Corporate Governance Statement

The Board is committed to ensuring high standards of governance for the company and considers that the 2018 Quoted Companies Alliance Corporate Governance Code (QCA Code) provides the most appropriate framework of governance arrangements for an AQSE company of its size. The Company complies with the QCA code in so far as is practical given the size of the Company and nature of its operations.

It is the responsibility of the Board to ensure that the Group is managed for the long-term benefit of all shareholders and stakeholders, with effective and efficient decision-making.  Corporate governance is an important aspect of this, reducing risk and adding value to our business.

QCA Code

The 10 principles set out in the QCA Code are listed below, with an explanation of how the Company applies each of the principles and the reason for any aspect of non-compliance.

Principle 1 - Establish a strategy and business model, which promotes long-term value for shareholders

Shepherd Neame’s vision is to be a Great British Brewer and run the best pubs.

The Company’s mission is to give its customers a great and memorable experience to make for a better day.

The strategy is to drive shareholder returns from four strategic objectives:

• To drive footfall to our pubs
• To develop our offer to enhance the customer experience
• To attract, retain and develop the best people
• To create demand and build awareness for our brands

An explanation of how the strategy and business model are executed is contained in the Company’s Annual Report each year and is available on the Company’s website www.shepherdneame.co.uk/investor-relations/reports-presentations

Principle 2 - Seek to understand and meet shareholder needs and expectations

The Board believes in an open and regular dialogue with its shareholders. Information is provided to shareholders in the interim and annual financial statements. The Chair, Chief Executive and Finance and IT Director make an annual presentation of the Group’s results to professional investors and analysts. This presentation is simultaneously posted on the Company’s website. The Board offers to hold individual briefings with its major shareholders and twice a year meets with the Family Council, which was established in 2014 to improve communications with major family shareholders, to make presentations on the Company’s performance. The Chair and Chief Executive discuss governance and strategy with major shareholders and the Board receives updates on these meetings which helps develop the Non-Executive Directors’ understanding of the views of major shareholders.

Investors also have access to current information on the Company through its website www.shepherdneame.co.uk. The Board responds quickly to any queries and enquiries received from shareholders with the Chief Executive being supported on Investor relations by the Chair and Finance and IT Director. Brokering and advisory services are provided by Peel Hunt LLP.

The Company provides regulatory, financial and business news updates through the Regulatory News Service in accordance with AQSE Rules and all recent announcements are also available on the Company’s website www.shepherdneame.co.uk/investor-relations.

All shareholders are encouraged to attend the Annual General Meeting where the Directors are available to answer any shareholders questions or concerns.

Principle 3 - Take into account wider stakeholder and social responsibilities and their implications for long term success

The Board recognises that the long-term success of the Company will be enhanced by good relations with these different internal and external groups and aims to understand their needs, interest and expectations.

Underpinning our strategy is a drive to do the right thing for our community, our team members, our stakeholders and our environment. These objectives actively influence our decision making and we have clear objectives for progress over the long term.

In addition to its shareholders, the Company believes its main stakeholder groups are its customers, trade customers, employees, suppliers and the communities in which the brewery and our pubs are based.

Customers - We serve customers a range of experiences in our pubs and hotels and through off trade sales so customers can enjoy Shepherd Neame products in their homes.

Trade Customers - We are dedicated to offering excellent service to our licensees, on and off trade and export customers so that working with Shepherd Neame is a unique and distinctive experience that adds value to their own businesses.

Our teams - We look to motivate and reward our team members well. We are committed to being a Company where people want to work enabling our people to demonstrate their individuality, creativity and talent. We invest in training and development but also with regard to employee physical and mental well-being. We have introduced a wellness project and have re-introduced a Diversity and Inclusion committee.

Suppliers - We look to build long term relationships with our suppliers and use a network of food producers throughout Kent and the South East to supply our brewery and pub estate. We continue to employ traditional crafts to work on our pubs and brewery, including thatchers, sign writers, carpenters and shipwrights.

Communities - Our pubs are often the heart of the communities they are based in and the Company has proud roots in the town of Faversham and the County of Kent. The Company and our licensees support a number of national and local charities and community initiatives.

Environment – The Company places significant emphasis on sustainability. It customarily aims to minimise its energy and utility use and is a member of the industry Zero Carbon Forum. In addition it is actively engaging in initiatives to reduce the waste from the business. We are continuing to evolve our strategy in this area.

Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board and management team continually assess the risks that the Company is exposed to through operating the Brewing and Brands and Pub divisions. Classification of risks takes into account the likelihood of their occurrence and the scale of potential impact (both financial and reputational) on the business. Once the key risks have been identified, each business unit and functional area is responsible for evaluating current controls in place to manage their risks. The individual risk registers are reviewed and the risk mitigation plans are monitored. Risk registers are aggregated and considered on a top-down basis in the context of delivering our strategy and are adapted appropriately to the changing environment.

Some external risks are out of the direct control of the Board. These points are discussed at Board meetings to ensure that the business can respond effectively to changes in the external environment. These risk management processes are designed to manage risks which may have a material impact on the business rather than to mitigate all risks entirely.

Principal risks and uncertainties are detailed in the Company’s Annual Report.

Principle 5 - Maintain the Board as a well-functioning, balanced team led by the Non-Executive Chair

The Board comprises a Chair, a Chief Executive, three Non-Executive Directors and three Executive Directors.  Richard Oldfield is the Chair, and is a non-executive. Hilary Riva is the Company’s Senior Independent Director. Hilary Riva and Kevin Georgel are considered independent Non- Executive Directors. The biographical details in the Annual Report which are available to view on the website at www.shepherdneame.co.uk/investor-relations/board show the broad range of experience and skills the Directors bring to the Board. All Directors of the Company are expected to provide sufficient time for the role so that they can carry out their responsibilities.

Any significant commitment or role outside the business or potential conflict of interest is declared by the Director concerned and approved by the Chair.

The number of Main Board and Board Committee meetings in any financial year and the attendance record for the relevant members are detailed in the annual report.

Each Director is subject to re-election at the third Annual General Meeting after the meeting at which he or she was previously elected or re-elected. Non-Executive Directors serving a period beyond nine years are subject to annual re-election. All newly appointed Directors stand for election at the Annual General Meeting following their appointment.

The Board governs through its Executive and other committees as detailed under principle 9. Each Board Committee has specific terms of reference and there is a list of Matters Reserved for the Board, which can be found at www.shepherdneame.co.uk/investor-relations/governance and which distinguishes between the types of decision that are taken by the Board or delegated to management. The Chair of each Committee reports to the Board on proceedings of Committee meetings as appropriate.

Principle 6 - Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

The Nominations Committee is appointed to lead the process for Board appointments and to make recommendations to the Board in order that there is a formal, rigorous and transparent procedure for appointment of new directors to the Board.

New Board appoints are made following an evaluation of the balance of skills, knowledge and experience on the Board and identification of the role and capabilities required for a particular appointment. The committee will:

• Consider candidates from a wide range of backgrounds
• Consider candidates on merit and against objective criteria, taking care that appointees have enough time available to devote to the position
• Consider the use of external advisers or advertising to facilitate the search, if applicable; and
• Consider the requirements of the family shareholders and the requirements set out in the Company’s Memorandum and Articles of Association

Professional and industry and sector-specific experience are considered objectively in the context of the requirements of the role. We give full consideration to succession planning for directors and other senior executives taking into account the challenges and opportunities facing the Company and what skills and expertise will be needed on the Board in the future.

Prior to the appointment of any Director the Committee obtains from the proposed appointee details regarding any other business interests which may result in a conflict of interest and ensures that consideration is given to whether these need to be approved by the Board.

 

Principle 7 - Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The Board has initiated an annual Board performance evaluation process, led by the Chair. Each member of the Board will be asked to complete a short self-evaluation and appraisal form, covering the Director’s contribution to the Board’s discussions and decision making and the Company’s strategic direction, for discussion individually with the Chair. The SID will similarly discuss the Chair’s contribution with the Chair. General conclusions will be summarised for Board consideration.

Principle 8 - Promote a corporate culture that is based on ethical values and behaviours

The Corporate values of the Company around Community, Heritage, Responsible Retailing, Employees and Environment can be viewed on the Company website at www.shepherdneame.co.uk/corporate-values

The corporate culture is based on these values and is underpinned by compliance with statutory regulations and the implementation, review and enforcement of various policies including an Anti-Slavery Policy, an Anti-Bribery and Corruption Policy and a Whistleblowing Policy. The Company also enforces clear rules around share dealing. This framework ensures that all aspects for the Company are run in a robust and responsible way.

The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company and the way that employees behave. The Company culture respects the individual and treats its employees and suppliers as key stakeholders interacting with them as set out under Principle 3. The executive team engages closely with staff and places strong emphasis on regular communications and updates for staff.

Sound ethical values and behaviours are crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this is reflected in all the Company does.

 

Principle 9 - Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board is responsible for the overall leadership of the Company and setting the Company’s values and standards. It has a formal schedule of matters reserved to it for decision which can be viewed at www.shepherdneame.co.uk/investor-relations/boardgovernance/matters-reserved-board

The roles and responsibility of the Chief Executive Officer, Chair and other Directors are laid out below:

• The Chief Executive’s primary responsibilities are to: lead the development of the Company’s strategy in consultation with the Board; act as the Company’s primary spokesman; lead communications with shareholders and external audiences such as investors, analysts and the media; lead the executive Board in running the company on a day-day basis.
• The Chair’s primary role is to ensure that the Board is effective in setting and implementing the Company’s direction and strategy. Primary responsibilities are to: direct the Board’s composition and development; ensure good corporate governance; plan and conduct Board meetings effectively and ensure all Directors are encouraged to participate fully; support the Chief Executive.
• The Senior Independent Director’s responsibilities are to: act as a sounding board for the Chair; to be an intermediary for other directors; to be available to address shareholder concerns should they feel that such concerns are not being fully addressed through the usual channels of communications; to review the Chair’s performance.
• All Board members, Non-Executive and Executive, participate in all Board decisions and contribute to Board discussions. While Executive Directors are members of the Executive Committee and Non-Executive Directors have a particular role in constructive challenge and scrutiny of Executive Committee actions and recommendations, the role and responsibility each Director has as a member of the Board is equivalent in terms of the setting of strategy and contribution to decision-making. The Board is supported by the Company Secretary and by various committees as detailed below, which are chaired by, and membership of which largely comprises the NEDs.

Executive Committee

The Executive Committee of the Board comprises the Executive Directors and is chaired by the Chief Executive. It meets monthly to review operating performance and has delegated authority from the Board to deal with operational matters such as the approval of minor capital projects and refurbishments, the agreement and approval of minor contracts with third parties and employee appointments.

Audit Committee

The Committee consists of the Non-Executive Directors and is chaired by Bill Brett. The Audit Committee meets at least twice a year and is responsible for ensuring that the Company’s financial performance is properly monitored, controlled and reported. Periodically the Company auditor, Chief Executive and the Finance and IT Director attend meetings by invitation. During any meeting with the external auditors it is the policy of the committee that the non-executive members meet with the Company auditor with neither the Chief Executive nor the Finance and IT Director present.

The Committee has defined terms of reference which can be found at www.shepherdneame.co.uk/investor-relationsgovernance/audit-committee-terms-reference.

The Committee reviews the financial reporting process, the system of internal control and management of financial risks, the audit process and the Company’s process for monitoring compliance with laws and regulations and its own code of business conduct. In performing its duties, the Committee maintains effective working relationships with the Board of Directors, management team, the external auditors and any specialist advisor that is engaged to support the committee in its work.

Remuneration Committee

The Remuneration Committee is chaired by Hilary Riva and it comprises the Non-Executive Directors. The Chief Executive attends the meetings by invitation. The work of the Committee is set out in its terms of reference which are available on the Company’s website. It meets regularly and determines on behalf of the Board the remuneration package of the Executive Directors.

The Remuneration Committee is also responsible for approving the incentive targets and payments for the Company’s Executive Directors and Senior Managers.

The Committee aims to ensure that remuneration packages for Executive Directors are competitive and comparable with companies of a similar size, complexity and activity and are designed to attract, retain and motivate Executive Directors with appropriate skills and capabilities.

Remuneration for Executive Directors comprises fixed remuneration (salary, car allowance and other taxable benefits), pension contributions and performance related remuneration designed to motivate maximum performance over a sustained period.

In coming to these decisions the Remuneration Committee considers the overall performance of the business and of the individual Directors and Senior Managers and the performance of our national and regional competitors when appropriate. External consultants are used periodically to help with these decisions.

Salary levels for Executive Directors are reviewed annually in line with the overall company pay review process.

The Remuneration Committee is also responsible for granting options under the Company’s share option plan and, in particular, conditions which may apply to any grant.

Nomination Committee

The Nomination Committee is chaired by Richard Oldfield and comprises the Non-Executive Directors. The Chief Executive attends the meetings by invitation. The Committee is responsible identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise.

It keeps under review the structure, size and composition (including the skills, knowledge, experience and diversity) of the Board, as well as leadership needs of the Company, both executive and non-executive, with a view to ensuring the continued ability of the Company to compete effectively in the market place and makes recommendations to the Board with regard to any adjustments that are deemed necessary.

The Committee is responsible for considering the Company’s succession planning for directors and other senior executives taking into account the challenges and opportunities facing the Company and what skills and expertise will be needed on the Board in the future.

 

Principle 10 - Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board is committed to good communications with all stakeholders providing them with access to information to help them make informed decisions about the Company.

The AGM is an important opportunity for communication with shareholders and other stakeholders and includes an update on the company’s latest trading performance. Shareholders have an opportunity to ask questions of the full Board. Results of shareholder meetings and votes can also on the Company’s website in the General meetings section.

The Investor Relations section of the Group’s website provides access to all required regulatory information. The Board section provides further details of each Director and the Investor News section details all Group announcements since 2010.