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Corporate Governance Code

 

The Quoted Company Alliance (QCA) Code

The Directors recognise the importance of good corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’). The QCA Code was developed by the QCA in consultation with a number of significant institutional small company investors, as an alternative corporate governance code applicable to small and mid sized companies. The underlying principle of the QCA Code is that “the purpose of good corporate governance is to ensure that the company is managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the longer term”. To see how the Company addresses the key governance principles defined in the QCA Code, please refer to the below table. Further information on compliance with the QCA Code will be provided in the Company's next annual report and accounts for the year ending 30 November 2018.

This disclosure was last reviewed and updated on 26 September 2018

Deliver Growth

Principle Application Evidence
1. Establish a strategy and business model which promote long-term value for shareholders The Board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long term future. Due to the stable nature of Board membership and the varied contributions from directors during meetings, the Chairman is wholly satisfied that all Board members have a shared view of the Company’s purpose. Examples include their input to strategy days, which take place annually and their contributions at Board and committee meetings, together with a detailed description of the strategy and business model which is contained in the strategic review in the Company's 2017 Annual Report and Accounts (pages 6-20).
2. Seek to understand and meet shareholder needs and expectations Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.
Twice-yearly investor roadshows and analyst presentations are held, alongside the Company's AGM, that affords all shareholders the opportunity to take part in the ‘shareholder event’ at our offices in Sheffield (for 2018) and see the business first hand, as well as engage directly with members of the management and the Board.

The Company's Annual Report and Accounts contains detailed information regarding Synectics’ strategy and decisions. There are no concerns at present regarding shareholder voting intentions or patterns that would warrant additional investigation.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.
The Board undertakes a detailed review of the results of the annual Employee Opinion Survey, which provides an insight to the views of the workforce on the Company and is considered by the Board every September.

Additionally, the Board also undertakes significant investor relations activities as described on page 38 of the Company's 2017 Annual Report and Accounts.

Synectics takes corporate social responsibility seriously and its activities to support this are explained in its Annual Report and Accounts.

Synectics engages in a number of different activities, which include investor roadshows, Employee Opinion Surveys (which the Board receives the full results of) and outputs and outcomes of these activities are discussed at length during Board meetings.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation The Board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).
The Audit Committee undertakes a detailed review of the approach to risk management on behalf of the Board (though the Board retains overall responsibility for setting both the framework and risk appetite of the Group, in line with best practice). Details can be found on page 50 of the Company's 2017 Annual Report and Accounts.

The Group has clear procedures for capital investment appraisal, contract risk appraisal and financial reporting. The Audit Committee and Board also receive the detailed risk reviews on a twice yearly basis as well as business risk registers which are used to inform strategy setting (as well as informing the Group’s internal audit strategy).

 

Maintain A Dynamic Management Framework

Principle Application Evidence

5. Maintain the Board as a well-functioning, balanced team led by the chair

The Board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The Board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a Board judgement.

The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.
The obligations on directors to promote the interests of the company are enshrined within s172 of the Companies Act 2006. Additionally, these obligations are made clear to all Board members during the induction process.

The service standard for Board members receiving papers and information is one week in advance of Board meetings. Additionally, soft-copies of all Board papers are sent to Board members on the day of publication.

The current Board composition of two Executive Directors and four Non-Executive Directors (including the Chairman) is considered appropriate.

The Board is supported by an appropriate committee structure, comprising separate Audit and Remuneration Committees. The role of the Nominations Committee is performed by the Board as a whole.

All Board members have confirmed they have sufficient available time to undertake their duties effectively. A register of interests, including external appointments, is maintained by the Company Secretary and any subsequent external appointments require the express approval of the Chairman.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities The Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition.

The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a Board. As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change.
The Board contains an appropriate mix of diverse skills, personal qualities and capabilities. This is continually assessed by the Chairman and Chief Executive and formally, as part of an annual review by the Chairman (with the Chairman’s review conducted by the Senior Independent Director).

The latest review of Board effectiveness did not highlight any areas of concern. Additionally, neither the Chairman, Chief Executive or SID has received any representations to this effect.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for Boards. No member of the Board should become indispensable.
A review of Board effectiveness and individual directors is undertaken annually.

Board performance is undertaken internally at present, though an external review may be considered in a future year. Details are available on the Company's website under Governance > The Board > Role & Performance and are included on page 38 of the Company's 2017 Annual Report and Accounts.

Board composition is reviewed regularly, with Dennis Bate retiring in April 2018. The Company's most recent Board member, Michael Butler, was appointed in 2016.
8. Promote a corporate culture that is based on ethical values and behaviours The Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the Board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.
The maintenance of the culture of the Group is a specific personal objective of the Chief Executive.

Synectics’ culture is guided by many different activities, which include senior management conferences, feedback following the Employee Opinion Surveys and its performance management framework.

A recruitment policy, used consistently across the business is in place, together with training and appropriate performance management and development frameworks, which are aligned to the culture and needs of the business. The appropriateness of the reward framework is assessed by the Remuneration Committee and comprises both individual objectives aligned to the business interests and group elements.

Consistency of brand and messaging is in place, with the Annual Report and Accounts clearly articulating the importance of culture to the business and how this is led by everyone, including the Board and Chief Executive. The Company's significant emphasis on its people and values are included within the strategic review, details of which are on pages 6-20 of the Company's 2017 Annual Report and Accounts and in the Our People section of the Company's website.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
  • size and complexity; and
  • capacity, appetite and tolerance for risk.
The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.
The Board is satisfied that the governance arrangements for the business remain appropriate and that the delegations in place are effective and with strong oversight and controls. This is, of course, subject to regular Board and managerial oversight and review.

 

Build Trust

Principle Application Evidence
10.Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders A healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.

In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist:
  • the communication of shareholders’ views to the Board; and
  • the shareholders’ understanding of the unique circumstances and constraints faced by the company.
It should be clear where these communication practices are described (annual report or website).
As an AIM quoted company, Synectics has additional obligations relating to seeking shareholder approval for certain decisions. Additionally, Synectics has an open dialogue with both its shareholder and stakeholder base, through many of the events it holds during the year.

Synectics holds investor roadshows following publication of its annual and interim results, as well as an analyst presentation. Additionally, the Chairman, Senior Independent Director and Chief Executive hold informal meetings with shareholders who request such meetings and the outcomes of any discussion are reported to the Board as a whole.

This information is included in the Company's Annual Report and Accounts and on its website.

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