capital and liquidity for Eagle Contract requirements
e Provide guidance to the Financial Services management team
e Consider Risk Management matters prior to consideration and decision by Audit, Risk & Compliance
Committee
e Provide authorisation to proceed with contractual agreements for new products, services and
suppliers and changes to existing agreements in accordance with the existing mandate and
delegated authority limits of the Post Office Limited Board
e Receive a quarterly report on Financial Services, including a copy of the Risk Register — this will be
noted at the Post Office Limited Board along with minutes and actions
« Annual Review of the Sub-Committee's effectiveness
8. Inputs:
e Business performance reports
e Focused papers from Financial Services management on key activities requiring approval to proceed
9. Outputs:
Key decisions and actions from the meeting
Report to the Post Office Limited Board on decisions/actions taken
Quarterly report on Financial Services performance to the Post Office Limited Board
Risk management matters to be referred to the Audit, Risk & Compliance Committee
Issues/decisions to be referred to the Post Office Board.
Approved by the Financial Services Sub-Committee 27 January 2014
Post Office Limited Financial Services Sub-Committee Terms of Reference (Approved 27.01.14)
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POST OFFICE LIMITED
REMUNERATION COMMITTEE
TERMS OF REFERENCE
PURPOSE
The purpose of the Remuneration Committee is to recommend to the board the remuneration strategy
and any changes to individual elements of the remuneration package for executive directors of Post Office
Limited, members of the Executive Committee who report directly to the Chief Executive and other
significant senior level appointments with comparable remuneration, as determined by the Board.
Any changes in remuneration for directors of Post Office Limited must be approved in advance by the
Shareholder. The remuneration of the Chairman and of non-executive directors will be set by the
Shareholder.
A. COMPOSITION AND GOVERNANCE.
1. The Remuneration Committee is constituted as a sub-committee of the Board and its Chairman shall
be appointed by the Board. If considered independent at the time of appointment, the Chairman of the
Company may be a member of the Committee, but shall not chair it.
2. Members of the Committee shall be appointed by the Board, acting on the recommendation of the
Nominations Committee and in consultation with the Chairman of the Remuneration Committee.
3. The Committee shall be made up of at least two independent non-executive directors. Only non-
executive directors shall be eligible to be members of the Committee such that no individual shall be
involved in determining their own remuneration.
4. In the absence of the Chairman of the Committee at any meeting, the Committee members present
shall determine who shall chair the meeting.
5. Members of the Committee will normally serve for a period of three years. Their appointment may be
renewed for a further three year period but no director shall serve as a member of the Remuneration
Committee for a period of more than six years.
6. Only members of the committee have the right to attend Committee meetings. The Chief Executive
and the Group People Director (or the holder of any equivalent position) shall be informed of the date
of each meeting and may be invited by the Committee Chairman to attend all or part of any meeting,
as and when appropriate.
7. The Company Secretary shall not be a member of the Committee but shall act as Secretary to the
Committee and shall keep minutes and records of each meeting and ensure regular reporting by the
Committee to the full Board.
8. Minutes of each meeting will be circulated to all members of the Committee and, once agreed, to
those members of the Board who have no personal interest in the matters discussed. Where a conflict
of interest exists, the Company Secretary will provide sufficient information to the full Board to provide
an understanding of the matter(s) considered.
9. If so requested by the Board or by the Shareholder, the Committee shall provide an annual report on
its activities.
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10. The Committee shall have access to sufficient executive time and resources in order to carry on its
duties, including access to the Company Secretary and members of the HR team;
11. The Committee shall be authorised to seek any information it requires from any employee of the
Company in order to perform its duties.
12. The Committee shall have authority to appoint remuneration consultants and to obtain, at the
Company's expense, legal or other professional advice on matters within its terms of reference as
required, up to a financial limit determined by the Board.
13. If there should be disagreement between the Remuneration Committee and the full Board, the
Chairman of the Board shall make time available for discussion of the issue so that the matter may be
resolved. Where any such disagreement cannot be resolved, the Remuneration Committee shall
report the issue as part of any annual report on its activities required by the Shareholder.
14. Training will be provided by the Company for members of the Committee, as required. Such training
may take the form of internal briefings, attendance at formal courses and conferences and/or sessions
with external advisers.
15. Members of the Committee shall conduct an annual review of the Committee’s performance.
B. MEETINGS
1. The Committee shall meet as often as required but not less than three times each year. The
Committee may meet in person, by telephone or by other electronic means, so long as each member
can contribute to the business of the meeting simultaneously.
2. The quorum necessary for the transaction of business shall be 2 members.
3. Meetings may be convened by the Secretary to the Committee, at the request of the Committee
Chairman, or by any member of the Committee, at any time.
4. Notice of each meeting shall be given to all members of the Committee and any other person
required to attend, at least 3 working days before each meeting.
C. DUTIES AND RESPONSIBILITIES
The main duties and responsibilities of the Committee are:
1. to recommend to the Board the remuneration strategy for the Chief Executive, executive directors
and those members of the Executive Committee who report directly to the Chief Executive, always
taking into account the remuneration policy set for other employees;
2. with the consent of The Secretary of State for Business, Innovation and Skills, determine each
element of the total individual remuneration package of the Chief Executive and other executive
directors, both existing and for new hires, including any increases in salary (whether or not resulting
from company-wide pay increases), pension provision and the outturn of performance related pay
arrangements and incentive schemes.
3. to determine the elements which will form the remuneration package for an individual in the above
group, which may include, but shall not be restricted to:
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base salary
short term incentive (annual bonus)
Long Term Incentive Plan
pension provision
benefits such as car or car allowance, private health, holidays
contractual terms such as notice periods
to keep under review the contractual terms applicable to executive directors such that payments
made are fair to the individual and to the company, that success, rather than failure, is
rewarded and that the duty to mitigate loss is fully recognised;
to work with the Nominations Committee in respect of new hires, such that the Remuneration
Committee can recommend to the Board an appropriate level of remuneration which will attract
talent but not be excessive;
to receive information on each element of the remuneration package and total remuneration for new
hires and any internal promotions and appointments which are proposed to carry a salary in excess of
the lowest salary of any member of the current Executive Committee;
to review the overall total remuneration of the Senior Group (defined as the Chief Executive, executive
directors and members of the Executive Committee) compared both with external market
comparators and with the remuneration of other employees in the Group;
to review and recommend to the Shareholder the implementation of, or changes to, performance
related incentive schemes for the executive directors, Executive Committee members and senior
managers eligible to be invited to participate in the Post Office Long Term Incentive Plan;
to review and agree the criteria for, and the outturn of, performance related pay arrangements for
executive directors and Executive Committee members, subject to authorisation from the
Shareholder;
to review the total outturn of performance related pay arrangements across the business;
to approve any exit package for any individual with a salary above the lowest salary within the
Executive Committee membership, where the exit package would be in excess of contractual
obligations;
to undertake any other function delegated to the Committee by the full Board.
ANNUAL REVIEW
The Committee will undertake an annual review of the Terms of Reference and recommend to the
Board any necessary changes.
These Terms of Reference were last reviewed in February 2014.
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Roles and Responsibilities
The Board is collectively responsible, within its delegated powers from the Shareholder for the
long term success, reputation and sustainability of the Post Office.
Chairman
The principal duty of the Chairman is to lead the Board in setting the strategic direction of the
Post Office and holding the Chief Executive and her team to account for delivering it.
The Chairman is responsible for:-
« Leading the Board to ensure that the organisation’s strategy is clear, takes account of
key developments in the marketplace and is underpinned by clear performance criteria
against which success is regularly monitored;
e Leading the Board in such a way that it considers the right issues, at the right time, on
the basis of appropriate information; and engaging all the Directors so as to maximise
their effectiveness, individually and collectively;
e Supporting and challenging the Chief Executive in developing and delivering the
strategy, setting clear objectives for her performance and personal development,
monitoring achievement and providing her with a sounding board; and
« Managing the relationships with key stakeholders — in particular, understanding the
priorities of the Shareholder and communicating to the Shareholder the key actions
being taken by the Post Office to deliver the agreed strategy.
Underpinning these responsibilities, the Chairman will:
« Build constructive relationships between Executive and Non-Executive directors
e Manage Board discussions so that all present can make an effective contribution and
no single individual or clique dominates
« Manage any conflicts of interest which may arise at Board level
e Ensure that all Directors receive appropriate induction and ongoing training according to
their needs and that orderly succession planning is in place
e Promote good corporate governance, taking all necessary steps to maintain high
standards and the public reputation of the Post Office
« Inthe event of a vacancy arising, lead the selection of the Chief Executive, with the
agreement of the Board and the Shareholder
e Ensure that succession plans are in place for key leadership positions within the Post
Office
e Undertake regular evaluations of Board performance and effectiveness , pursuing the
action points arising from such evaluations
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Chief Executive
The Chief Executive is responsible to the Board for leading the development of the Post Office's
strategy; communicating it internally and externally, once it has been approved; and leading the
organisation to deliver it.
Underpinning these responsibilities, the Chief Executive will:
.
Develop a clear vision for approval by the Board and support this with operational
business plans to achieve the financial and performance targets set in each financial
and Government reporting period
Set, communicate and demonstrate the values and ethos of the Post Office, including
regular review of the Post Office “vision”
Lead and continue to develop the Executive Committee and, through them , the Senior
Leadership Team and executive management of the Post Office, to provide strong and
effective leadership for the business on a day to day basis
Safeguard the resources available to the Post Office and raise with the Board any need
for significant further investment or support from the Government shareholder
Report to the Board on progress against targets, implement remedial action where
necessary and promote any necessary changes to the Strategic Plan
Represent the Post Office in public
Build relationships with stakeholders, with Government, with the media and with a wide
range of interest groups and organisations to promote the long term success of the Post
Office
Monitor developments in government and market trends and key risks for Post Office’s
business position
Ensure close liaison with Royal Mail Group on matters concerning public service
obligations re mail deliveries and compliance with the Postal Services Act 2011
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