Dr John McAdam, chair of the nomination committee
To ensure that board members and senior management have the appropriate balance of skills and experience to support the group's strategic objectives.
- The Code requires that a 'majority of members of the nomination committee should be independent non-executive directors'
- The role of the committee is to make recommendations to the board on its composition, balance and membership and on refreshing the membership of the board committees
- The company secretary attends all meetings of the committee
- The business services director, who has responsibility for human resources, regularly attends meetings and is responsible for engaging with executive search recruitment advisors
- The CEO is not a member of the committee, but from time to time is invited to attend. Neither the Chairman nor the CEO would participate in the recruitment of their own successor
Terms of reference – corporate.unitedutilities.com/corporate-governance
Nomination committee members
Dr John McAdam (chair)
Dr Catherine Bell
Board of directors' biographies
As highlighted by the Financial Reporting Council's (FRC) recently issued discussion paper on UK Board Succession Planning, we have tried to provide a more informative explanation of our succession planning activities. In many ways, given the nature of the subject matter, it is a difficult topic to report publicly, and on a human level, people's lives and circumstances can change, sometimes at short notice.
As a board that is relatively small in size, succession planning to ensure that board members and senior management have the appropriate balance of skills and experience to support the group's strategic objectives is a matter that the board as a whole considers. In accordance with our annual board calendar, we have two related reviews. First, in June when we review the specifics of executive succession planning, and secondly in October as part of the organisational capability review and people plan. All the non-executive directors are members of the nomination committee and are involved in the detailed process of recruitment and consideration of candidates, for both executive and non-executive board appointments. The nomination committee is supported in the recruitment process by Sally Cabrini, business services director, as part of her human resources responsibilities.
Historically, independent non-executive directors at United Utilities have served a term of between seven and nine years, a pattern which has facilitated the refreshing of the board, and also provided a high degree of continuity, and is the pattern that our succession plan for our independent non-executive directors works to. Notwithstanding this, the specifics of each of the non-executive directors' time of departure has been driven by their own personal circumstances. Serving beyond a nine-year term is identified in the Code as being one of the reasons which could affect a non-executive director's independence. The Code excludes board chairmen from the nine-year rule.
Catherine Bell indicated to the board her intention to retire at the AGM in July 2016 and so for the fifth successive year we have undertaken the recruitment process for a new non-executive director, which culminated in the recruitment of Alison Goligher who will join the board with effect from 1 August 2016. The board gender diversity policy is taken into account during every candidate selection process. Ultimately, we do strive to appoint the person we believe is best matched to the role in terms of what they have to offer the company and to make a positive contribution to the board conversation and board dynamics. Diversity of outlook and interest is essential to ensuring we have a different variety of views to contribute to discussions.
In our succession planning we aim to ensure both our board directors and our senior managers are well equipped with the right skills and experience to address the challenges of our business and in pursuing our strategy and be in tune with the culture of the company. We are mindful of the need to develop our talent pipeline, at all levels throughout the business, so that our employees have the skills and experience to support the long-term needs of our business. We will review the recommendations of the FRC's report on UK Board Succession Planning when available with a view to improving our processes.
Dr John McAdam
Chair of the nomination committee
Main responsibilities of the committee
- Lead the process for board appointments and make recommendations to the board about filling vacancies on the board, including the company secretary
- Consider the succession planning of directors and members of the executive team
- Make recommendations to the board on refreshing the membership of the board's principal committees
- Review directors' conflict authorisations
- Consider the request from executive directors for election to the boards of other companies and make a recommendation to the board
- Consider requests from non-executive directors for the election to the boards of other companies; this role has been delegated to the Chairman (other than in respect of his own position)
Directors' tenure as at 31 March 2016
What has been on the committee's agenda during the year
1. Board succession
- reviewed a draft written succession planning matrix (incorporating the skills matrix) for the board directors as a useful guiding tool to support the long-term planning process for board appointments. The succession planning matrix highlights the Code governance requirements; existing directors' terms of appointment; the projected strategic needs of the business and the resulting preferred experience of any potential new board member and potential successors to a role (where identified) and those who could act as an interim should the need arise;
- with reference to the succession planning matrix, drafted and approved a brief, setting out the attributes and experience of a preferred candidate in light of the needs of the business at this point in the regulatory cycle and to reflect the changes to the business in terms of the increasing competition and the need to strengthen the engineering and industrial capabilities of the board. The brief was issued to a number of executive search consultants to begin the process of the recruitment of a non-executive director. A number of executive search consultants were invited to present their understanding of the brief and their knowledge of the company;
- concluded that JCA, who had demonstrated the best understanding of the role, should be appointed to conduct the search. (JCA is a signatory to the voluntary code of conduct on gender diversity for executive search firms; it has no other connection with the group other than being used from time to time for executive search purposes);
- considered and reviewed the long list of candidates and identified those to be shortlisted for interview initially with the Chairman, CEO and the business services director. A number of candidates were then invited to meet with the other non-executive directors and the CFO; and
- discussed the candidates, following feedback from the interview process, and the 'best fit' with the succession planning matrix and the skills matrix (as shown above); took into account the board diversity policy (set out below) and the brief as provided to the executive search consultants; and duly made a recommendation to the board to appoint Alison Goligher as a new non-executive director with effect from 1 August 2016. Alison brings additional industrial and engineering experience to the board, areas of expertise which the board felt could be strengthened (see panel below).
Skills matrix of board directors
|Dr John McAdam||✓||✓||✓||✓|
|Dr Catherine Bell||✓||✓||✓|
Alison was appointed in October 2014 as a non-executive director of Meggitt PLC, the engineering group specialising in extreme environment components and smart sub-systems for the aerospace, defence and energy markets. She is a member of the audit, remuneration and nomination committees at Meggitt.
From 2006 to 2015 she worked for Royal Dutch Shell, with her most recent executive role as Executive Vice President Upstream International Unconventionals. Prior to that she spent 17 years of her early career with Schlumberger, an international supplier of technology, integrated project management and information solutions to the oil and gas industry.
She holds a BSc (Hons) Maths and Physics and a MEng in Petroleum Engineering.
2. Refreshing the membership of the principal committees
Catherine Bell's departure from the board will leave a vacancy on each of the board's principal committees and as chair of the corporate responsibility committee. Stephen Carter will succeed Catherine as chair of the committee. On her appointment on 1 August 2016, Alison Goligher will join the audit, nomination, remuneration and corporate responsibility committees.
3. Board diversity
The board diversity policy is to 'ensure the selection process for board candidates provides access to a range of candidates, although any appointments will be made on the basis of equal merit but with due regard for the benefits of diversity on the board, including gender diversity'. The identification and recruitment of board members is treated with the utmost importance, meetings are chaired by the Chairman, and all non-executive directors are members of the committee and participate both in meetings and in the recruitment process. As stated by the policy, they are looking for new directors to bring something different to the board table, be it in terms of experience, skills, perspective or interests.
We have retained the 25 per cent gender diversity ratio on our board, in accordance with our board diversity policy.
We are keen to develop our female senior managers so that, over time, they can be considered for executive board appointments or as potential candidates for non-executive directorships in other companies and we have a number of initiatives in place supporting women in the workplace. We encourage our senior managers to take on a non-executive directorship role but recognise that the responsibilities of such a role are very much a personal commitment. During the year, Sally Cabrini, business services director, was appointed as a non-executive director of Lookers plc.
4. Conflicts of interest
The company's articles of association contain provisions which permit unconflicted directors to authorise conflict situations. Each director is required to notify the Chairman of any potential conflict, and the board reviews the position of each director annually. No changes were recorded which would impact the independence of any of the directors.
5. Induction of new non-executive directors
An induction programme is devised for each new non-executive director. It would include one-to-one meetings with the Chairman and each of the existing non-executive directors. They will have one-to-one meetings with the CEO, CFO, managing director of the wholesale business and the company secretary along with other members of the executive team. They will also meet members of the operational teams and visit some of the key operational sites and capital projects to ensure they get a first-hand understanding of the water and wastewater business.
New directors receive a briefing on the key duties of being a director of a regulated water company including the role of the regulated company's holding company, and they will also meet with the director of regulation. They will also meet with representatives of Ofwat.
6. Wider succession and talent management
For a number of years we have had a written succession plan for our executive directors and other members of the executive team, in particular the CEO, CFO, and managing director of wholesale. This plan identifies an interim internal successor to fill the role in the short term should the need arise, and the longer term development needs of potential successors to be able to fulfil the role on a more permanent basis. As with all our board appointments, we would always aim to appoint the best person to fulfil the role. It would be common, when recruiting for a senior role, for an external search to be conducted alongside an internal candidate recruitment process. Any changes that are required to the profile of the management team to reflect the changing needs of the business are considered by the board in the executive succession plan. Succession and development initiatives for senior executives include executive mentoring and international business school training.
During the year, Gary Dixon, customer services director, informed the CEO of his intention to retire at the end of 2016. This has enabled a timely recruitment process to be conducted, culminating in the appointment of an internal candidate, Louise Beardmore, to the role. As part of the handover, Louise initially worked alongside Gary until 1 April 2016 when she took over the full responsibility for customer services. Gary will stay with the business, supporting Louise in this important role until he retires.
Louise Beardmore's promotion to customer services director from 1 April 2016 demonstrates how we have been able to develop our own talent in the organisation. Louise joined the company over 20 years ago and in that time has progressed her career through a variety of roles in operations, customer services and HR. In her last role as head of business transformation, she led all aspects of change and transformation across the company to drive improvements in service and efficiency through people, process and technology changes. At the time of the approval of this report, there were 10 members of the executive team (2015: nine) including the CEO and CFO, with a ratio of six males to four females.
During the year, board directors have a number of opportunities to meet with members of the executive team and those employees at all levels identified as potential talent within the business.
Summary of board diversity policy
- Ensure the selection process for board candidates provides access to a range of candidates, although any appointments will be made on the basis of equal merit but with due regard for the benefits of diversity on the board, including gender diversity
- Ensure that the policies adopted by the group will, over time, promote gender diversity among senior managers who will in turn aspire to a board position
- In selecting candidates for board positions, only use the services of executive search firms who have signed up to the voluntary code of conduct for executive search firms as recommended by Lord Davies
- Adopt measurable objectives from time to time for achieving gender diversity at board level – which is currently to maintain at least 25 per cent female representation
Louise Beardmore, customer services director
Working for the United Utilities group for over 20 years, Louise has held a number of senior positions at North West Water, Norweb, Vertex and United Utilities, leading teams in water operations, customer services and HR. Prior to her new role, Louise was head of business change and organisational development, supporting all aspects of transformational change across the group driving people, process and technology changes to improve service and drive efficiency.
What have we done in 2015/16
Improving diversity across the talent pool
In our executive team of 10 (including the CEO and CFO), four are women, namely Sue Amies-King (business retail director), Louise Beardmore (who was appointed customer services director on 1 April 2016), Sally Cabrini (business services director) and Gaynor Kenyon (corporate affairs director). We are actively working with these individuals on their personal development plans, which include building their external portfolio.
Women hold 21 per cent of senior leadership positions. For this group, we actively support their individual personal development plans, which includes encouraging them to broaden their external network. Last year our employees set up a self-managed 'Women in UU' network. Monthly meetings are held and internal and external speakers are invited to address the group. Membership has trebled during the year. The company will continue to actively support the network over the coming year and provide senior support as required.
Our graduate scheme continues to be successful in attracting female applicants; 26 per cent of applicants were female, and 44 per cent of those appointed were female, while the overall number of female graduates on the scheme is 39 per cent.
In 2015, 30 per cent of our intake of apprentices were female, an increase of five per cent from 2014. Research from the Sector Skills Council for Science, Engineering and Manufacturing Technologies shows the average number of women in apprenticeships is between five and seven per cent. All of our apprentices are supported by a senior manager as part of their career development with us.
We are members of Race for Opportunity, part of Business in the Community and the leading organisation for ethnic diversity and inclusion. In 2015 we participated in the annual benchmarking survey and achieved a bronze award.
Our employee-run lesbian, gay, bisexual and transgender network has organised a number of employee events during the year. Most notable was our presence at the Manchester Gay Pride March in August 2015, where employees were taking part in the parade wearing our company branded clothing and driving a United Utilities branded vehicle.