IN STRICTEST CONFIDENCE
B(02)06
CONSIGNIA plc BOARD
GOVERNANCE OF POST OFFICE LIMITED
Purpose
The need to change the Chairman of Post Office Limited (POL), and to establish a
corporate governance framework to regulate the relationship between Consignia ple as
parent, and POL, as subsidiary, was highlighted at the Board meeting on 11 December
2001. This paper sets out a framework, including delegation of areas of responsibility
and to POL, and matters that will continue to be reserved to the Board of Consignia ple.
Board Meetings
Quarterly, minuted meetings are recommended.
pa
Company Law sets out a minimum requirement for a board to meet once a year, to
approve the accounts and recommend a dividend. The Combined Code on Corporate
Governance recommends that the Board meets as frequently as is required to discharge
its duties.
The Articles of Association for POL provide that the business of the company is a
matter for its Board of Directors, and that this may be delegated to individuals or
committees (including an Executive Committee comprising some, but not exclusive to,
Directors of the Company) as appropriate.
It would be prudent for the Board of POL to ensure that the Directors have a direct input
to decisions likely to have a significant impact on the company, particularly in view of
the trading circumstances of the company. Whilst the Articles of Association permit
written resolutions or Board meetings, or telephone Board meetings, it would be
appropriate for actual meetings to be convened where there is material business to be
transacted, rather than relying on paper meetings or sub-committees. A suitable
frequency for these meetings to demonstrate active governance of the company would
be quarterly, but the decision here is for the POL Board.
The Board of POL is required to keep formal minutes of its meetings, and the quorum
for these meetings is two Directors, as set out in the POL Articles,
Control of Post Office Limited
Control of appointments to the POL Board will remain with Consignia, who can also issue
directions to POL,
The power to appoint and remove Directors of POL, a Chairman and a Deputy
Chairman is reserved to Consignia. This is incorporated into the Matters Reserved to
the Consignia Board document, and the Articles of Association for POL.
1
IN STRICTEST CONFIDENCE
IN STRICTEST CONFIDENCE
CB(02)06
CONSIGNIA pic BOARD
GOVERNANCE OF POST OFFICE LIMITED
Purpose
hy
The need to change the Chairman of Post Office Limited (POL), and to establish a
corporate governance framework to regulate the relationship between Consignia ple as
parent, and POL, as subsidiary, was highlighted at the Board meeting on 11 December
2001. This paper sets out a framework, including delegation of areas of responsibility
and to POL, and matters that will continue to be reserved to the Board of Consignia ple.
Board Meetings
[ Quarterly, minuted meetings are recommended.
J
Z
Company Law sets out a minimum requirement for a board to meet once a year, to
approve the accounts and recommend a dividend. The Combined Code on Corporate
Governance recommends that the Board meets as frequently as is required to discharge
its duties.
The Articles of Association for POL provide that the business of the company is a
matter for its Board of Directors, and that this may be delegated to individuals or
committees (including an Executive Committee comprising some, but not exclusive to,
Directors of the Company) as appropriate.
It would be prudent for the Board of POL to ensure that the Directors have a direct input
to decisions likely to have a significant impact on the company, particularly in view of
the trading circumstances of the company. Whilst the Articles of Association permit
written resolutions or Board meetings, or telephone Board meetings, it would be
appropriate for actual meetings to be convened where there is material business to be
transacted, rather than relying on paper meetings or sub-committees. A suitable
frequency for these meetings to demonstrate active governance of the company would
be quarterly, but the decision here is for the POL Board.
The Board of POL is required to keep formal minutes of its meetings, and the quorum
for these meetings is two Directors, as set out in the POL Articles.
Control of Post Office Limited
Control of appointments to the POL Board will remain with Consignia, who can also issue
directions to POL.
6.
The power to appoint and remove Directors of POL, a Chairman and a Deputy
Chairman is reserved to Consignia. This is incorporated into the Matters Reserved to
the Consignia Board document, and the Articles of Association for POL.
1
IN STRICTEST CONFIDENCE
IN STRICTEST CONFIDENCE
The Consignia Board at its December meeting recommended that Allan Leighton be
appointed as the Chairman of POL. This paper therefore seeks formal approval to
appoint Allan Leighton as a Director of POL.
The Articles of Association for POL require the company to comply with any direction
issued from time to time by Consignia in writing.
Delegated Powers - Principles
The Matters Reserved to the Consignia Board continue to apply, but a new list clarifying
matters to be delegated to the POL Board is proposed.
10.
It is proposed that a list of Matters Reserved to the POL Board is agreed, incorporating
some issues which were previously reserved to the Consignia Board. Other than where
expressly delegated to POL, the Matters Reserved to the Consignia Board will continue
to apply to POL. Annex A summarises the proposed boundaries of this delegation,
alongside the powers that will be retained by Consignia in respect of POL. Any matters
not explicitly covered by either list are to be treated as delegated to POL.
Day to day management of POL will reside in an Executive Committee (EC), which
will in turn be delegated powers from the POL Board. The POL EC has already
established a governance structure through its Unit Charter, which identifies
accountabilities and items reserved to the EC.
The Articles of Association for POL set out a number of governance requirements,
which must be complied with, in addition to the proposed delegation of powers from
Consignia. POL will also be required to comply with the policy on Corporate
Governance for Subsidiary Companies, agreed recently by the Executive Board. This
sets out the key Consignia policies or processes which subsidiary companies are
required to comply with as part of the Consignia Group. This means that even where
the Board of POL is formally responsible for taking decisions about the Company, in
some cases these decisions, or the way in which they are arrived at, may need to be
consistent with practice in the rest of the Group.
Proposed Delegation of Matters Reserved to POL - Other Issues
12.
The POL delegated powers list incorporates statutory functions which its Board must
carry out, such as approving annual accounts, along with a number of management
activities central to governance, which it is appropriate to consider periodically at Board
level for Directors to demonstrate they are exercising their duty of care to the Company.
The Matters Reserved for the Consignia Board include capital projects with costs in
excess of £20m. Capital sums less than this can be authorised by POL, which plans to
set up an Investment Board similar to that operated within Consignia.
It is proposed that approval of pay strategy for POL staff and agents is delegated to
POL, although the approval of the Consignia Board will still be required for the POL
strategic plan and annual operating budget of which pay assumptions will be an integral
part. This is at present a matter reserved to the Consignia Board.
2:
IN STRICTEST CONFIDENCE
15.
IN STRICTEST CONFIDENCE
It is also proposed that Consignia retains control of the remuneration, development and
succession planning for “Top Y’ personnel within POL, as all POL staff are Consignia
secondees and this will promote movement between businesses for senior executives.
The POL Board will however be delegated the power to determine development and
succession below ‘Top Y’.
In accordance with the subsidiary governance policy, the power to create any future
POL subsidiary, and to appoint directors of it will rest with the POL Board.
Although it is proposed that the POL Board takes formal responsibility for risk
management strategy and internal control arrangements within the Company, it is
envisaged that the Audit Sub-Committee of the Consignia Board will continue to deal
with any POL audit issues, by virtue of its role overseeing financial probity across the
whole of the Consignia Group. It is not therefore proposed to convene an Audit Sub-
Committee of the POL Board.
Recommendations
18.
The Consignia Board is invited to:
(i) endorse the commencement of active proceedings of the POL Board;
(ii) agree Allan Leighton be appointed as a Director of POL, and Chairman of the POL
Board
(iii) agree the list of powers to be delegated to the POL Board, and the matters which
will continue to be reserved to the Consignia ple Board, as set out in Annex A.
Jonathan Evans
January 2002
3
IN STRICTEST CONFIDENCE