Review of the Company's governance and the Nomination and Governance Committee
Report by Philip Lader
Chairman of the Nomination and Governance Committee
Nomination and Governance Committee members
1 Appointed to the committee in June 2013.
2 Appointed to the committee on 19 February 2014.
|Philip Lader (chairman)||6|
Dear share owner
Committee responsibilities and how they were discharged in 2013
Throughout 2013, succession planning – not only for senior management, but also for non-executive directors – and Board performance were the principal focus of the Nomination and Governance Committee’s six formal meetings and frequent informal exchanges between committee members and our fellow directors.
All non-executive directors were invited to participate in most of these sessions, with the committee’s recommendations to the Board generally reflecting the consensus of such larger number of opinions.
Initiated in 2012, refreshment of the Board’s composition and leadership has dominated this Committee’s past year’s activity. To this end, we reaffirmed our policy that requires all WPP directors to stand for annual re-election by share owners and established a new tenure policy for non-executive directors:
Newly-elected non-executive directors shall not stand for re-election after having served for the period of their ‘independence’ under applicable US and UK governance authority, that presently being ‘the nine-year rule’. (i.e., under current general governance policy, a non-executive director will not stand for re-election at the AGM that follows the completion of nine full years’ service after the first AGM at which he or she was first elected by share owners; nor will such non-executive directors subsequently stand for election to this Board).
Applying this policy to currently-serving non-executive directors results in the retirement of long-serving colleagues over the next several years and, this year, of two non-executive directors:
- Orit Gadiesh, the Chair of Bain & Company, who has served for 10 years as a WPP non-executive director; and
- Esther Dyson, a leading authority on digital communications and an international investor in web-based businesses, who has served in this capacity for 15 years.
They will not stand for re-election to the Board and will be very much missed. And as I proposed in last year’s Annual Report, I shall retire from the Board at the end of this calendar year. The Board intends to announce my successor as chairman in sufficient time to provide an orderly transition.
Process, criteria and appointments
We then undertook an exhaustive process of considering the skills and experience of an extremely broad range of potential candidates. Supplementing the many names proposed by then-current Board members, the executive recruitment firm, Egon Zehnder International, utilised its consultants around the globe to identify, evaluate, and screen a highly diverse universe of individuals.
Our criteria focused on diversity in its broadest sense: geography, gender, career discipline, professional perspective, and technical skills. Traditional qualifications, financial competencies, media-related, marketing-services and developing-markets experience, independence, time availability and the level of commitment were scrutinised, leading to many current directors’ interviews of several dozen candidates.
From this process, the Board appointed, during 2013-2014 as the individuals became available, the following new non-executive directors (see the Board of Directors' biographies):
- Roger Agnelli
- Dr Jacques Aigrain
- Charlene Begley
- Dr John Hood
- Daniela Riccardi
- Nicole Seligman
- Hugo Shong
- Sally Susman
Committee leadership and service
Under our new non-executive director tenure policy, one of those non-executive directors retiring in the next few years is WPP’s senior independent director, Jeffrey Rosen, who has devoted enormous time and effort to chairing its Compensation Committee. The planned succession of this committee chairmanship from him to Dr John Hood was delayed – by the Board’s unanimous judgement – until the 2014 Annual General Meeting because of Dr Hood’s unavailability for earlier appointment to the Board, the need for a brief transitional period after such appointment, and the need for major revision of the Group’s complex remuneration plans this past year and the preparation of the prospective Executive Remuneration Policy. Jeffrey now stands for re-election as a non-executive director and would continue to apply his international financial experience to the work of the Audit Committee and the Nomination and Governance Committee, as well utilize his in-depth understanding of the Group as senior independent director.
Colin Day has served on this Board and its Compensation and Audit Committees since 2005 and as chairman of the Audit Committee since June 2013. He has only been chairman of the Audit Committee since June 2013, however; and the Board, notwithstanding his length-of-service as a director, considers him truly independent and has asked him to continue as chairman of this committee until such time as his successor is appointed.
To ensure an effective Board transition, both Jeffrey and Colin – notwithstanding their prospective service for more than nine years – are proposed for re-election as directors, but will not stand for re-election at the 2015 AGM.
With the appointment of the aforementioned new non-executive directors and subject to their AGM election, the composition of our three main committees has also been significantly revised:
|Committee composition 2014||Audit Committee||Compensation Committee||Nomination and Governance Committee|
|Philip Lader||chair •|
|Colin Day||chair •||•|
|John Hood||chair •|
From the Audit Committee’s enlarged membership, a new committee chair is expected to emerge and succeed Colin; and it is likely that the new Board chairman will replace me as chairman of the Nominations and Governance Committee.
Board and committee evaluation
The annual evaluation of the Board’s and all committees’ effectiveness was conducted, with reference to questions utilised in prior years’ interviews of directors, through candid Board discussion at two Board meetings and two non-executive directors’ dinners, as well as consultations with Egon Zehnder International. That firm’s consultants presented thorough evaluations of the Board’s and this committee’s performance and, while offering specific recommendations for improvement, concluded that both the Board and this committee continued to operate effectively and had made considerable progress in Board refreshment. Observations from these discussions and presentations will be intensely reviewed by this committee in upcoming meetings, with proposals to the full Board as to improving Board effectiveness.
Fair, balanced and understandable
During the year, the Board considered the changes to the UK Corporate Governance Code, especially the requirement for directors to confirm that they consider the Annual Report and Accounts, taken as a whole, to be fair, balanced and understandable. The Audit Committee discussed the appropriate critera with members of the Disclosure Committee and reviewed the process for compilation and assurance of the report’s information. The Audit Committee then received an early final draft of the report for review and comment, as well as a report from the Disclosure Committee as to the governance relating to compilation of the report. The Board subsequently considered the Annual Report and Accounts as a whole and discussed the report’s tone, balance, and language for compliance with these standards. Read The Board's statement on the report.
Terms of reference
The committee’s terms of reference, which are reviewed with the Board annually and most recently in July 2013, are on the Company’s website at wpp.com/investor.
Chairman’s continuing role
In addition to customary governance, management oversight and representational duties, I shall be assisting our new colleagues in their familiarisation with this Company’s many dimensions, continuing share owner consultations to resolve any outstanding compensation and governance issues, and participating in the work of committees. Until the transition to my successor, I shall lead the Board in its determination and periodic revision of confidential, potential emergency leadership plans and ensure that there is ongoing emphasis on management development and CEO succession planning.
16 April 2014
Chapter 9 of 13