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Hotel Chocolat Group plc
Corporate Governance Statement
Approved by the Board on 28th September 2018
Corporate Governance Statement from the Chairman
As Chairman of the Board, I am responsible for ensuring that the Board is fully committed to maintaining the highest standards of corporate governance throughout its operations and that all of its practices are conducted transparently, ethically and efficiently. The Board believes that good governance will result in continued success and improve shareholder value. Therefore, the Board has chosen to base its governance on compliance with the UK's Quoted Companies Alliance Corporate Governance Code (the "QCA Code"). Below we have provided a description of how Hotel Chocolat complies with each QCA Code principle.
Andrew Gerrie, Chairman
Principle 1. Establish a strategy and business model which promote long-term value for shareholders
Everything Hotel Chocolat does is guided by the three basic values that we started with and will always retain: Originality, Authenticity, Ethics. The Board is responsible for establishing the business model and strategy for development of the Group in a way which is consistent with these values. Details of our business model and strategy are published within the Company’s Annual Report and Accounts. For the year ended 1st July 2018 these details can be found on pages 8 to 9 and 17 to 20 of the Annual Report and Accounts. In addition, the key challenges to the business are detailed in the risk section on pages 24-25 of the Annual Report and Accounts.
Principle 2: Seek to understand and meet shareholder needs and expectations
We recognise the importance of maintaining communication with our shareholders. The Group publishes its Annual Report and Accounts, full-year and interim results announcements and trading updates along with other corporate information on the website, which can be viewed here. Shareholders are invited to attend the AGM at which the Group’s activities are presented and questions answered. The Executive Directors are also available for individual meetings with major shareholders. The Non-executive Directors are available to discuss any matter stakeholders might wish to raise, and the Chairman and independent Non-executive Directors will attend meetings with investors and analysts as required. Investor relations activity is regularly considered on the Board’s agenda. Shareholders may contact our investor relations team by emailing firstname.lastname@example.org.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long term success
Hotel Chocolat maintains communication with a wide range of stakeholders to ensure that their needs, interests and expectations are understood and reflected within the Company’s strategy.
Regular business briefings are held with staff and employees have the opportunity to present matters of interest to them to the Board via the Employee Voice Forum. Non-executive Director, Sophie Tomkins, takes a lead in these matters.
The Group strives to ensure that our business activities positively benefit all stakeholders including customers, growers, suppliers, employees, shareholders and local communities. Details of our engaged ethics program are provided in the Annual Report and Accounts and here on our website. Our 2018 corporate social responsibility report can be found at pages 28 and 29 of the Annual Report and Accounts and here on our website. Details of our communications and relationships with stakeholders can be found on page 35 of the Annual Report and Accounts.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
Our risk management policy and framework is detailed in the Annual Report and Accounts and for the year ended 1st July 2018 the summary of key risks is located on pages 24 and 25. The Board is responsible for reviewing risks to ensure that the business is not exposed to unnecessary or poorly-managed risks. Whilst review of the risk register is a scheduled item on the annual calendar of Board agenda items, the Board’s consideration of risk matters is not limited to those occasions. Risks and opportunities are factors which are continually considered when the Board is making decisions about the business and strategy. The Audit Committee assists the Board in this process by reviewing the risk register as well as the effectiveness of internal controls, including financial controls. Further detail about the Group’s internal control systems are provided on pages 34 and 35 of the 2018 Annual Report and Accounts.
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair.
The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration and internal control, is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and reflective of the Group’s values. Further details of the Board and our governance framework can be found within the Annual Report and Accounts. For year ended 1st July 2018 this information is on pages 30 to 35. Details of our Directors can also be found on the website.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The identities of all Directors, as well as the relevant skills and experience each Director brings to the Group, are included in the Directors section on website and in the Annual Report. For the year ended 1st July 2018 they are on pages 30 to 31. Further information can also be found on page 33 under the sub-heading of Board Decisions and Activity and page 34 under the Development section of the Report. Development activities to ensure Directors keep up to date with, for example, the regulatory environment are undertaken as required and there is also an induction process for new Directors. Individual development needs are considered as part of annual evaluation processes.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board has undertaken an evaluation of its effectiveness, with input obtained from every Board member on a number of key topics including whether::
- the Board is effective in setting strategy
- a rigorous and wide-ranging debate of issues takes place
- decision making is balanced and objective
- the Board is responsive to new events and new information
- the Board has the appropriate composition and skills to discharge its duties
The Board identified specific actions which are being implemented including development of our senior team as part of our succession plans. Reviews will be carried out annually to ensure continuous improvement. The Board Effectiveness section of the Report and Accounts on pages 33 and 34 provided further details of our recent Board effectiveness review.Principle 8: Promote a corporate culture that is based on ethical values and behaviours
Everything we do is guided by the three basic values which have been central to our business since it was founded – Originality, Authenticity and Ethics. These values are at the heart of our business model which is described on pages 8 and 9 of the 2018 Annual Report and Accounts. The Board receives regular updates on our Engaged Ethics programme and has set target on issues such as the use of plastic and other resources. Our wider team are great advocates of our values. Colleagues are kept up to date on relevant ethical and behavioural issues through regular business briefings, the annual conference and weekly ‘all staff’ email bulletins from the Chief Executive. Details of our Engaged Ethics are reported in the Annual Report and Accounts and can be found on pages 16 and page 28 as well as on our website.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the board.
The Directors recognise the value and importance of good corporate governance and are fully accountable to the Group’s shareholders and other stakeholders including shareholders, customers, suppliers and employees. The Board believes that it complies with all of the principles of the QCA Code. The Board believes its governance arrangements are robust and appropriate to the size, risks, complexity and operations of the business and reflective of the Group’s values.
The Chairman is responsible for leading the Board, setting its agenda and monitoring its effectiveness. There is a clear division of responsibility between the Chairman and the Chief Executive, who is responsible for day to day management and delivery of the strategy, and a schedule of matters reserved to the Board has been defined (see link below). Board oversight and reporting in relating to key drivers of growth continues to develop and was specifically reviewed as part of the most recent Board annual strategy meeting.
The Board has delegated specific responsibilities to the Audit and Remuneration Committees and the full Terms of Reference for each committee are linked below. The Audit Committee is chaired by independent Non-Executive Director, Sophie Tomkins, who is a qualified accountant. The Committee has the primary responsibly for monitoring risk matters, the quality of our internal controls and for ensuring the integrity of our financial reporting.
The Remuneration Committee is chaired by independent Non-Executive Director, Greg Hodder. The Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation at the time, including our all-employee Sharesave plan.
Matters reserved for the Board are available here
The Terms of Reference for the Audit Committee are available here
The Terms of Reference for the Remuneration Committee are available here The Board’s structures and governance arrangements are set out in detail at pages 32-35 of the 2018 Annual Report and Accounts.
Principle 10: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Group maintains a dialogue with a wide range of stakeholders to ensure that their needs, interests and expectations are understood and reflected within the Group’s strategy. Customer feedback is collected from stores, online reviews and via social media. We work with cocoa growers and other agricultural producers and with organisations that promote their interests to understand and support their needs. We meet with existing and potential suppliers and visit trade fairs. We also meet with charities, activist groups, academics and specialists to keep abreast of developments in fields such as sustainability, recycling and nutrition.
The Group maintains communication with institutional shareholders through individual meetings with Executive Directors, particularly following publication of the Group’s interim and full year results. Private shareholders are encouraged to attend the Annual General Meeting at which the Group’s activities are considered and questions answered. The outcomes of the Shareholders voting on the resolutions at the Annual General Meeting are published on the website here. General information about the Group is also available on the Group’s website (www.hotelchocolat.com). The Non-executive Directors are available to discuss any matter stakeholders might wish to raise, and the Chairman and independent Non-executive Directors will attend meetings with investors and analysts as required. Investor relations activity and other stakeholder engagement matters are discussed by the Board.