Composition, Succession and Evaluation - Halfords Group plc Annual Report 2019

A Skilled and Experienced Board

The below graphic illustrates the number of Directors on the Board who have the relevant skills and experience alongside the years’ worth of experience combined.

Diversity and Inclusion

The Group recognises the importance of diversity and inclusion, including gender and ethnicity, at all levels of the organisation. The Group's Diversity Policy (the "Policy") is reviewed annually and sets out our commitment to eliminating unlawful discrimination and promoting equality of opportunity. The Policy is applied to the Group, including the Board, and it is considered that the background and experience brought to the Board by each individual Director exemplifies and personifies the Board's commitment to its Policy.

The Nomination Committee keeps under review the composition and diversity of the Board and the capability and capacity to commit the necessary time to the role in its recommendations to the Board. Whilst the Group does not apply a fixed quota on diversity to decisions regarding recruitment, the Nomination Committee considers the Policy and ensures we have a sufficiently diverse Board in terms of age, gender and educational and professional background and that the Board members work together effectively to achieve its objectives. The intention is to ensure the appointment of the most suitably qualified candidate to complement the Board and to promote diversity. Those appointed are deemed to be the best able to help lead the Company in its long-term strategy. At Halfords half of the Board is female, which exceeds the recommended target as published by the Hampton-Alexander Review ("Improving Gender Balance in FTSE Leadership") in November 2017, and we are committed to improving ethnic diversity at Board and senior management level with a target of having at least one person of colour on the Board by December 2023. The Board is well placed by the mixture of skills, experience and knowledge of its Directors to act in the best interests of the Company and its shareholders.

Board Evaluation

A formal Board effectiveness review is conducted on an annual basis. This includes an assessment of the Board, its Committees and individual Directors.

FY20

External Evaluation by Lintstock

FY21

Internal Evaluation

FY22

Internal Evaluation

Evaluation Process

Step One

Issued online surveys and cross-surveys to the Board members.

Step Two

Received and analysed the feedback with the Chair of the Board. The Chair then produced a note of action points to be addressed, which was circulated to the Board members.

Step Three

The Chair of each Board Committee received the evaluation report in relation to their Committee, and time was arranged to consider the findings and agree an action plan.

Step Four

Implementation and monitoring of the action plans.

The findings identified by the FY21 internal review are as follows:

Topic	FY21 Outcomes
Board composition	To ensure the Board has the right mix of skills, diversity and experience going forward.
Stakeholder oversight	To have more insight over suppliers and employee voice.
Succession and talent management	To ensure appropriate succession planning for Board and senior management.

The findings identified by the FY20 external review were as follows:

Topic	FY20 Outcomes	Progress Made in FY21
Strategic plan	The Board mentioned that continued delivery and clear reporting of the progress against the delivery plan is essential throughout the year.	The Board was pleased to note that the strategy outlined previously is regarded as correct and appropriate for the Company both in terms of longer-term aspiration and dealing with the COVID-19 pandemic. The Company has focused particularly on One Halfords Family (keeping colleagues and customers safe), and costs and efficiency and Organisational Design to ensure optimum performance of the business.
NED programme	The introduction of a NED programme to ensure the best contribution from the NEDs.	The regularity with which the NEDs visit the business (stores, garages, DCs and to attend listening groups). These activities help to ensure the NEDs fully understand the needs of the business.
Quality and structure of Board meetings	The Board highlighted the importance of getting out and about to the different locations around the Group and to split some of the Board and Committee meetings over two days. This would allow more time for location visits and ensure time is available to receive the required number of management presentations.	Despite some changes to the Board schedule due to the impact of COVID-19 which required meetings to be held remotely, the plan to conduct meetings over two days has been progressed. During the period, additional time was made available for committee activity and a separate session was held on strategy.
Quality of Board packs	The Board felt that more focus is required in Board papers to ensure the Board is able to effectively monitor the progress on delivery.	The Board packs (particularly the financial information) have been improved to allow and ensure greater focus on the metrics which are of key importance to the business.
Culture and talent	Being a people-driven, service-based business, the Board felt that a renewed review of our culture was necessary to ensure that it evolves and remains fit for purpose. The Board will also monitor the talent within the business and the implication of appropriate succession planning.	The new Company Values have been agreed and rolled out during the period. These have been well received and engagement has benefited as a result. This has been of particular importance during the COVID-19 crisis which has been challenging from an operational perspective.
Board training	All Board members to update on training they have received.	During the year, Directors have received updates on changes in corporate governance requirements and regular reports on the progress of the Company's Digital Transformation.

Gender

Female 50%

Male 50%

Educational Attainment

Level 7 – Master's degree = 1

Level 6 – Bachelor's degree = 3

Level 5 – Higher National Diploma = 2

Risk Management and Internal Control

The Board is responsible for the Group's risk management processes and the system of internal control. The Board considers its appetite in relation to the Group's risks, determining whether the risks and mitigating actions are appropriate. During the year, the Board conducted a review of significant risks. The Group's principal risks and uncertainties, and mitigating actions, are detailed in the Strategic Report in Our Principal Risks and Uncertainties.

The Board has established a continuous process for identifying, evaluating and managing risks faced by the Group and assessing the effectiveness of related controls to ensure an acceptable risk/reward profile. The Audit Committee considers the principal and emerging risks of the business and reviews the mitigating controls with senior management. During the year, a Risk Committee was formed with Executive Team support. The Committee provides oversight of the development of the risk management framework and also reports to the Audit Committee on regulatory and compliance risk. The Audit Committee uses all forums to discuss the management of risk and adequacy of the control environment with senior management.

The Internal Controls function was also strengthened during 2021, with a number of new colleagues focusing on ensuring the business is ready for prospective changes in the audit environment.

Our process for identifying, evaluating and managing the significant risks faced by the Group and assessing the effectiveness of related controls routinely identifies areas for improvement. The Board has neither identified nor been advised of any failings or weaknesses that it has determined to be material or significant.

The management of risk and review of the internal control environment is a continual process supported by all colleagues. The Board supports the development of risk maturity and a strong control culture and will continue to improve the quality of risk reporting.

IR Calendar Dates for
FY20–21

FY21 Prelim Results

FY22 20-week Trading Update

AGM

FY22 Interim Results

FY22 Q3 Trading Statement

Annual General Meeting ("AGM")

We aim to encourage our shareholders to receive communications by electronic means, helping to make the Company more environmentally friendly. Information available on the Company's website includes current and historic copies of the Annual Report and Accounts, full and half-year financial statements, market announcements, corporate governance information, the Terms of Reference for the Audit, Nomination, Remuneration and ESG Committees and the Matters Reserved for the Board.

The AGM gives all shareholders the opportunity to communicate directly with the Board and their participation is welcomed. It is the Company's practice to propose separate resolutions on each substantial issue at the AGM. The Chair will advise shareholders on the proxy voting details at the meeting.

We very much hope that we will be able to hold our 2021 AGM in person as we did in 2020, but we will continue to monitor the COVID-19 situation and will have regard to developments over the coming weeks ahead of the meeting.

By order of the Board

Tim O'Gorman
Company Secretary
16 June 2021

Corporate Governance Report Composition, Succession and Evaluation