Matters of compliance with the Combined Code on corporate governance (the Combined Code)
The principle underlying the Combined Code is “comply or explain”, and the listing rules of the London Stock Exchange place a continuing obligation on listed companies to make a statement in their report and accounts regarding compliance with the Combined Code, and to give reasons for any areas of non-compliance.
We set out below our explanation of the bonus scheme for the executive directors, and also our views on the independence of our independent directors.
Bonuses
During the year, the executive directors participated in a new bonus scheme which applies equally to all employees. The maximum bonus that can be earned is £1,000 per person. This does not comply with provision B.1.1. of the Combined Code in that performance related elements do not form a significant proportion of the total renumeration package. The Company believes that the payment of significant bonuses does not incentivise the directors to align their interests with those of shareholders. The commitment and high performance standards of the directors are pre-requisites of their roles and as such as already reflected in the level of renumeration.
Independence of independent directors
Background
The Combined Code states that the board should identify each independent director it considers to be independent, and the Code then lists various circumstances which may appear relevant to its determination. This includes (amongst others) if the director has served on the board for more than nine years.
At Games Workshop the board has had to confront this list of circumstances as one of the independent directors have served for more than nine years.
In making this assessment the board has taken into account the personal attributes of each director in relation to the current and future needs of the board. Independence (like judgement and wisdom) is not an attribute which can be measured by reference to a checklist. It is rather an attribute which the members of the board can observe being demonstrated by a director in his actions and interactions with other members of the board as it faces the various issues which are placed before it. Independence is the absence of complacency, lazy thinking and a reluctance to accept the status quo.
Regarding the specific Combined Code circumstance of service of over nine years, the board's position is as follows.
The 'nine year rule' is a handy guide to the risk of directors becoming 'stale'. The board considers this risk periodically, but has not yet found it to be an issue at Games Workshop. If it did, it would react accordingly. Indeed, at present the board feels that both the long-term nature of the succession planning referred to above, and the requirement for members of the board to have a real understanding of, and empathy with, the Games Workshop Hobby, point in favour of retaining the experience the board currently has.
Conclusion
Based upon its assessment, which focuses on each director's attitude towards making his best contribution to the progress of the Company, the board considers that both of the independent directors are independent.
