Corporate governance.

Introduction

The regulatory and governance environment continued to evolve during 2011: the Bribery Act came into force in July 2011; issues such as risk appetite, diversity, succession planning, board evaluation and remuneration were brought to the fore through a number of consultations and reports; and amendments to the UK Corporate Governance Code were announced. GKN continues to be active in contributing to the governance debate and we have taken the necessary actions to ensure that our governance framework remains robust.

Board changes

As reported in my Chairman’s statement, we have strengthened the non-executive Director representation on the Board through the appointment of Tufan Erginbilgic. Furthermore, our succession planning delivered very capable internal successors for the roles of both Chief Executive and Chairman; Nigel Stein and Mike Turner bring extensive skill and experience to their respective positions and the continuity they provide will doubtless be of great benefit to the Group.

Remuneration

During the year, the Remuneration Committee undertook a thorough review of the policy and structure of remuneration for our executive Directors and a number of changes to the remuneration framework are proposed as a result. These are designed to improve the alignment of the remuneration framework with the interests of shareholders and our strategic objectives, in particular the delivery of long term sustainable earnings growth. Further information can be found in the remuneration report.

Diversity

In February 2011, Lord Davies published a report containing recommendations to address the balance of women on boards, including recommendations for listed companies to announce their goals in this regard. The report fostered much debate around gender diversity, culminating in the amendment of the UK Corporate Governance Code.

Achieving gender diversity is more difficult in certain sectors and, as an engineering business, the demographic profile of the current talent pool presents significant challenges. Notwithstanding this, we will work towards extending the female composition of our Board as vacancies arise and suitable candidates are identified, with an aspiration of 25% female membership by 2015.

Our prime responsibility, however, is the strength of the Board and our overriding aim in any new appointments must always be to select the best candidate.

Our governance framework is outlined in the following statement and is one which I believe will continue to contribute to the future success of GKN and its shareholders.

Roy Brown
Chairman

27 February 2012

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