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ae
UK Government
Investments
Principles of Corporate Governance
A Practitioner’s Guide
July, 2018
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Contents
Introduction
Principles
Leadership & Governance
Board Appointments .....
Objectives, Strategy & Accountability ....
Risk Management
Remuneration & Accounting Officer Responsibilities ....
Relationship Management
op Bn on Pr ON >
Portfolio Performance Management...
ANNEX A: Core Governance Documents
ANNEX B: Governance Resources Relevant to Companies in Government
ANNEX C: UKGI Governance Checklist.
Tals
12:
1.3.
1.4.
1.5.
1.6.
Th
1.8.
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Principles of Corporate Governance
1. Introduction
UK Government Investments (UKGI) provides the corporate governance role for a
broad and diverse portfolio of organisations, acting as shareholder on behalf of
Departments. The portfolio ranges from public bodies such as Executive Agencies,
with strong links to Government Departments, through to private limited companies.
There is no single governance model, with the relationship with the sponsor
department varies from asset to asset driven by the nature of the formal position of
the asset within the relevant department. However, there are certain key principles
and governance arrangements which we aim to apply across the portfolio and in
our governance roles.
The purpose of this document is to set out clear and consistent governance
principles and processes that we expect to apply to our existing assets and which
we aim to put in place for new organisations when they join the UKGI portfolio. It is
also important to note what the governance role involves and what it does not.
In general, a “comply or explain” approach is adopted by UKGI — we expect the key
principles and the highlighted features of good governance set out in this guidance
to be put in place unless there is good reason not to do so.
Many of these principles draw on practices used in the private sector. However,
Government owned organisations are also subject to the requirements of Public
Law and areas of HMG guidance. This carries implications for governance,
decision-making and the financial management of the organisation, and
accordingly, some principles of public law and accountability have also been
reflected in these principles. In particular, there is a range of governance
frameworks and guidance produced by HMT and Cabinet Office, the most central of
which is Managing Public Money. The principal documents are listed in Annex [A]
and while these principles reflect this guidance, UKGI shareholder teams should
consult the underlying documents for any specific issues.
Where UKGI has a shareholding or governance role with an asset, there should
also be an MoU with the relevant Department and, in many cases, a asset specific
MoU/Framework Agreement setting out UKGI's roles. It is important that these
documents provide absolute clarity regarding the UKGI role - setting out both what
we will cover and what we will not cover.
. This document should be read in conjunction with the separate guidance produced
for UKGI’s Non-Executive Directors sitting on portfolio company boards and the
UKGI NED induction pack.
UKGI also provides a governance function for certain listed assets. In these
instances UKGI also follows the FRC Stewardship Code.
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2. Principles
2.1. Taking the themes highlighted in the Financial Reporting Council's UK Corporate
Governance Code as a model, UKGI applies the following general approach to its
governance and shareholder roles:
e Leadership & governance
o We work with the organisation to facilitate appropriate governance
frameworks being put in place for the organisation
o We make sure the roles of the Chair and Board are clearly established and
defined
o We provide clarity on who in the organisation leads on the relationship with
the shareholder (usually the Chair).
e Effectiveness
o We advise upon Board appointments made by Ministers or public bodies, and
help manage the appointment process where applicable
o Where appropriate, a UKGI Director or ED will act as a Non-Executive
Director on a Board (and, depending on circumstances, on Board sub-
committees)
o We advise Ministers and sponsors on various aspects of the Government's
day-to-day relationship with the organisation — covering the Government's
interests from a shareholder perspective.
e Objectives, strategy & accountability
o We advise Ministers upon, and hold the Board to account with respect to, the
overarching objectives and strategy which the Board proposes for the
organisation
o Where possible, we seek to align the organisation's strategy with its sponsor
department’s objectives
o We advise the sponsor department/relevant Government Ministers on
whether to approve business plans
o Where appropriate, we advise on setting annual budgets for organisations
and we monitor financial performance throughout the year.
e Remuneration & accounting officer obligations
o We advise on remuneration, including, where relevant, whether this is
compliant with Government objectives
o We ensure the accounting officer (AO) for an organisation is aware of his/her
AO obligations, where these apply
o For assets funded by Government Departments other than HM Treasury
(HMT), we liaise with the finance team of the relevant department and HMT to
provide direct line of sight for the Principal Accounting Officer, who is often
the Permanent Secretary of the relevant department.
e Risk management
o We encourage all appropriate risk management processes and structures to
be put in place, with clear lines of accountability and responsibility
o We would expect these arrangements to flow up from individual operating
risks through to the Audit and Risk Committee (ARC) and then on the main
asset Board
2:2)
2.3.
24.
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o We would expect the ARC to review the main risk register in detail on a
regular basis (typically quarterly) and at least annually to conduct a thorough
review and challenge of this register. The Board should consider the
summary risks on a regular basis — potentially as a standing item
co As part of our shareholder function, we would expect to see regular updates
of the organisation's principal risk register risk register and have the
opportunity to discuss this with the organisation.
co Inour shareholder role, asset teams should have processes in place to
escalate risks to the relevant Department and its Minsters.
e Relationship management
o We develop and maintain clear lines of communication with the Chair, Board
and Executive of each portfolio organisation
o We would expect to have UKGI NED representation on the organisation's
Board (at Director or Executive Director level)
o Weaim to maintain an effective regular meeting “rhythm” with Chair, Board
and Executive, ensuring free flow of information through mutual trust
o We promote and encourage a “no surprises” culture.
. The areas set out above outline the UKGI governance role. It is important to note
the limitations which also apply and to be clear about these limitations with the
departments and organisations with whom we work. Our role is governance, it is not
the delivery of individual projects or ongoing operations. Examples of these
limitations include the approach to risk, where the UKGI role is to recommend that
the appropriate structures and processes are in place and we should not be held
accountable for the delivery of the risk function itself. It is the responsibility of the
organisation and ultimately its Board to ensure and assure that these processes are
followed and drive strong risk management.
We should ensure that these limitations to the UKGI role are clear in the framework
documents and MoUs that define our roles with Departments and organisations.
The UKGI Portfolio In addition to the principles set out above for individual
organisations, the portfolio of UKGI assets will be monitored and managed as
follows:
e Regular portfolio meetings
o Under the responsibility of the COO, held quarterly or biannually, depending
on the organisation
co Inconjunction with the UKGI Risk and Assurance process, facilitate
escalation of significant risks/concerns both risks within the organisation and
tisks to UKGI to UKGI’s Executive Committee (ExCo) and/or the UKGI’s Risk
and Assurance Committees
o Issues identified can be escalated to UKGI’s Board for review (if required).
e Regularly updated risk registers and Risk and Assurance Committee held at least
annually for each organisation
o Reviewed by ExCo monthly and reported to the UKGI Board in summarised
form.
« UKGI Board “deep dives” on individual assets
o Held as appropriate to address any significant issues or concerns.
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3. Leadership & Governance
Key feature(s):
* Work with the organisation and Department to facilitate appropriate governance
frameworks being put in place, including a Chairman’s Letter where appropriate
« All Board roles and responsibilities to be clearly established and defined (and
explicitly agreed with the organisation)
3.1. All UKGI organisations will have documented governance arrangements. Each will
be unique and driven by the formal shareholder relationship to the organisation.
Governance frameworks will also depend on the status and Government
accounting classification of individual organisations. However, some common
principles should be followed.
3.2. The organisations within the UKGI portfolio broadly break down into Companies Act
companies and Executive Agencies:
« Companies Act companies will operate though a fiduciary Board and will be
governed through Articles of Association and, in many cases, a Framework
Document. Both of these will establish the rights of HMG as shareholder and the
role of UKGI will be to help the sponsor department exercise those rights; the
relationship between UKGI and the relevant department will be set out in the
MoU between UKGI and each department.
« Executive Agencies are non-Companies Act organisations and will normally have
their governance arrangements enshrined through a Framework Document.
There may be ancillary agreements around specific issues such as remuneration.
Types of Executive Agency vary and can range from separate departments in
their own right through to Non-Departmental Public Bodies (NDPBs) and Trading
Funds. Such organisations will also have defined roles for their Accounting
Officer, with letters of delegation from the Principal Accounting Officer (normally
the Permanent Secretary of the controlling department) covering issues such as
financial delegations.
e UKGI also manages minority shareholder stakes in several companies on behalf
of Government. In these cases, the relationship between shareholders and the
governance arrangements are typically set out in the articles of association
(Articles) and shareholder agreement of the relevant organisation.
3.3. In addition to the governance structures set out above, we would expect to issue an
annual Chair's Letter. This letter provides the opportunity for UKGI to help the
sponsor department set out the objectives and priorities for the organisation for the
coming year and, if appropriate, the longer term, reflecting Government priorities.
This should be discussed with any policy sponsor and then agreed with the Chair.
He/she will then typically use the letter to set out Government's priorities with the
Board and this process is often the best way to maximise alignment of the
approach/decisions being taken at Board level with the wishes of HMG as a whole.
The typical letter should include the following features:
« A brief summary of progress over the last year (and thanks, where appropriate).
e Asense of the progress the Government, as shareholder, expect to see achieved
during the period.
« Asummary of the key objectives for the business over the coming 12 months - in
cases where objectives cover longer than 12 months, these should also be
included but noted as such, and we should seek input from policy colleagues
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where appropriate. They should reflect, but not be limited to, the objectives set
out in the business plan agreed with Ministers.
e Specific targets we would expect the Board to achieve.
e Any issues around management/governance that would be appropriate to be
shared.
3.4. The draft letter should be shared with the Chair in order to reach an agreed form,
but a protracted negotiation on individual terms should be avoided. The letter
should be written so it is suitable to be shared with the other Non-Executive
Directors (NEDs) on the Board.
3.5. In the past, use of these letters has varied and their frequency can be anything from
one to three years; in some cases they are not used at all. UKGI should aim to have
in place an annual letter for all Chairs, as this also helps assess the Chair's
performance during the year.
3.6. We would expect Boards to appoint a Senior Independent Director (SID) from
amongst their number.
3.7. UKGI’s CEO should have the opportunity each year, canvassing the views of other
Board members where possible, to appraise the Chair's performance — in practice,
this may be delegated to the relevant Director and would typically involve, or
include the views of, the SID.
3.8. In addition, UKGI should ensure regular (preferably annual) Board effectiveness
reviews are carried out. The review should be seen as an opportunity to assess
Board capability, draw out any areas for development or improvement, and link back
performance to the organisation’s objectives, the Board’s terms of reference and
other governance documents. At a minimum, these should be conducted by a third
party once every three years. In between, the Chair could conduct the review and
report back to UKGI, with the SID, where appointed, reviewing the performance of
the Chair.
3.9. Guidance on Board effectiveness reviews in contained in separate UKGI practice
notes, set out in the Governance section of the intranet.
3.10. In addition to formal Board reviews, we should assess overall Board composition to
make sure that the necessary skills are covered. While a Board should not
necessarily seek to replicate the role of the Executive, we should, alongside the
Chair, seek to include NEDs with sufficient understanding to challenge key areas of
operations and risks. Depending on the organisation, these could include
procurement, contract management, IT and legal as well as other areas specific to
operations.
3.11. The role of UKGI in selection and appointment of a CEO will vary between
organisations. There will be a clear and leading role if the CEO is a Ministerial
appointment. For the executive below the CEO, this will normally be an issue for the
CEO him/herself, in some cases in consultation with the Board. As part of the UKGI
governance role, we would wish to be assured that the executive team was
sufficiently strong but would not have a direct role in its composition.
3.12. As part of the role of the Board, we should encourage that sufficient visibility is given
to key issues, such as legal issues which might require the presence of the
organisation’s general counsel or equivalent. How this is done will depend on the
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relationship but will include the role of any UKGI member NED and review of Board
papers and minutes. The Board should insist on the presence of legal advice or the
General Counsel if key legal issues are being discussed.
3.13. Within UKGI, there is an established Governance Framework which flows as shown
below, and has these features and characteristics:
« UKGI - Shareholder relationship/role
© correct framework/MOU
° appropriate governance ‘levers’
©. Clear policy/shareholder roles
e Shareholder to organisation relationship/role
o established frameworks for relationship between shareholder (typically
UKGl/the Department) and the organisation
o clear structures for decision-making
o clarity on appointments process and policy
e Day-to-day shareholder relationship
0 effective communication and clear interaction
© strong working relationships built around trust
o “no surprises” culture
e Regular reporting from organisation to shareholder
o clarity on strategy
5-year business plan
annual budget
reporting against budgets and business plan
monthly reviews
«Internal UKGI structure
Board
CEO
Director (overall responsibility)
Executive Director (ED) and Assistant Director (AD)/Manager team —
responsible for day-to day management.
°
°
°
°
oo000
3.14. It is recognised that individual assets may have different processes as a result of
their specific circumstances, with sponsor departments often playing a more involved
role, but the Framework above may assist as a guide to best practice.
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4. Board Appointments
Key feature(s):
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4.2.
4.3.
4.4.
45.
46.
Leading role for UKGI on Board appointments — particularly where these are
Ministerial appointments
Where appropriate, a UKGI representative on Board (and on Board sub-committees
as relevant)
. One of the most important levers UKGI has in its governance role is its role in the
appointment of an organisation’s Board. In most cases this will be done by
managing Ministerial approval of Board appointments, particularly NEDs. Even
where appointments are made by a Board directly, we should where possible be
fully involved on behalf of the sponsor department.
Our role in Board appointments allows us to consider how best the necessary skills
are represented on the board to allow good understanding of issues and resulting
challenge.
The role of UKGI/HMG in Board appointments will be set out in the Articles and/or
Framework Agreement for each organisation. In most cases input in all NED
appointments will be possible, but in others only appointment of the Chair and SID
roles might be caught, with responsibility for appointment of other NEDs delegated
to the Board.
In many cases the appointment of the CEO will be made by the Board with no
formal role for Ministerial approval, but nevertheless UKGI should be involved from
the outset on behalf of the shareholder/sponsor department, informing Ministers as
appropriate.
The majority of Board appointments are Ministerial and will follow the public
appointments guidance, updated following Sir Gerry Grimstone’s review of the
public appointments system, which can be found here.
Where UKGI has appropriate levers, such as a Ministerial appointment, our
involvement in Board appointments should generally include the following:
e We (particularly the shareholder NED if appointed) should work with the Chair to
ensure that role description and attributes sought take into account the overall
needs of the Board and Government's priorities for the organisation.
e We should ensure that the proposed remuneration for the post is proportionate
and will allow the right calibre of candidate to be found, securing necessary
agreement from HMT if required (see paras 4.6 below for more detail).
« Where head hunters are to be used, we should help manage their selection and
appointment in accordance with the relevant department's policies on head
hunters and ensure they are aware of the Minister's views and the general
requirements for public appointments.
e We should aim for the UKGI shareholder NED, or another UKGI official (e.g.
Director) to be on the selection panel (or advisory assessment panel for
Ministerial appointments), and as such, be involved in longlisting, shortlisting and
candidate interview stages.
«¢ Together with the sponsor department, ensure that Ministers’ views are
represented appropriately in the process at all stages and that Ministers are kept
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informed throughout, to allow them to take informed decisions where they have a
role in the process.
4.7. Board appointments (both executive and non-executive) which are the responsibility
of Ministers may also require approval from the Chief Secretary to the Treasury
(CST) for the remuneration offered, if it exceeds certain thresholds. Guidance on
remuneration is set out in more detail at section 7 below.
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5. Objectives, Strategy & Accountability
Key feature(s):
« Depending on the MoU terms, could include:
.
5.1.
5.2.
5.3.
5.4.
5.5.
5.6.
5.7.
a leading role in testing overarching objectives and strategy
Review of business plans, to be endorsed by the Board and approved by the
shareholder and relevant Ministers
Advising on annual budgets
Ongoing performance monitoring through a regular cycle of meetings
UKGI should provide guidance around the overarching objectives for each
organisation, drawing on views of the sponsor department as shareholder and any
relevant policy requirements. This should be communicated to the Board through
the annual Chair's letter and reinforced where possible through UKGI’s Board
representation.
We should encourage each organisation to have a clear strategy and 5-year
business plan, endorsed by its Board.
UKGI should scrutinise and review any business plan submitted for approval to the
relevant Ministers.
The 5-year business plan should be reflected in a more granular annual business
plan. Flowing from the business plan, the organisation should produce an annual
budget, against which performance will be measured on a month by month basis.
UKGI should have a leading role in reviewing and agreeing these annual budgets
on behalf of sponsor departments.
Both the 5-year and annual business plan should reflect the agreed funding
envelope and relevant Spending Review settlement(s).
Both the business plans and annual budget will form a central plank of the
standards against which any pay incentive plans will be assessed.
The business plans and progress against the organisation’s strategy should be
monitored during the year on an ongoing basis. This is also covered under
“Relationship Management’ in section 8.
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6. Risk Management
Key feature(s):
Work with the organisation to facilitate the appropriate risk management frameworks
6.
being put in place, incorporating best practice (as laid out in HMT Orange Book)
The organisation's risk management should include risk assessment at operational
level, flowing up to the ARC and then Board, combined with top down risk
assessment
Organisation risk management process and risk registers to be discussed with UKGI
(and through UKGI with Department) as part of shareholder function
. We should encourage organisations to put strong risk management processes in
place and implemented is an important part of our governance function. In this
respect, we should differentiate between the responsibility of UKGI to encourage
that strong structures and processes are put in place and the role of the Board and
organisation to ensure that this happens and then execute those processes.
6.2. Good risk management should include the following principles:
«e A “bottom-up” approach to risk. Within the organisation, each significant project
or area of operation should maintain its own risk register
« These should then be collected through a central risk assessment and the risks
then discussed on a regular basis at the Executive Board level. In addition to the
“bottom-up” approach, this forum should also seek to capture any overarching
corporate or strategic risks
« The resulting risk register (including corporate/strategic risks) should form a part
of a regular discussion at the ARC and the Board should consider the top-level
risks as part of its regular performance review of the business — for example a
risk “heat map” could be included in monthly board reporting
«¢ The Board should allow time for a more detailed review and challenge of risk at
least once a year, linking in with the more detailed risk work carried out by the
ARC.
e Flowing from this, the ARC and Board should conduct their own top-down
assessment of risk, ensuring that risks are prioritised and appropriate mitigations
are in place.
6.3. A further level of risk management should be a link to the internal audit function of
the organisation. This could naturally occur through the ARC but should be used by
the organisation to ensure that risk is being managed thoroughly and that there is
scope for all risks to be escalated as necessary.
6.4. As part of its regular meeting cycle with the organisation, UKGI should review the
tisk register with senior management of the organisation. This review should also
include a challenge as to both the processes used to review and prioritise risks as
well as the mitigants being put in place to manage those risks.
6.5. The shareholder team should establish processes to allow regular updating of risks
to the owning Department and, where appropriate, its Ministers.
6.6. Ultimately, good risk management is best established when a culture of identifying,
evaluating and managing risks is embedded in all levels of the organisation. This
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includes the setting of risk appetite statements for key areas or characteristics of
risk (such as financial, operational and reputational), which aid the escalation and
cascade of risk from one level of the business to another. This in turn leads to
encouraging a “no surprises” approach which should be key principle both within
the organisation and in its reporting approach to UKGI in our shareholder and
governance role.
The role of UKGI as shareholder should be to encourage best practice risk
management structures and processes to be put in place. It is the responsibility of
the organisation and ultimately its Board to ensure and assure that these processes
are followed and drive strong risk management.
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7. Remuneration & Accounting Officer Responsibilities
Key feature(s):
« Ensuring Board-level remuneration is compliant with Government objectives
« Working with accounting officers in carrying out their AO obligations
7.1. Remuneration The remuneration on offer for an appointment should be agreed
before the role is advertised. Where the proposed remuneration is above the limits
set by HMT (see paragraph 7.2) this will require approval by the CST and so the
time taken to seek this approval should be factored into your planning. Sponsor
departments may also have their own internal remuneration approval processes to
be followed before decisions on remuneration can be taken by Ministers, and
should be checked with sponsor department contacts.
7.2. The HMT Guidance for the approval of senior pay sets the following thresholds
above which CST approval is required:
e Remuneration greater than £150,000 per annum, or the pro rated equivalent for
part time roles (including Chair and NED fees)
e Any bonus payment (or potential bonus payment) greater than £17,500 — this
threshold is pro-rated when assessing bonus arrangements for part-time roles
e There are de minimis thresholds for seeking CST approval: appointments which
pay below £30,000 per annum or performance pay below £3,500 do not require
CST approval, even where the individual is working less than one day per week.
Approval from the relevant Departmental Minister may still be required.
7.3. UKGI should work with both the organisation and the sponsor department to ensure
that clear arguments are developed to justify the pay proposed for Board roles,
including use of relevant comparators and benchmarking. In many cases the most
appropriate benchmarks will be public sector organisations of a similar size and
scale, although it may in some specific circumstances be appropriate to consider
relevant private sector comparators particularly for roles which do not exist in the
public sector.
7.4. Where appropriate, most remuneration arrangements for executives should include
an element of performance related pay or pay at risk, with clear and stretching
targets aligned to the Government's long term priorities and risk appetite for the
organisation. This can include both Short Term Incentive Plans (STIP) and/or Long
Term Incentive Plans (LTIP) as appropriate. UKGI will have a leading role in
ensuring these plans (and the incentives/behaviours that such plans drive) align
with Government requirements, including all relevant policy areas.
7.5. The majority of non-executive roles will only need to seek CST approval once per
term, as the remuneration will be fixed (e.g. an annual fee paid each year for a fixed
three-year term). However, many executive roles will have an element of
performance-related pay which may change each year, and these pay frameworks
may need to be agreed by the CST annually.
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7.8.
79.
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Managing Public Money The public, and Parliament acting on their behalf, have a
tight to expect that funds raised using powers agreed by Parliament will be used for
the purposes intended. Public servants have a demanding fiduciary duty to use
public money responsibly. The full Managing Public Money guidance is contained
here.
Much of what managing public money, or MPM, requires is just good common
sense, or sound financial management. There are also some specific rules and
conventions about how certain things are handled, which ensure that policies,
programmes and projects work smoothly and serve their intended purposes.
Accounting Officers MPM guidance requires each Government body appoint an
Accounting Officer to ensure that its use of resources meets specific standards of
governance, decision-making and financial management. This is usually a senior
decision-maker in the form of the Chair or CEO. UKGI should encourage an
effective balance between the role of the AO and the fiduciary responsibility of the
Board.
A clear line of communication should be established with the finance team of the
sponsor department, and their input sought on financial management. Early
engagement prior to annual review and on matters likely to affect the organisation’s
financial performance is strongly encouraged.
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8. Rel
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lationship Management
Key feature(s):
8.1
8.2.
8.3.
8.4.
Clear lines of communication with the Chair, Board and Executive
Effective regular meeting “rhythm”, ensuring free flow of information through mutual
trust
Enshrining a “no surprises” culture
. The UKGI team must establish a regular meeting cycle to cover a range of areas.
This should include any succession issues and review the organisation’s progress
against its:
(i) strategy;
(ii) budgets (monthly); and
(iii) annual and 5-year business plans (quarterly).
The UKGI team should find the most effective structure for these meetings while
ensuring that all areas are covered on a regular basis and in the appropriate level of
detail.
In addition, the UKGI team (particularly the responsible Director/ED) should have
regular dialogue (through one-to-one meetings) with the Chair and CEO, as well as
contact with the SID and other NEDs.
The respective roles of UKGI, the sponsor department and the Board should be
clearly defined (including the split between the relevant department's shareholder
and customer roles, where applicable), allowing all parties to operate in an
atmosphere of mutual understanding, while allowing each group to play its
particular role as effectively as possible. It is essential to keep the sponsor
department engaged, sharing information and giving the relevant decision-makers
the opportunity to input where appropriate.
8.5. The underlying philosophy should be based on a “no surprises” culture. Honest,
open and transparent dialogue is essential to allow this to develop.
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9. Po
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rtfolio Performance Management
Key feature(s):
9.1
9.2.
9.3.
9.4.
Regular portfolio meetings
Regularly updated risk register
Use Risk Committee “deep dives” to explore complex issues
Use UKGI Board to discuss high priority topics
. UKGI has an established structure for managing and monitoring its portfolio assets.
This comprises the quarterly or bi-annual portfolio review meetings, the UKGI Risk
and Assurance Committee, ExCo and the UKGI Board.
The portfolio management process is designed to monitor the
shareholder/governance and board role being carried out by UKGI, to identify and
discuss key issues and challenges and to support the shareholder teams. In doing
this, we will look to embed best practice governance as set out in this document
The Portfolio reviews form the focal point for regular reviews of portfolio assets.
These should occur quarterly for the larger or higher risk assets and bi-annually for
others. Portfolio reviews are chaired by the COO and should include a panel of 2
Directors and 2 EDs.
The structure of a portfolio review is a document that should cover the following
areas:
(i) action points from the previous meeting;
(ii) an asset summary, covering: strategic objectives, key risks and contextual
factors, UKGI’s levers, UKGI’s objectives and resource requirements;
(iii) a review of key developments since the last meeting, including progress
against UKGI’s quarterly priorities;
(iv) overview of financial performance, against budget, annual and 5-year
plans, including summary commentary;
(v) review of the organisation’s Board and management, remuneration issues
and succession planning;
(vi) review of risks, both within the organisation and to UKGI, by way of Traffic
Light Analysis;
(vii) the current entry in the UKGI dashboard; and
(viii) any other areas the team would like to discuss.
9.5. The Risk and Assurance Committee and ExCo may also arrange meetings to cover
specific aspects of risk or material decisions. Issues that come to the Risk and
Assurance Committee and ExCo will then normally be reported to the Board if high
probability / high impact risk for UKGI.
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Core Governance Documents
ANNEX A
Chairman’s Letter UKGI/sponsor Setting out Government's aims and _Articulates the Chairman’s objectives, with a particular focus on the next 12 months
department expectations for the company but also setting out longer term goals.
Framework (i) Sponsor department, _To ensure that the company Includes policies and procedures on:
Document and (ii) the company complies with the necessary policies
and procedures (particularly around = * —_—Recruitment and pay;
Managing Public Money) * Reporting and responsibilities;
+ Business planning; and
* Sponsor department SoS consent matters as shareholder.
Finance and nsor department, _To set out the financial Includes:
Delegations Letter and (ii) GovCo arrangements between Government
and company
GovCo's annual budget;
Financial delegation thresholds;
specific Government sign-off; and
Reporting requirements.
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ANNEX B: Governance Resources Relevant to Companies in
Government
Corporate governance in central government departments: Code of good practice 2011 -
Guidance Note (this also considers the relationship with ALBs)
https://www.gov.uk/government/publications/corporate-governance-code-for-
central-government-departments
- The seven Principles of Public Life (known as the Nolan Principles)
- The Green Book _https://www.gov.uk/government/publications/the-green-book-
appraisal-and-evaluation-in-central-governent (Treasury Guidance for public sector
bodies on how to appraise proposals before committing funds to a policy, programme
or project.)
- The Orange Book: https://www.gov.uk/government/publications/orange-book (basic
introduction to concepts, development and implementation of risk management
processes in government organisations)
- NAO report on managing risk in government:
https://www.nao.org.uk/wpcontent/uploads/2011/06/managing risks in government
-pdf
[ADD LINKS]
Private Public NDPB which
company company is
Governance resources limited by limited by incorporated
shares or shares (Plc)
guarantee
(Ltd)
£ UK Code No Yes No
xe]
2
o
z UK Code — smaller unlisted
& companies Yes No _
oO
hal Yes (if Yes (if Yes (if
o ; exercising exercising exercising
Z UK Stewardship Code stewardship stewardship stewardship
© role) role) role)
o
o A
o Disclosure and Transparency
ry Rules No Yes No
a
oO
&£
a
a Companies Act 2006 Yes Yes Yes
19
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Bodies: Guidance
Articles of Association Yes Yes Yes
Managing Public Money Yes Yes Yes
Partnerships with Arm’s
Length Bodies: Code of Good Yes Yes Yes
Practice
Code of Conduct for Board No No Yes
Members of Public Bodies
Public Appointments:
Guidance to Departments Yes Yes Yes
>
A]
3
re) Framework Document Yes Yes Yes
=
a
Fe Classification of Public
i Bodies: Information and Yes Yes Yes
Ke} Guidance
3
ty
6
Hy Non-departmental Public
8 Bodies: Characteristics and No No Yes
‘5 Governance
S
8
o Executive Agencies:
o Characteristics and No No No
5 Governance
a
oD
2
2 The Approvals Process for the
¢ Creation of New Arm’s Length Yes Yes Yes
Bodies
New Sponsors of Arm’s
Length Bodies Yes Yes Yes
Sponsorship Specialism
Competency Framework Yes Yes _
Tailored Reviews of Public Yes Yes Yes
20
ANNEX C: UKGI Governance Checklist
Overall Governance [Name of ALB]
Is the organisation’s governance structure clearly
set out?
ls there a framework of agreement?
Is there a Chair's letter?
Date of latest revision
If applicable, does the UKGI Director have an
indemnity from the Sponsor Department?
Are the roles, responsibilities and expectations of
the Board and Associated Committees set out in
terms of reference?
Are there regular meetings between UKGI and
the Chair/CEO and policy lead?
ls an Accounting Officer letter in place?
ls there a Board succession plan?
Board Composition/Effectiveness
When was the most recent internal/external
Board evaluation?
ls the Chair's performance reviewed annually by
UKGI and/or Department?
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Purpose and itegy
Does the organisation have a clear
vision/purpose?
Is there a long-term strategic plan in place which
reflects that vision/purpose?
Risk Management
Is there is an executive/ team within the
organisation specifically accountable for risk
management?
Does the organisation have effective risk
management structures/processes in place to
feed into ARC/Board?
ls risk reported/discussed regularly at:
- ARC
- Board
Is there a team member with responsibility for
UKGI risk reporting?
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ganisational Performance
ls there an annual budget in place before the
start of next year?
Is there a 5-year plan in place?
Does the organisation have clear objectives?
Does the organisation have measurable KPIs for
each objective?
Is performance against KPIs tracked overtime?
Culture and Ethics
Does the organisation have an agreed set of
values?
Finance/Budget
ls budget agreed with Sponsor Department?
Cyber Security
Does the Board review its cyber risk program on
an appropriate basis?
Does the Board demonstrate due diligence,
ownership and effective management of cyber
risk?
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