There are three executive directors, two of whom are also Nomination Committee
MDU members. The Board has three non-executive directors
The Board’s Nomination Committee, chaired by the Chairman
who are not members of the MDU and have no financial
of the Board, makes recommendations on the appointment of
interest in the MDU other than their fees as Board members.
directors. Membership of the Nomination Committee varies
There are seven non-executives with MDU membership, who
according to the nature of the vacancy. The committee
receive fees as Board members and as expert witnesses. The
prepares a description of the role and capabilities required for
Board does not consider that this compromises their
a particular appointment. It selects a shortlist of candidates for
independence as Board members. All the non-executive
consideration by the Board, on merit and against objective
directors are therefore considered to be independent. The
criteria.
non-executive directors are sufficiently strong in numbers and
independence to provide a proper balance on the Board.
Remuneration Committee
The posts of Chairman and Chief Executive are separate. This The Remuneration Committee, also chaired by the Chairman of
distinguishes the running of the Board from executive the Board, makes recommendations on the remuneration of
responsibility for the business. The roles of Chairman and Chief the executive directors, non-executive directors and members
Executive are defined in writing. of the Council and of committees. The Remuneration
Committee works on the basis that remuneration should be
There is an induction process for new directors. This is tailored
sufficient to attract, retain and motivate individuals of the
to meet the needs of individuals. It is designed to give new
quality required but without paying more than is necessary.
directors knowledge of the business and of their role in it as
directors.
Internal Control
The Board undertakes an annual evaluation of its performance
by questionnaire. The Chairman reports back to the Board on
The Board is ultimately responsible for the internal control and
the results of the evaluation.
risk management of the MDU and for the effectiveness of
these systems. The Audit Committee has authority to advise the
All Board members are subject to election by MDU members at
Board on these matters. Management is responsible for
the first Annual General Meeting after their appointment. All,
identifying, assessing, managing and monitoring risk, and for
including the executive directors, are also subject to retirement
developing, operating and monitoring the system of internal
by rotation and re-election at least every three years.
control. Control is exercised through an organisational
structure with clearly defined levels of responsibility and
The Board met five times in the year. The attendance record of
authority and appropriate reporting procedures. Information is
the directors at the Board meetings is set out on page 44.
regularly provided at all levels and compared with budgeted
The Board has a schedule of matters reserved to it for decision,
targets which are reviewed on a quarterly basis. The Board
including the following:
considers regular reports on the risks inherent in the business.
• Approval of commercial strategy
The principal risks are identified in the Operating and Financial
Review at pages 42 - 43.
• Changes to corporate structure
The internal control and risk management systems cannot
• Internal control arrangements
eliminate risks to the business, but they are designed to
• Board and committee appointments
manage them. Internal controls can provide only reasonable
• Contracts not in the ordinary course of business
and not absolute assurance against material misstatement or
loss. The Board, with advice from the Audit Committee, has
The Board has a procedure for directors to obtain independent
reviewed the effectiveness of the risk management and
advice. All Board members have access to the advice and services
internal control of the group.
of the Company Secretary.
Financial instruments
Audit Committee
The group's financial risk management objective is broadly to
The Board has an Audit Committee, which meets as often as
seek to realise neither profit nor loss from exposure to currency
necessary. The committee is chaired by Mr R J C Pearson, a
or interest rate risks.
non-executive director without MDU membership. Mr Pearson
The group monitors its likely exposure to non-sterling claims
is a chartered accountant and has extensive audit experience.
and advisory costs and its policy is, where possible, to finance
The committee includes four other non-executive members of
these through matching subscription and other receipts in the
the Board. The committee meets, and spends time alone with,
same currency. The matter is kept under constant review and if
the internal and external auditors. The committee reviews risk
deemed appropriate forward contracts are entered into.
management and internal control arrangements, and their
effectiveness. It guides the activities and reviews the results of
The directors do not consider any other risks attaching to the
internal audit. The committee also reviews the scope and
use of financial instruments to be material to an assessment of
results of the external audit, and reviews the annual financial
its financial position.
statements and other information in the Annual Report before
publication. The committee meets the MDU’s actuarial advisers Going Concern
each year and reviews the results of their work.
The financial statements are prepared on a going concern
basis. In deciding to adopt the going concern basis the
directors have reviewed the group’s business plans and
budgets and taken account of the discretionary nature of the
company’s indemnity obligations.
45
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