PSAA Corporate Governance Framework

Appendix 1 – Principles underpinning PSAA’s corporate governance framework

PSAA has regard to the principles set out in the Code of Conduct for Board Members of Public Bodies and in the UK Corporate Governance Code, to the extent this can be applied to a small company without shareholders.

Code of conduct for board members of public bodies (Cabinet Office, 2011, updated November 2019)

All holders of public office are expected to work to the highest personal and professional standards. In support of this, all non-executive board members of UK public bodies are required to abide by the principles set out in the Code of Conduct issued by the Cabinet Office.

The Code is based on the seven principles of conduct underpinning public life:

• Selflessness: holders of public office should act solely in terms of the public interest.
• Integrity: holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships.
• Objectivity: holders of public office must act and take decisions impartially, fairly and on merit, using the best evidence and without discrimination or bias.
• Accountability: holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this.
• Openness: holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.
• Honesty: holders of public office should be truthful.
• Leadership: holders of public office should exhibit these principles in their own behaviour. They should actively promote and robustly support the principles and be willing to challenge poor behaviour wherever it occurs.

The UK Corporate Governance Code (Financial Reporting Council, 2018)

The main principles of the UK Corporate Governance Code dated July 2018 relevant to PSAA are set out below. This version of the Code applies to accounting periods starting on or after 1 January 2019. PSAA’s aim is to have regard to the intent of these principles, to the extent that they can be applied to a small company without shareholders.

1. Board Leadership and Company Purpose

• A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company contributing to wider society.
• The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture.
• The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed.
• In order for the company to meet its responsibilities to stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties.
• The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern.

2. Division of Responsibilities

6. The chair leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information.
7. The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision-making. There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the company’s business.
8. Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account.
9. The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently.

3. Composition, Succession and Evaluation

10. Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an effective succession plan should be maintained for board and senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
11. The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the board as a whole and membership regularly refreshed.
12. Annual evaluation of the board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively.

4. Audit, Risk and Internal Control

13. The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements.
14. The board should present a fair, balanced and understandable assessment of the company’s position and prospects.
15. The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives.

5. Remuneration

16. Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company’s long-term strategy.
17. A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management remuneration should be established. No director should be involved in deciding their own remuneration outcome.
18. Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, and wider circumstances.

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