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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 2020.

Introduction

This Report explains the key features of the Company’s governance structure to provide a greater understanding of how the main principles of the updated 2018 UK Corporate Governance Code (the Code), published by the Financial Reporting Council, have been applied, and to highlight areas of focus during the year. A copy of the Code can be obtained at www.frc.org.uk. The Report also includes items required by the Disclosure and Transparency Rules.

Compliance with the UK Corporate Governance Code

The Company has complied with all provisions of the Code in this financial year, with the exception of provision 38. Provision 38 provides that Executive Director pension contributions should be aligned with those available to the workforce. Our Remuneration Policy, which was approved by shareholders in 2020, stipulates that new Executive Directors pension contribution rates must match that available to the wider workforce. Our incumbent Executive Directors’ pension contributions are in line with the Policy for existing Directors, however, they do not match the wider workforce. As detailed on page 92 of the Directors’ Remuneration Report, the pension contributions for incumbent Executive Directors will be brought in line with the wider workforce by 2022.

Application of the Code Principles

Principle Application and further information
1. Board leadership and Company purpose  
A. A successful company is led by an effective and entrepreneurial Board, whose role is to promote the long-term sustainable success of the Company, generating value for shareholders and contributing to wider society. The Board is collectively responsible to its stakeholders for the long-term success and value generation of the Company. The Board has delegated certain responsibilities to Board Committees to help it with discharging its duties, including ensuring that appropriate processes are in place to manage risk, maintain a sound system of internal control and monitor the Company’s financial, sustainable and operational performance. The Board Committees play an essential role in supporting the Board to implement its purpose, mission, vision, values 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 Company’s website, www.stockspirits.com.
B. The Board should establish the Company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All Directors must act with integrity, lead by example and promote the desired culture. The Board approved the Group’s purpose, values and strategy and reviews the culture to ensure alignment. See page 65 of ARA 2020 for further details.
C. The Board should ensure that the necessary resources are in place for the Company to meet its objectives and measure performance against them. The Board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed. The Board are satisfied that the necessary resources are in place to enable delivery against the strategy. All Board Directors have access to the Company Secretary, who advises them on Board and governance matters. 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.
D. In order for the Company to meet its responsibilities to shareholders and stakeholders, the Board should ensure effective engagement with, and encourage participation from, these parties.

The Company has a comprehensive investor relations programme which includes offering meetings to our top 20 shareholders, potential shareholders and buy and sell side analysts. 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. The Board receives regular updates from the CFO including feedback following meetings and analyst updates are circulated to the Board. Prior to COVID-19, 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 both faceto-face and from March 2020 by telephone or video conference.

David Maloney is available for calls and meetings to our top 20 shareholders throughout the year and governance meetings are offered with the Chair and the Company Secretary ahead of the AGM. 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 (when legislation allows), 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. The Committee Chairs and all of the Directors make themselves available for meetings and interact with shareholders throughout the year as required. The Directors are usually available at the AGM, however, as this is unlikely for the 2021 AGM, shareholders are encouraged to either submit questions via the website or send an email to: sally.kenward@stockspirits.com.

The Group encourages strong and positive relationships with all our stakeholders, including shareholders, employees, suppliers, customers, local and national governments, consumers and the communities in which we operate. Further details on our stakeholder engagement during the year and how their views have been taken into account in the Board’s decision-making can be found on pages 16 to 19 of ARA 2020. The Board would usually meet employees during operational site visits to the markets and would hold Town Halls, however, this has not been possible this year. More details regarding the engagement sessions held by the designated NED are on pages 76 to 79 of ARA 2020. Workforce engagement will continue to be discussed at each Board meeting and further details are on pages 17 and 36 of ARA 2020.

E. The Board should ensure that workforce policies and practices are consistent with the Company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern. The Board ensures that workforce policies and procedures are aligned with our values and that they support the long-term sustainable success of the Company. Details regarding the independent whistle-blowing hotline are on page 47 and 83 of ARA 2020.

 

Principle Application and further information
2. Division of responsibilities  
F. The Chair leads the Board and is responsible for its overall effectiveness in directing the Company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the Chair facilitates constructive Board relations and the effective contribution of all Non-Executive Directors, and ensures that Directors receive accurate, timely and clear information.

See page 74 of ARA 2020 for a clear definition of the Chair’s role. The Company has established an Audit Committee, a Nomination Committee, a Remuneration Committee, a Disclosure Committee and a Responsible Business Committee.

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. 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.

The Chair and the Company Secretary work together to ensure Board papers are clear, accurate, delivered in a timely manner and of sufficient quality to enable the Board to discharge its duties.

G. The Board should include an appropriate combination of Executive and Non-Executive (and, in particular, Independent Non-Executive) Directors, such that no one individual or small group of individuals dominates the Board’s decisionmaking. There should be a clear division of responsibilities between the leadership of the Board and the executive leadership of the Company’s business.

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 pages 62 and 63 of ARA 2020. A skills and experience matrix is included on page 88. The biographies and matrix 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’s full responsibilities are set out in the ‘Matters Reserved for the Board’ and are available on the Company’s website, www.stockspirits.com. There is a clear separation of the roles of the Chair and CEO and the division of responsibilities is detailed on page 74 of ARA 2020. 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.

No individual or group dominates the Board’s decision-making processes. All NEDs, including the Chair, serve on the basis of letters of appointment that are available for inspection at the Company’s registered office. The Executive Directors’ service contracts are also available for inspection at the Company’s registered office.

H. Non-Executive Directors should have sufficient time to meet their Board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account. 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 and all Directors have demonstrated that they have sufficient time to fulfil their duties and responsibilities. The NEDs provide constructive challenge, strategic guidance and hold management to account.
I. The Board, supported by the Company Secretary, should ensure that it has the policies, processes, information, time and resources it needs to function effectively and efficiently.

The Chair, 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 Chair, 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 updates on environmental matters and climate change; S172 and stakeholder engagement; the impact of COVID-19 on governance and Director remuneration, along with regular updates on governance related matters.

During the year, operational site visits were arranged for the Board, however, due to COVID-19 these were postponed. Instead, the senior management teams in each market were invited to present updates to the Board virtually and this will continue until the Board can resume travelling to our markets.

The Directors have access to the Board portal which gives access to accurate and timely information and they also have access to the Company Secretary and to independent professional advice.

 

Principle Application and further information
3. Composition, succession and evaluation  
J. Appointments to the Board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be maintained for Board and senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.

Appointments to the Board are made in accordance with a formal, rigorous and transparent procedure and regular succession planning is carried out with a continued focus on diversity. Please see page 89 of ARA 2020 for further details.

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.

K. The Board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the Board as a whole and membership regularly refreshed.

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. The Board comprises eight Directors: a Chair (who, for the purposes of the Code, was independent on appointment); a Senior Independent Director (SID); four Independent NEDs; and two Executive Directors. See pages 62 to 63 of ARA 2020 for details of the Board’s experience and page 88 for the skills matrix and length of service of the Board.

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).

L. Annual evaluation of the Board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each Director continues to contribute effectively.

The effectiveness and performance of the Board is vital to our continuing success. Following the external evaluation in 2019, an internal evaluation of the performance of the Board, its Committees and the Chair was carried out during the year and was conducted according to the guidance in the Code. The process of evaluating the performance was undertaken by the Company Secretary under the direction of the Chair. A tailored, high-level questionnaire was provided to the Directors to complete. This was structured to provide Directors with an opportunity to express their views on:

  • The performance of the Board and its Committees, including how the Directors work together as a whole,
  • The balance of skills, experience, independence and knowledge of the Directors, and
  • Individual performance, and whether each Director continues to make an effective contribution.

The process confirmed that all Directors contribute effectively, demonstrate a highlevel 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 for the year ahead were agreed to be a continuing focus on gender diversity, increased attention to environmental and social matters, stakeholder engagement and S172 requirements and the strategy for the Group.

The responses to the evaluation of the Board and its Committees were reviewed with the Chair and considered by the Board and were also discussed individually between the Chair and each Director. The results of the evaluation of the Chair’s performance were considered by the SID and discussed with the Chair at a separate one-to-one meeting. The outcome of these meetings and the overall Board discussion on the results, indicated that the Board is working well and that there were no significant concerns among the Directors about its effectiveness. It was generally felt that the actions agreed from the previous year’s external evaluation had been progressed. These actions included a review of the vision, culture and strategy of the Group and supporting the launch of the Group behaviours.

For 2021, an internal evaluation of the performance of the Board, its Committees and the Chair will take place. The process of evaluation will be undertaken by the Company Secretary under the direction of the Chair.

 

Principle Application and further information
4. Audit, risk and internal control  
M. The Board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements. The Board has established formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions through the delegated responsibility of the Audit Committee. The Board is satisified with the integrity of the financial and narrative statements. Please see the Audit Committee Report on pages 80 to 85 of ARA 2020.
N. The Board should present a fair, balanced and understandable assessment of the Company’s position and prospects. Arrangements are in place to ensure that any information published is fair, balanced and understandable. See page 112 of ARA 2020 for the statement.
O. The Board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the Company is willing to take to achieve its long-term strategic objectives. The Board sets the Group’s risk appetite, oversees the internal control framework and agrees the nature and extent of the principal risks. These processes and systems are reviewed regularly by the Board. See pages 82 to 83 and 52 to 59 of ARA 2020 for further information.

 

Principle Application and further information
5. Remuneration  
P. Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the Company’s long term strategy. The Group’s revised remuneration policy was approved at the 2020 AGM and is designed to support the strategy and promote the long-term sustainable success of the Company, as well as to align with the Company purpose, values and vision. See pages 93 to 100 of ARA 2020.
Q. A formal and transparent procedure for developing policy on executive remuneration and determining Director and senior management remuneration should be established. No Director should be involved in deciding their own remuneration outcome. The Remuneration Committee develops the remuneration policy through formal and transparent procedures. See pages 93 to 100 of ARA 2020 for the current Policy. No Director is involved in decisions regarding their own remuneration.
R. Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of Company and individual perforance, and wider circumstances. The Remuneration Committee sets the remuneration for the Executive Directors and oversees the remuneration of senior management and applies judgement and if required, discretion. See pages 90 to 107 of ARA 2020.

Key Board activities in 2020

Detailed below are the highlights of the main areas of focus for the Board during the financial year:

  • Strategy
  • Health and safety
  • Risk appetite and scenario planning
  • Environmental initiatives and improving external reporting on environmental issues
  • M&A: review and assessment of potential acquisition opportunities
  • Stakeholder engagement
  • COVID-19 and its impact across the Group
  • Distillery build in Lublin, Poland.

Division of responsibilities

Leadership Independent oversight and challenge

Chair

The Board is chaired by David Maloney, a NED who met the independence criteria in the Code on his appointment. It is the Chair’s duty to lead the Board and to ensure Directors have sufficient resources available to them to fulfil their statutory duties and are kept fully informed of relevant matters. The Chair 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 Chair 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. The Chair ensures effectiveness of the Board and engages in discussions with shareholders.

Non-Executive Directors (NED)

The NEDs constructively challenge the Executive Directors; develop proposals on strategy; scrutinise the performance of management; satisfy themselves on the integrity of the financial information, controls and systems of risk management; and make recommendations to the Board regarding Board appointments.

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 internal 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.

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 development and implementation of the Group’s strategic objectives and leading discussions with shareholders. In fulfilling his duties, the CEO is supported by the senior management team, whom he also leads.

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 Chair, 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 Chair, and serves as intermediary for the other Directors, with the Chair, 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 Chair nor the SID are employed as executives of the Group.

Chief Financial Officer (CFO)

Paul Bal is the CFO. He manages all aspects of the Group’s financial affairs, is responsible for the management of the capital structure; contributes to the management of Group operations and leads shareholder discussions alongside the CEO.

Company Secretary

The Company Secretary supports the Chair in setting the agenda for Board meetings; ensures information is made available to Board members in a timely fashion; supports the Chair in designing and delivering Board inductions and Board effectiveness reviews; co-ordinates training requirements for the Board; and advises on corporate governance matters.

Meetings and attendance

In the financial year to 30 September 2020, there were seven 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 – 7
Audit Committee
Maximum – 4
Remuneration Committee
Maximum – 5
Nomination Committee
Maximum – 4
David Maloney 7 - - 4
Mirek Stachowicz 7 - - -
Paul Bal 7 - - -
John Nicolson 7 4 5 4
Mike Butterworth 7 4 5 4
Diego Bevilacqua 7 - 5 4
Tomasz Blawat1 7 3 5 -
Kate Allum 7 4 5 -

1. Mr Blawat was unable to attend the Audit Committee meeting in May 2020 due to urgent business at Carlsberg

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 Chair 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.

Prior to the COVID-19 pandemic, on the evening before each Board meeting, a dinner is generally 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.

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 every meeting to ensure the procedure is working effectively.

Annual General Meeting (AGM)

The Company’s AGM will take place at 10am on Thursday, 4 February 2021 at our head office: Solar House, Mercury Park, Wooburn Green, Buckinghamshire, HP10 0HH. In light of the pandemic and the current legislation, we will hold the meeting as a closed meeting and unfortunately, shareholders will not be allowed to attend. As shareholders will not have an opportunity to ask questions in person, please send any questions in relation to the AGM to: sally.kenward@stockspirits.com, by 10am on Tuesday 2 February 2021 . Responses will be published on our website following the meeting.

The notice of the AGM can be found on our website, www.stockspirits.com, 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.

 

David Maloney
Chair

2 December 2020