Man Group plc - Annual Report 2007

The Board is committed to high standards of corporate governance and supports the need for clear standards to be laid down to safeguard the interests of shareholders and other stakeholders. The Board is accountable to the Company’s shareholders for good corporate governance.

The Company’s shares are listed on the London Stock Exchange and the Company is therefore required to comply with the Listing Rules of the UK Listing Authority. These Rules require listed companies to include a statement of corporate governance in their annual reports relating to compliance with the principles and provisions set out in Section 1 of the Combined Code (2003) on Corporate Governance describing how the Company has applied those principles and whether or not the Company has complied with those provisions throughout the year.

The directors consider that the Company has complied throughout the year ended 31 March 2007 with the provisions of Section 1 of the Combined Code (2003).

The Board of Directors
As at 31 March 2007, the Board comprised two executive directors and six non-executive directors (including the Chairman). However, from 31 May 2007 the number of executive directors increased to three following the appointment of Kevin Hayes as the new Finance Director.

The roles of Chairman and Chief Executive are separate, with responsibilities clearly divided between them. The Chairman is able to dedicate significant time to the business and has no other material commitments outside Man Group. Non-executive directors represent the majority of the Board. Of the six non-executive directors, Jon Aisbitt, Alison Carnwath, Dugald Eadie and Glen Moreno are considered to be independent non-executive directors. The Board is satisfied that there are no relationships or circumstances which are likely to affect, or could appear to affect, the judgement of those directors. The Board makes this assertion having considered and taken full account of the fact that Glen Moreno was first appointed to the Board in 1994. Following a rigorous review of his performance and his independence the Board, including all of the other members deemed independent, is completely satisfied that Glen Moreno is independent in character and judgement. Given his experience, credibility and commitment, he makes a significant, valuable and challenging contribution to both governance and strategic issues. Accordingly, independent non-executive directors comprise the majority of non-executives and half of the members of the Board (excluding the Chairman). Alison Carnwath is considered to have “recent and relevant financial experience”. Glen Moreno is recognised as the senior independent non-executive director and is available to shareholders in the event that they have concerns that have not been resolved through the normal channels with the Chief Executive or Chairman. The Chairman frequently attends meetings with institutional investors and always attends results presentations. The non-executive directors met together twice during the year without the Chairman or executive directors present. On a separate occasion the non-executive directors, including the Chairman, met without the executive directors present.

Prior to their appointment, potential non-executive directors are asked to confirm that they have sufficient time available to meet what is expected of them, including the membership of relevant Board committees. They are also subject to a review to assess their independence and to confirm that they have no other relationships that might affect their judgement. The non-executive directors are appointed by the Board and stand for re-appointment at the first Annual General Meeting of the Company following their appointment. They hold office for a three-year period, subject to the Company’s Articles of Association, whereupon they may stand for re-appointment by shareholders in General Meeting. They are entitled to a fee for their services plus reasonable out of pocket expenses incurred for Group purposes. They are not entitled to any pension or bonus and cannot participate in any Man Group share-based incentive schemes. They are not entitled to any compensation for early termination, save as may be provided for in general law. Non-executive directors are not required to hold shares in the Company but are encouraged to do so. All non-executive directors held shares as at the year-end.

The Board is confident that the non-executive director fees structure currently in place enables it to attract and retain non-executive directors of sufficient calibre and experience to bring balance, insight and challenge to the role. There has been no change to the fee arrangements for the year ended 31 March 2007. Further details appear in the Remuneration Report.

All directors are subject to re-appointment at intervals of no more than three years. Any directors appointed by the Board are subject to re-election by the shareholders at the Annual General Meeting following their appointment. All directors have access to the advice and services of the Company Secretary, Peter Clarke, who is responsible to the Board for ensuring that Board procedures are followed and that there is compliance with applicable rules and regulations. In addition, the Board has established a procedure that enables any director to have access to independent professional advice at the Group’s expense. Appropriate directors’ and officers’ liability insurance is also in place. The removal of the Company Secretary is a matter for the Board as a whole. Although the Company Secretary, Peter Clarke, is also Group Chief Executive, the Board considers his position as Secretary is appropriate given his professional qualifications and experience.

The Board holds meetings on a regular basis, at least six times per year and additionally for specific purposes as and when required. During the year there were six Board meetings including a four-day strategic planning session attended additionally by senior executives below Board level from across the Group’s activities. All Board members attended every meeting during the year except Glen Moreno who was absent for one meeting. To enable the Board to discharge its duties effectively, all directors receive appropriate and timely information with briefing papers distributed in advance of Board meetings. All new directors receive an appropriate introduction to their responsibilities and the Group’s operations, by way of a detailed briefing pack and meetings with relevant senior management. All directors also receive regular updates on changes and developments to business, legislative, regulatory risk and financial matters as well as details of any investor relations issues or specific views of major shareholders.

The Board has ultimate responsibility for the management and performance of the business including the system of internal controls and corporate governance, as well as the development of strategy and major policies. To this end the Board has adopted written delegated authorities which identify matters specifically reserved to it for decision and which also provide for a tiered approval process for decisions below Board level, encompassing strategic, expenditure, financial, risk and control authorities. As part of a continuing process, the Board reviewed these delegated authorities during the year to take account of business developments, governance and regulatory change, and Group risk appetite. The Board formally delegates certain of its responsibilities to committees by way of written terms of reference. Details of each principal committee, its membership and the terms of reference are summarised below. Their composition and terms of reference are available on the Group’s website www.mangroupplc.com. As usual, the Chairman of each Committee will be attending the Company’s Annual General Meeting to answer any questions regarding the Committees’ activities and responsibilities.

Each Board Committee is expected to conduct an annual self appraisal of its performance which includes taking the views of the Board on the performance of that Committee and the Chairman of the relevant Committee reports to the Board on the results of the process. During the year a comprehensive and rigorous evaluation process was conducted on the overall effectiveness and performance of the Board and its committees. This was led by the Chairman, using a detailed questionnaire, the results from which were then reviewed and discussed collectively by the Board, and areas for improvement agreed and actioned. Additionally, the senior independent director in consultation with the rest of the Board conducted a review of the Chairman’s effectiveness, and the Chairman led an individual director assessment process.

Nomination Committee
The Nomination Committee is appointed by the Board and is responsible for identifying, assessing and nominating for the approval of the Board, candidates to fill vacancies as and when they arise. This includes consideration of the re-appointment of non-executive directors at the conclusion of their specified term of office and the re-election by shareholders of any director under the retirement by rotation provision of the Company’s Articles. It is also responsible for considering succession planning for both the Board and senior management positions. The Committee comprises all of the non-executive directors and accordingly has a majority of independent non-executive directors. Apart from the resignation of Jonathan Nicholls from the Board in July 2006, there were no changes to the composition of the Committee during the year. The Board considers that the position of Group Chairman necessitates a leading role in the composition and balance of the Board and accordingly the Committee is chaired by Harvey McGrath. The Committee meets as and when required. There was one meeting during the year to consider the re-appointment of non-executive directors at the conclusion of their terms of office and the re-election of directors under the retirement by rotation provisions of the Company’s Articles. All members were present at the meeting.

Remuneration Committee
The Remuneration Committee is appointed by the Board and is responsible for setting remuneration for all executive directors and the Chairman of the Board, and agreeing the framework and policy for the remuneration of directors and other members of senior executive management, including pension rights and eligibility for benefits under long-term incentive schemes. The Committee approves the terms of any service agreement to be entered into with any executive director and any proposed compensation for termination. The Committee is exclusively responsible for selecting and appointing any remuneration consultants who may advise the Committee. The Remuneration Report, includes details of the Committee’s activities, a statement of the Company’s remuneration policy and the procedures for determining executive directors’ remuneration. The Remuneration Committee comprises four independent non-executive directors: Dugald Eadie (Chairman), Jon Aisbitt, Alison Carnwath and Glen Moreno. The Committee met twice during the year and all members were present on each occasion. During the year the Committee reviewed its terms of reference. Apart from the resignation of Jonathan Nicholls from the Board in July 2006 there were no changes to the composition of the Committee during the year.

Audit and Risk Committee
The Audit and Risk Committee (ARCom) is appointed by the Board. It comprises the four independent non-executive directors and is currently chaired by Alison Carnwath. Jon Aisbitt will replace Alison Carnwath as Chair of the Committee for the year ending 31 March 2008. A further independent non-executive director, Jonathan Nicholls, resigned from the Committee on 20 July 2006 as a requirement of his appointment as an executive director of Old Mutual plc.

The Committee has formal terms of reference which are available on the Group’s website. The terms of reference were updated in the year to formalise changes in the Committee’s practices and to reflect the evolution of best practice for audit committees.

ARCom met eight times during the year, compared to six times in the previous year. The increased number of meetings reflects the additional time required by the Committee in order to address matters relating to the planned IPO of Man Financial. Of these meetings, one was a brief session for ARCom members only held as part of the strategic off-site meeting and dedicated to ARCom’s approach and work for the forthcoming year and two were focussed on discussions of the interim and final accounts. Except for Glen Moreno, who was unable to attend one meeting, all members were present at each meeting. With the exception of the session at the strategic offsite meeting, Stanley Fink (Chief Executive), Peter Clarke (Group Deputy Chief Executive and Finance Director) and the Group Financial Controller were present at all meetings and Harvey McGrath (Chairman) was present at all but one of them. Kevin Davis (Managing Director, Man Financial), the Heads of Group Risk and Internal Audit and the external auditors were invited by the Chairman of ARCom to attend part or all of five meetings. A manager within Group Risk acted as secretary to the Committee.

The Chairman of the Committee met separately with the Head of Internal Audit and with the external auditors without any other members of management present and reported to the Committee on these discussions. The full Committee had a meeting with the external auditors once during the year without any other members of management present. ARCom members received all reports prepared by Internal Audit together with management’s responses to any recommendations.
With the exception of the meetings relating principally to the financial statements and the session at the strategic offsite at all other meetings ARCom received reports from:

• the Head of Internal Audit summarising the status of the internal audit programme and any significant findings from audits completed in the period since the last meeting;
• the Chairman of ARCom on any relevant discussions with the external auditors since the last meeting;
• the Finance Director on any relevant discussions between senior management and the external auditors;
• the Group Financial Controller or the Finance Director on updates to the Group’s financial reporting and on the schedule of audit and non-audit fees;
• the Head of Group Risk on the Group’s risk profile, including significant legal and compliance matters, and reports on matters discussed at the Group Risk Committee; and
• the Head of Corporate Responsibility provides a written update as to the status of the programme and the minutes of the Corporate Responsibility Committee meetings.

Where possible, separate reports were received for Man Investments and for Man Financial.
ARCom examined regulatory compliance issues and corporate responsibility reporting and also reviewed its forward agenda at the end of each meeting. Over the course of the year the ARCom received regular reports on the progress of the investigation into the circumstances relating to the investor losses arising from the failure of PAAF.

A theme for ARCom in the period was the examination of risk issues in relation to the proposed IPO for Man Financial. Different aspects of this were discussed at a number of meetings. The principal recurring matters were the introduction of an Internal Controls Best Practice (ICBP) programme, reflecting Sarbanes-Oxley requirements, and an examination of the effects of US GAAP on Man Financial reporting.

ARCom has explicit authority to investigate any matters within its terms of reference and has access to all resources and information that it may require for this purpose. It is entitled to obtain legal and other independent professional advice and has the authority to approve all fees payable to such advisers.