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Corporate Governance Framework

The Corporate Governance report forms part of the Directors’ report from the annual report for the year end 30 September 2018.

Introduction

This report explains key features of the Company’s governance structure to provide a greater understanding of how the main principles of the UK Corporate Governance Code (the Code), published in 2016 by the Financial Reporting Council, have been applied, and to highlight areas of focus during the year. The report also includes items required by the Disclosure and Transparency Rules. A copy of the Code can be obtained at www.frc.org.uk.

 

Compliance with the UK Corporate Governance Code

The Company has complied with the provisions of the Code in this financial year.

 

Governance Overview

The Board is collectively responsible to its stakeholders for the long-term success of the Company. The Board has delegated certain responsibilities to Board Committees to assist it with discharging its duties, including ensuring that appropriate processes are in place to manage risk and monitor the Company’s financial and operational performance. The Board Committees play an essential role in supporting the Board to implement its purpose, mission, vision and strategy, and to provide focused oversight of key aspects of the business. The full terms of reference for each Committee are available on the Committees page.

 

How the Board works

The Board composition and qualification

The Company is led and controlled by the Board. The names, responsibilities and details of the current Directors appointed to the Board are set out on the Management page. The biographies illustrate that the Non-Executive Directors (NEDs) have a range of skills and experience including expertise in the food and drinks industry within Europe and beyond, that is relevant to the management of the Company.

The Board believes that there is an appropriate balance between the Executives and NEDs and that this balance is enhanced by the varying lengths of service, diversity and expertise of the NEDs.

The Board composition, experience, balance of skills and effectiveness are regularly reviewed to ensure the right mix of people are on the Board and its Committees. Following the appointment of Kate Allum in November 2018, the Board comprises eight Directors: a Chairman (who, for the purposes of the Code, was independent on appointment); a Senior Independent Director (SID); four Independent NEDs; and two Executive Directors.

The Board agrees the strategic direction and governance structure that will help achieve the long-term success of the Company and deliver value to all our stakeholders. The Board takes the lead in areas such as strategy, sustainability, financial policy, operational performance, assessing the principal risks and ensuring the Company maintains a sound system of internal control.

The Board’s full responsibilities are set out in the ‘Matters Reserved for the Board’.

Role of the Chairman

The Board is chaired by David Maloney, a NED who met the independence criteria in the Code on his appointment. It is the Chairman’s duty to lead the Board and to ensure Directors have sufficient resources available to them to fulfil their statutory duties. The Chairman is responsible for setting the Board’s agenda, ensuring adequate time is available for discussion of all agenda items and ensuring a particular focus on strategic issues.

The Chairman promotes a culture of openness and debate by facilitating the effective contribution of NEDs in particular, and by encouraging constructive relations between Executive Directors and NEDs.

Role of the Chief Executive Officer (CEO)

Mirek Stachowicz is the CEO. Through delegation from the Board, he is responsible for executive management of the Group, including the implementation of the Group’s strategic objectives. In fulfilling his duties, the CEO is supported by the senior management team, whom he also leads. (biographies for the Senior Management Team can be found on the Board and Management page).

Interaction between the Chairman and the CEO

The roles of the Chairman and the CEO are separate, with a distinct division of responsibilities.

The partnership between David Maloney and Mirek Stachowicz is based on mutual trust and is facilitated by regular contact between the two. The separation of authority enhances independent oversight of the executive management by the Board and helps to ensure that no one individual on the Board has unfettered authority.

Role of the Senior Independent Director (SID)

John Nicolson is the SID and is available to shareholders if they have concerns that the normal channels of Chairman, CEO or other Executive Directors have failed to resolve, or for which such channels of communication are inappropriate. The SID also acts as an internal sounding board for the Chairman, and serves as intermediary for the other Directors, with the Chairman, when necessary. The role of the SID is considered to be an important check and balance in the Group’s governance structure. In accordance with the Code, neither the Chairman nor the SID are employed as executives of the Group.

Non-Executive Director (NED) independence

The Board considers and reviews each NED’s independence on an annual basis, as part of the Directors’ performance evaluation. In carrying out the review, consideration is given to factors such as their character, judgement, commitment and performance on the Board and relevant Committees, and their ability to provide objective challenge to management. The Board has considered the findings from the external Board evaluation exercise, carried out during the year and reviewed the independence of each NED. The Board is of the view that all were and continue to be, independent in accordance with the provisions of the Code.

 

Meetings and attendance

In the financial year to 30 September 2019, there were eight scheduled Board meetings. In the months when there is not a Board meeting, a Board call will be held to review the latest performance and cover any other matters requiring attention. Additional ad hoc meetings are held by telephone as required. Attendance at the formal pre-scheduled Board and Committee meetings was as follows:

Director Board
Maximum 8
Audit Committee
Maximum 4
Remuneration Committee
Maximum 5
Nomination Committee
Maximum 5
David Maloney 8 - - 5
Mirek Stachowicz 8 - - -
Paul Bal 8 - - -
John Nicolson1 8 4 5 5
Mike Butterworth 8 4 5 5
Diego Bevilacqua 8 - 5 5
Tomasz Blawat2 7 3 4 -
Kate Allum 8 4 5 -

1  Mr Nicolson was unable to attend the second day of meetings in June due to being called away on urgent business
2  Mr Blawat was unable to attend the Committee and Board meetings in May due to urgent business


During the financial year, certain Executive and Non-Executive Directors who are not Committee members, attended Committee meetings by invitation (other than meetings where there would be a conflict). These details have not been included in the table.

Board meetings are structured in an open atmosphere, conducive to challenge and debate and all Directors are expected to attend. In the event that a Director is unable to attend a meeting, they will receive the papers scheduled for discussion at the relevant meeting, and are encouraged to provide comments to the Chairman or CEO on key items in advance of the meeting, so their views and opinions can be shared and taken into account at the meeting.

Generally on the evening before each Board meeting, a dinner is held for Directors to discuss strategic matters and matters to be covered the next day in a more informal environment. Senior management who are presenting to the Board may be invited to attend the dinner if appropriate.

The Board delegates authority to its Committees to carry out certain tasks on its behalf, so that it can operate efficiently and give the right level of attention and consideration to relevant matters. The composition and role of each Committee is summarised in each of the respective Committee Reports.

 

Appointment and tenure

All NEDs, including the Chairman, serve on the basis of letters of appointment that are available for inspection at the Company’s registered office. The letters of appointment set out the expected time commitment of NEDs who, on appointment, undertake that they will have sufficient time to meet what is expected of them.

The Executive Directors’ service contracts are also available for inspection at the Company’s registered office.

The Company does not place a term limit on a Director’s service, as all continuing Directors will present themselves for annual re-election by shareholders at the Company’s Annual General Meetings (AGMs).

Director induction and training

The Chairman, with the support of the Company Secretary, is responsible for the induction of new Directors and the ongoing training and development of all Directors. New Directors receive a full, formal and tailored induction on joining the Board, designed to provide an understanding of the Group’s business, governance and key stakeholders. The induction process includes site visits, meetings with key individuals, and briefings on key business, legal and regulatory issues facing the Group.

As the internal and external business environment changes, it is important to ensure the Directors’ skills and knowledge are refreshed and updated regularly. Accordingly the Chairman, with the assistance of the Company Secretary, ensures that regular updates on corporate governance, regulatory and technical matters are provided to Directors at Board meetings. During the year, the Board received training on the changes to the Corporate Governance Code and Section 172 as well as an update on developments in executive remuneration.

During the year, operational site visits were arranged for the Board to the newly acquired Distillerie Franciacorta in Borgo Antico, Italy and to the Company’s production sites in Poland and the Czech Republic. The visits included a tour of each site, a deep dive presentation on the market, meetings with the local senior management team and a town hall meeting with a selection of the local team. In this way, Directors keep their skills and knowledge relevant so as to enable them to continue to fulfil their duties effectively and employees are able to meet the Directors and ask questions in an informal environment.

Information and support available to Directors

All Board Directors have access to the Company Secretary, who advises them on Board and governance matters.

The Chairman and the Company Secretary work together to ensure Board papers are clear, accurate, delivered in a timely manner to Directors and of sufficient quality to enable the Board to discharge its duties. As well as the support of the Company Secretary, there is a procedure in place for any Director to take independent professional advice at the Company’s expense in the furtherance of their duties, where considered necessary.

Director re-election

In accordance with the Code and the Directors’ letters of appointment, the Directors will put themselves forward for annual re-election. Following recommendations from the Nomination Committee, the Board considers that all Directors continue to be effective, committed to their roles and to have sufficient time available to perform their duties. Accordingly, all Directors will seek re-election at the Company’s forthcoming AGM.

Directors’ conflicts of interest

Directors have a statutory duty to avoid situations in which they have, or may have, interests that conflict with those of the Company, unless that conflict is first authorised by the Board. This includes potential conflicts that may arise when a Director takes up a position with another company. The Company’s Articles allow the Board to authorise such potential conflicts, and there is a procedure in place to deal with any actual or potential conflict of interest. The Board deals with each appointment on its individual merit and takes into consideration all relevant circumstances. All potential conflicts approved by the Board are recorded in an Interests Register, which is reviewed by the Board at least quarterly to ensure the procedure is working effectively.

Board evaluation and effectiveness

The effectiveness and performance of the Board is vital to our continuing success. During the year, the Company commissioned Paula Hutchings of The People Stuff to conduct an independent, external evaluation of its Board. The evaluation was conducted according to the guidance in the Code. Neither Paula Hutchings nor The People Stuff have any other connection with the Company. The evaluation process consisted of an evaluation questionnaire, followed by individual face-to-face interviews with Board members and the Company Secretary, and a Board observation. The questionnaires were used to identify specific areas for further discussion during the interviews. The interviews also allowed each individual to reflect on the strategic direction of the Group, assess Board performance and the behaviour and dynamics of the Board. The interviews were conducted on a confidential and anonymous basis. The analysis confirmed that all Directors contribute effectively, demonstrate a high-level of commitment and dedication to their role, and together provide the skills and experience that are relevant and necessary for the leadership and direction of the Group. The areas of focus were agreed to be a review of the vision, culture and strategy for the Group. Company values were launched during the year and the supporting behaviours, which are currently being finalised, are due to be launched in the year ahead.

Following the results of the evaluation, individual meetings took place between the Chairman and each Director to discuss any specific points they wished to raise and these were included as part of the review to agree the action plan for the year ahead. It was generally felt that the actions agreed from the previous year’s internal evaluation had been progressed. These actions included succession planning; more focus on engagement with the management teams; and improving management information.

For 2020, an internal evaluation of the performance of the Board, its Committees and the Chairman will take place. The process of evaluation will be undertaken by the Company Secretary under the direction of the Chairman.

 

Annual General Meeting (AGM)

The Company’s AGM will take place at 10am on Thursday, 6 February 2020 at the offices of Numis Securities Limited at The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. All shareholders have the opportunity to attend and vote, in person or by proxy, at the AGM. The notice of the AGM can be found on the AGM page, and in a booklet that is being issued at the same time as this Report. The Notice of the AGM sets out the business of the meeting and an explanatory note on all resolutions. Separate resolutions are proposed in respect of each substantive issue.

The AGM is the Company’s principal forum for communication with shareholders. The Chairman of the Board and Directors will be available to answer shareholders’ questions at the AGM.

 

Committees

The Company has established an Audit Committee, a Nomination Committee, a Remuneration Committee, a Disclosure Committee and a Responsible Business Committee. The Board delegated specific responsibilities to these Committees. The role and responsibilities of each Board Committee are set out in formal Terms of Reference, which are available on the Company’s website. The Board Committees make recommendations to the Board as they see fit, as contemplated by their Terms of Reference.

 

Relations with Shareholders

The Company has a comprehensive investor relations programme which includes offering meetings to our top 20 shareholders, buy and sell-side analysts and potential shareholders. Primary responsibility for shareholder relations rests with Mirek Stachowicz, CEO and Paul Bal, CFO, supported by the Company Secretary. They ensure there is effective communication with shareholders on matters such as governance and strategy. David Maloney offers calls and meetings to our top 20 shareholders throughout the year and ahead of the AGM, when governance meetings are offered with the Chairman and the Company Secretary. The Company’s website, www.stockspirits.com, includes a dedicated Investor section and provides an easily accessible communication channel for existing and potential investors. Private shareholders are encouraged to attend the Company’s AGM or to submit questions via the website. The website also provides the latest news, historical financial information, details about forthcoming events and other information regarding Stock Spirits.

Regular presentations take place at the time of the interim and final results, as well as during the rest of the year. An active programme of communication with potential shareholders is also maintained. All of the Directors make themselves available for meetings with shareholders as required and will be available at the AGM.

During the year, the Chair of the Remuneration Committee contacted the top 20 shareholders, to obtain their views on the proposed Remuneration policy. The Board receives regular updates from the CFO on feedback from meetings, and analyst updates are circulated to the Directors when available. During the year, roadshows were held in London, Poland and North America with institutional investors, and various conferences were also attended. One-to-one investor meetings were held throughout the year with the CEO and CFO.

A Capital Markets Day was held in June 2019 for buy side and sell side analysts, and included visits to the production sites in Pradlo and Plzeň in the Czech Republic. Attendees received a tour of each site, and an update was provided on the strategy and business plans, including a specific focus on the local Czech market and the work being undertaken on premiumisation and M&A.

 

Stakeholder engagement

The Group encourages strong and positive relationships with all our stakeholders, which includes shareholders, as well as our employees, suppliers, customers, local and national governments, consumers and the communities in which we operate. Further details on our stakeholders can be found on page 45 of our Annual Report. The CEO and local Managing Directors are in regular contact with our main customers and updates are provided to the Board. Stakeholder engagement will continue to be an area of focus for the Board in 2020.

 

Workforce engagement

During the year, the Board agreed the approach to workforce engagement, in line with the new Code and it was agreed to appoint one of the NEDs to the role of designated NED. Kate Allum will be responsible for workforce engagement and will cover the role during the year ahead. The process will then be reviewed and it is likely that the role will be rotated between the NEDs each year. The existing engagement structures and processes will be used to engage with a broad range of the workforce, which will include town halls, market visits, brainstorming meetings and presentations with employee groups, and reviewing the employee survey results to create action plans which will be used to drive continuous improvement of engagement levels. It was agreed that workforce engagement would continue to be discussed and reviewed during the year ahead and the Board would issue a statement on workforce engagement within the 2020 ARA, which would explain how the Board has gathered and considered the views of the workforce across the Group and how these views have been taken into account in the Board’s decision making.

 

 

David Maloney
Chairman

4 December 2019