ITV plc Corporate Governance The following information supplements that set out in our Annual Report and Accounts and explains how ITV complies with the UK Corporate Governance Code (the Code). The 2017 Annual Report and Accounts are available on the Investor section of our website. A. Leadership A.1 The Role of the Board A.1.1 Board meetings and statement of how the board operates The number of meetings held during the year and attendance of Directors is set out in the Governance section of the Annual Report and Accounts. The Board agrees an annual schedule of matters it wishes to consider at each of its meetings and those of its committees. The schedule ensures that all relevant matters are considered and receive appropriate attention. Meetings are normally held at one of the London sites and at least once a year they are held at one of the regional or international offices. Board meetings are structured around the following areas: Operational and functional updates Financial updates Strategy Progress against strategy Business plan and performance against business plan Risk Management Framework, key risk areas and risk appetite Other reporting and items for approval Senior Executives and other colleagues are regularly invited to attend meetings for specific items. A summary of key considerations in 2017 and those planned for 2018 are set out in the Governance section of the Annual Report and Accounts together with our governance structure. A schedule of specific matters reserved to the Board for decision can be found on the Governance section of our website. There is an approvals framework in place which has been approved by the Board. A.1.2 Annual Report disclosure Information about Board directors, Committee membership and information on number of and attendance at board and committee meetings is set out in the Governance section of our Annual Report and Accounts. A.1.3 Insurance The Company maintains liability insurance for its Directors and officers which is renewed on an annual basis. The Company has also entered into deeds of indemnity with its Directors. A copy of the indemnity can be found on the Governance section of our website. A.2 Division of responsibilities A.2.1 Separation of Chairman and CEO Peter Bazalgette is Chairman and Carolyn McCall is CEO. Their roles are set out in writing and have been agreed by the Board. The job descriptions can be found on the Governance section of our website. For a period during the year, Peter Bazalgette occupied both the role of Chairman and CEO. It was felt that following Adam Crozier s departure that Peter Bazalgette was best suited to fill the vacant role for the 6 month period from July to December before Carolyn McCall joined the Company.
A.3 Chairman A.3.1 Independence Peter Bazalgette was independent on appointment. A.4 Non-executive Directors A.4.1 Senior Independent Director (SID) The Board has appointed Andy Haste as its SID. Andy is an independent non-executive director. Shareholders wishing to speak with Andy can reach him via the Company Secretary on 0207 157 3000. The Job description for the SID can be found in the Governance section of our website. A.4.2 Meetings Senior Executives and other colleagues are regularly invited to attend board and committee meetings for specific items. In addition to formal Board and Committee meetings, meetings take place between: Board members and Management Board members Chairman and Non-executive Directors Individual Non-executive Directors meeting with members of senior managers Senior Independent Director and Non-executive Directors (without the Chairman present) A.4.3 Concerns The Non-executive Directors have an open and transparent relationship and will meet together as one or in smaller groups to consider and discuss matters as appropriate. On appointment Non-executive Directors are provided with a Directors Manual which gives them information about their responsibilities together with administrative information. The manual reminds them that they must ensure any concerns they may have about the running of the business are recorded in the minutes of board or committee meetings and that a written statement should be provided to the Chairman on resignation if they have any such concerns. B. Effectiveness B.1 Composition of the Board B.1.1 Independence All Non-executive Directors (with the exception of the Chairman who was independent on appointment) are currently considered independent in accordance with the definition in the Code. The Board is still of the view that the current Non-executive Directors are independent in both character and judgement. They constructively challenge and help develop proposals on strategy, scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. The Board works well together, bringing strong, independent, balanced judgement, knowledge and experience to its deliberations. Each Non-executive Director has appropriate skills and experience so that their views carry significant weight in the decision making. B.1.2 Number of independent NEDs At least half of the board is made up of independent NEDs.
B.2 Appointments to the Board B.2.1 Nomination Committee There is a Nomination Committee in place which is made up of the Non-executive Directors and is chaired by the Chairman of the Board (unless the business is dealing with his succession). No additional fee is payable for membership of this committee. The Committee meets at least annually and at other times where necessary. Terms of reference for the Committee can be found on the Governance section of our website. B.2.2 Skills and Experience The Committee evaluates the balance of skills and experience of the board when considering vacancies in line with its succession planning framework. The succession planning framework helps to ensure that: The Board is refreshed appropriately in order to encourage new ideas ; There is a diverse Board with a wide range of skills and experience; and Board tenure is appropriate and Board members remain independent. The Board keeps this under constant review. B.2.3 Appointment term Non-executive Directors are appointed for an initial term of three years after which re-appointment is considered on an annual basis subject to a rigorous evaluation process. All Directors are required by the Company s Articles of Association to be elected by shareholders at the first AGM following their appointment by the Board. Subsequently, all Directors are subject to annual re-election by shareholders as recommended by the Code. B.2.4 Statement in Annual Report A description of the activities undertaken by the Nomination Committee during the year is set out in the Governance section of the Annual Report and Accounts where relevant. This includes information on diversity and appointments during the year. B.3 Commitment B.3.1 Chairman A job description can be found in the Governance section of our website. Other significant commitments are kept under review by the Board and details are set out in the biography section of the Annual Report and Accounts and our website. Any changes are dealt with in accordance with our Conflicts of Interest policy a copy of which can be found on the Governance section of our website. B.3.2 NED terms and conditions An outline of the terms of engagement for the Non-executive Directors can be found on the Governance section of our website. On appointment significant commitments are requested and are considered by the Board and the required undertakings on time commitment are obtained. Any changes are dealt with in accordance with our Conflicts of Interest policy. Non-executive Directors are expected to commit at least 18 to 20 days per annum and in practice spend considerably more than this. The Board is satisfied that each of the Non-executive Directors commits sufficient time to the business of the Company.
The Board has considered in detail the current external appointments of the Directors which may give rise to a situational conflict and has authorised potential conflicts where appropriate. This authorisation can be reviewed at any time but will always be subject to annual review. B.3.3 NED posts for Executive Directors Executive Directors are allowed to hold one non-executive appointment of a FTSE100 company with agreement of the Chairman. Currently Carolyn McCall is on the board of Burberry group plc. Directors are allowed to retain the fees from these posts and details of fees earned each year are set out in the Annual Remuneration Report. B.4 Development B.4.1 Induction On appointment, each Director takes part in a comprehensive induction programme where they: receive information about the Group, in particular operational, financial and strategic overviews in the form of presentations by executives from all parts of the business and on the regulatory environment; meet representatives of the Company s key advisers; meet other members of the Board; receive documents such as previous minutes and meeting papers and other key documents including information on the strategy and budget; receive information about the role of the board and the matters reserved for its decision, the terms of reference and membership of board committees and the powers delegated to those committees; receive information about the Company s corporate governance practices and procedures and the latest financial information about the Group; and are advised of their legal and other duties and obligations as a director of a listed company. This is supplemented by visits to key locations, including studios and regional sites, and meetings with key senior executives and with major shareholders where appropriate. The key stages of the induction programme are: Stage 1 Provision of documents Stage 2 Meeting with Chief Executive and Group Finance Director Meetings with Non-executive Directors Meetings with Management Board members and other senior executives Duties of a director, board procedures, board and strategy papers and corporate governance Business overview, strategy, current trading and key commercial issues Open discussion forums Commercial issues and projects Meetings with advisers and shareholders if appropriate Stage 3 Site visits Understanding of the business and operations
Additional specific induction programmes are in place when Non-executive Directors join committees. B.4.2 Training and Development During their period in office, the Directors are continually updated on the Group s businesses and the competitive and regulatory environments in which they operate. This is done through: updates and papers which cover changes affecting the Group and the market in which it operates; meetings with senior executives across the Group and key advisers; regular updates on changes to the legal and governance requirements of the Group and in relation to their own position as Directors; and presentations given at board and committee meetings on business matters and technical update sessions from external advisers where appropriate. B.5 Information and Support B.5.1 Independent Professional Advice The process for seeking independent professional advice can be found on the Governance section of our website. B.5.2 Company Secretary Directors have access to the support of the Company Secretary and of the ITV Secretariat team at any time. The appointment or removal of the Company Secretary is a matter for the Board as set out in our Articles of Association. B.6 Evaluation In accordance with the Code the Board undertakes an externally facilitated board and committee evaluation every three years. Further details are set out in the Governance section of the Annual Report and Accounts. B.7 Re-election B.7.1 By shareholders All directors are subject to annual re-election by shareholders. In order to align with the provisions of the Code our Articles of Association were updated at our AGM in May 2016 and provide for automatic retirement of all of the Company Directors at each AGM. The Notice of Meeting of the AGM contains biographical information for each director. A copy of the Notice is available in the Investor section (AGM) of our website. The board notes that John Oremrod has served on the Board for more than nine years and the Board had previously agreed that he would remain on the Board until a successor of the Audit and Risk Committee Chair was appointed. B.7.2 Information The Notice of Meeting for the AGM sets out why the Board believes directors should be elected or re-elected and that a rigorous evaluation process has taken place before a Director is recommended for re-election. C. Accountability
C.1 Financial and Business Reporting C.1.1 Responsibility for preparing annual report and accounts It is the Board s responsibility for preparing a fair, balanced and understandable assessment of the Company s position and prospects. The Audit and Risk Committee assists the Board with this assessment. The Directors responsibility statements are set out in the Annual Report and Accounts. C.1.2 Business model The Strategic Report in the Annual Report and Accounts explains the business model, our risks and uncertainties and contains the Directors Viability Statement. C.1.3 Going concern The going concern statement is set out in the Annual Report and Accounts. C.2 Risk Management and Internal Control Our risk management process and details of our principal risks and uncertainties is set out in the Strategic Report in our Annual Report and Accounts. C.3 Audit and Risk Committee and Auditors Information on what the Committee focused on in 2017 can be found in the Audit and Risk Committee Report in the Annual Report and Accounts. C.3.1 Audit and Risk Committee The Committee members have between them a wide range of business and financial experience. The Committee considers that John Ormerod, Anna Manz and Margaret Ewing have recent and relevant financial experience for the purposes of the Code. The role of the Committee is described in the Audit and Risk Committee report in the Annual Report and Accounts. At each meeting the Committee receives a report from the Head of Internal Audit on the progress of the work of the internal audit findings. In addition to the September risk focused meeting, the Committee also considers specific risk topics at meetings throughout the year. In addition to Committee members the Chairman of the Board, Chief Executive, COO & CFO, Director of Group Finance, Group Legal Director, Head of Internal Audit, Director of Treasury, Director of Tax and the external audit partner regularly attend meetings. The Committee members meet regularly with the external audit partner and Head of Internal Audit without executives present. An annual review of the performance of the Committee was conducted for the year. In addition to feedback from members of the Committee, input was sought from the Chief Executive, COO & CFO, Director of Group Finance, members of the external and internal audit teams and Chairman of the Board. Overall, the review concluded that the Committee is responding appropriately to its terms of reference and will continue to develop its role. Priorities for the year will include revisiting the internal audit model after the strategic regresh, and reviewing how the Committee engages with the risk functions to ensure they continue to meet the needs of the business. The Committee will continue to review its membership to ensure the skills and experience align with the business as it develops.
C.3.2 Terms of reference The Committees terms of reference are available to view on the Governance section of our website. C.3.3 Availability of terms of reference The Committees terms of reference are available to view on the Governance section of our website. C.3.4 Advice to the board Where requested by the Board, the Audit and Risk Committee provides advice on whether the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company s performance, business model and strategy. C.3.5 Whistleblowing ITV has arrangements in place that enable employees to raise concerns in confidence about any possible risks to employees, customers, viewers or the Company. The Committee considers the process and procedures each year and is of the view that they are operating appropriately and that colleagues are aware of and trust the process. Every three years ITV asks the whistleblowing charity Public Concern at Work to carry out an independent review of these arrangements. ITV is a signatory to The First 100 campaign which seeks to champion enlightened organisations that are committed to ensuring that their arrangements meet best practice. C.3.6 Internal Audit The Group s internal audit activity is outsourced to Deloitte who report directly to the Committee. The Committee continues to believe that outsourcing offers access to the wide range of skills and resources in the various geographies required and endorsed its continuing use. The Committee keeps under review the internal audit relationship with Deloitte and the procedures to ensure appropriate independence of the internal audit function is maintained. In particular, the Committee has approved guidelines in relation to other advisory and consultancy work that Deloitte may undertake for the Company, which adheres to the underlying principle that they cannot implement controls that they audit. Other services provided by Deloitte included tax and corporate finance advice. The effectiveness of internal audit is assessed over the year using a number of measures which include (but are not limited to): an evaluation of each audit assignment completed using feedback from the part of the business that has been audited; and a high level annual review that is completed by obtaining feedback from senior management in each division. At the start of the year the Committee considers and approves the internal audit plan, which included audits across the Group as well as assurance over live projects. During the year the Committee reviewed findings from these internal audit reports, the actions taken to implement the recommendations made in the reports and the status of progress against previously agreed actions. C.3.7 Auditors Auditor engagement The Committee is responsible for agreeing the terms of the engagement letter. Throughout the year the Committee receives reports from the auditor (KPMG) on their plans and the progress and results of their work.
Further information on how the Committee engages with the Company s auditors can be found in the Audit and Risk Committee report of the Annual Report and Accounts. Audit tender and rotation The Committee monitors changes in regulation for auditor appointments including the Department for Business (BIS) guidance, which sets out how EU audit rules will be implemented in the UK. The BIS guidance specifically highlights that companies which tendered the audit engagement before the application date for the EU Regulation, that resulted in the reappointment of the incumbent auditor, should benefit from the transitional provisions where the tender would meet the objectives of the EU Regulation. KPMG were appointed as auditor of ITV plc in December 2003 prior to the Company becoming the parent company of the ITV Group on 2 February 2004. In 2012 we undertook a competitive tender and,applying the BIS guidance on the EU Audit rules. The next mandatory tender would be for the 2023 financial year and the next mandatory rotation would be for the 2024 financial year. Further information can be found in the Audit and Risk Committee report in the Annual Report and Accounts. Auditor effectiveness Information on how the Committee reviews the effectiveness of the external auditor can be found in the Audit and Risk Committee report in the Annual Report and Accounts. At the conclusion of each year s audit the Committee performs a specific evaluation of the performance of the external auditor. This is supported by the results of questionnaires completed by the Executive Directors and relevant senior management, both finance and non-finance, covering areas such as quality of audit team, business understanding, audit approach and management. Where appropriate, actions are agreed against the points raised and subsequently monitored for progress. There were no significant findings from the evaluation for 2017 and the Committee considered the external audit to have been robust and effective. Independence, objectivity and fees The Committee seeks to ensure the objectivity and independence of our auditor through: focus on the assignment and rotation of key personnel; the adequacy of audit resource; and policies in relation to non-audit work. The senior audit partner serves no more than five years continuously and the independent review partner serves no more than seven years continuously. Other key partners serve for no longer than seven consecutive years. The Committee monitors the tenure of partners and senior staff as well as former employees working for the Company. The appointment by the Company of former senior employees of the external auditor would require approval of the Committee. C.3.8 Audit and Risk Committee report and Non-audit services The Audit and Risk Committee report is set out in the Annual Report and Accounts. The Committee regularly monitors the other services being provided to the Group by its external auditor, and has developed a formal policy to ensure this does not impair their independence or objectivity. The policy is based on the five key principles which underpin the provision of other services by the external auditor. These are that the auditor may not provide a service which: places them in a position to audit their own work; creates a mutuality of interest; results in the auditor developing close personal relationships with ITV employees; results in the auditor functioning as a manager or employee of ITV; or puts the auditor in the role of advocate for ITV. The policy is reviewed annually and is available on the Governance section of our website. Other than in exceptional circumstances management and the Committee do not expect non-audit fees to be in excess of fees for audit and audit-related services. A report on the level of non-audit work provided by the auditor is given to the Committee half yearly.
D. Directors Remuneration Full information on the remuneration for Directors is set out in our Annual Remuneration Report. Membership for the Committee is in compliance with the Code. Terms of reference for the Remuneration Committee and our current remuneration policy can be found in the Governance section of our website. Remuneration for Non-executive Directors is a matter for the Board. We do not award options to Nonexecutive directors. E. Relations with shareholders E.1 Dialogue with shareholders The Board attaches a high priority to effective communication with shareholders and has regular and open dialogue with investors. The Board believes that continued engagement with shareholders is beneficial to both ITV and its stakeholders as it helps to build a greater understanding of investors views, opinions and concerns. The CEO and COO & CFO, Ian Griffiths and our investor relations team meet with many institutional investors throughout the year to keep them updated on the Company s performance against our strategy. These range from one-to-one meetings to group presentations including the Full Year and Interim results and the AGM. Specifically, following the Full Year and Interim results one-to-one meetings are held with our largest institutional investors. The Chairman also responds to shareholder queries and holds meetings where appropriate. The Company maintains a programme of engagement with the investment community, including results presentations, briefings to brokers and other sales forces and attendance at a number of investor conferences. Presentations given to the investment community are available to download from the Investor section of our website. We regularly seek feedback on the perception of the Company amongst shareholders and the investor community more broadly via our corporate brokers. Investor comments are fed back to the Board and its committees regularly. Private shareholders represent more than 90% of our shareholders, holding 2.75% of our shares. We encourage shareholders to register their email addresses to receive information from us in a timely manner. E.2 Constructive use of AGM The AGM is held in May each year. The Notice of Meeting sets out the resolutions being proposed. The Notice, together with any related documents, is made available to shareholders on our website or is mailed to them, if they have elected to receive hard copies, at least 20 working days before the meeting. Last year all resolutions were passed. Voting is done by way of poll and details of the votes cast on each resolution are published via our RIS and on our website. Shareholders are invited to meet the Directors prior to and after the formal proceedings. At the meeting the Chairman and CEO will review the Group s current trading which is followed by a question and answer session. E.2.2 Voting Separate resolutions are proposed on each substantially separate issue and all resolutions are taken on a poll. The level of votes lodged on each resolution is made available on a regulatory information service and on the Company s website as soon as possible after the meeting. Shareholders who are not able to attend the meeting can vote online in advance via our website or by completing and returning a form of proxy which can be found in the Investor section of our website.
E.2.3 Questions Save in exceptional circumstances, all members of the Board will attend the AGM. Committee Chairmen are asked by the Chairman to respond to relevant questions. E.2.4 Notice of AGM The Notice of meeting is posted to shareholders in March for our AGM in May giving at least 20 clear working days notice. Copies of Notices of meeting can be found in the Investor (AGM) section of our website.