The Board is committed to achieving high standards of corporate governance, integrity and business ethics. The Board is responsible for establishing the strategic direction of the Group, monitoring the Group's trading performance and appraising and executing development and acquisition opportunities. During the year the Company held regular Board meetings at which financial and other reports were considered and, where appropriate, voted on and has also held ad hoc meetings as required to deal with specific issues.
STM has formally adopted the Quoted Companies Alliance code for Small and Mid-sized Quoted Companies ("QCA"). The statements and explanations below articulates how the group abide by the ten Principles of the QCA Code, and identifies any matters of note in relation to Governance. The Governance framework is a living process and will continue to evolve as the business matures and expands.
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
STM strives to be the financial services provider of choice for the both the UK and the UK expatriate market in relation to financial services products, specifically pension and life assurance solutions. Financial intermediaries that advise this market will recognize that STM offers an unrivalled service level to both them and their clients, putting the client at the forefront of its business proposition.
It is clear that STM Group's underlying client base is primarily the UK expatriate market and, to a lesser degree, foreign nationals that have worked in the UK. Our market segment has shifted from the HNWI Trust and Company sector to the Mass Affluent sector for Pensions and Life business over the last five years or so. However, our key driver is the UK Expat market, and this will remain the mainstay of our business for years to come, having focused most of our business development efforts in building these distribution channels. In addition to the above, the Group have stated their intention to also products to UK residents, so as to reduce any concentration risk from operating in purely one sector.
Expanding on the above, STM's business model is to:-
- continue to promote its Pensions Administration and associated Life assurance products to international mobile individuals with a focus on those that have previously worked in the UK.
- support its customers and intermediaries, STM will operate its pension administration services from a number of key jurisdictions so as to meet the customers' needs.
- strive to operate at the highest of service levels to both its customers and financial intermediaries in all jurisdictions.
- always operate in a compliant manner with local laws and regulations.
- rely on its network of financial intermediaries for the introduction of its business, and will continue to do so in the future. It is not proposed that STM will offer a retail product direct to the public, nor will it offer investment, financial or tax advice.
- differentiate itself from its UK competitors by being able to understand the more complex requirements of the UK expatriate market.
- differentiate itself from its International competitors through service levels, and a more comprehensive product / jurisdictional offering.
- To identify and promote products, through its intermediary partners, to UK residents.
The Board has adopted a three year strategy which focuses on a number of component parts, these include:-
- to continue to focus our business in the life and pensions sector
- an intention to increase the introducing intermediary network
- a diversification of the pensions and life product range so as not to be so reliant on limited products
- an intention to be seen as a more UK focussed business by increasing our UK regulated products to offer to UK residents as well as the expat market
- a drive to improve margins and the customers journey through efficiency and IT systems
- to seek opportunistic acquisition targets for both QROPS integration, as well as expansion in niche areas of the Pension and Life markets.
- a strategy of pro-actively engaging with key stakeholders, including shareholders and regulators
The above, embedded within a three year business plan, demonstrates an intention to deliver long term growth to the shareholders in a disciplined and clear manner, whilst not subjecting the company to unnecessary risk.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Group is committed to communicating openly and transparently with its shareholders to ensure that its strategy and performance are clearly understood. We communicate with shareholders through the Annual Report and Accounts, full year and half-year announcements, trading updates and the annual general meeting, as well as face-to face meetings with the larger shareholders. Further information on this and corporate news is also available on our website at https://www.stmgroupplc.com/media/media.
In addition to the above, it is our duty as a Board to develop a good understanding of the needs and expectations of all elements of the shareholder base. We do this by regular meetings with our institutional and larger shareholders at the time of presenting our interim and final results in the financial year, as well as on an adhoc basis. Our smaller shareholders have the ability to communicate directly with the company via our contact page on the website https://www.stmgroupplc.com/contact/contact-us. In addition the AGM allows attendance of any shareholder, allowing further access to the board as a whole.
The responsibility for investor relations on a day-to-day basis rests with the CEO, supported by the CFO, although it is made clear that the Chairman, as well as any other non-executive directors are happy to meet institutional shareholders at their request.
The Board consider feedback by shareholder's a very important part of understanding how this key set of stakeholders view the Board's performance. This is received after each presentational road show to the shareholders.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that long term success of the Group relies upon good relations with a range of different internal and external stakeholders, not just our shareholders. The STM board identifies these various stakeholders and attempts to understand their needs, interests and expectations. These needs and interests and expectations are embedded into the company's business model and strategy, and most importantly within our code of conduct which can be found on our website at http://info.stmgroupplc.com/our-company/our-people/.
This sets out how we as a group, and as individuals throughout the business are expected to conduct ourselves when dealing with our stakeholders. It also requires our interaction with stakeholders to be fair and transparent, putting the customer at the heart of our decision making processes.
Our main internal stakeholders are our colleagues. Our ability to fulfil customer services efficiently and proactively is dependent on ensuring we have a motivated and talented workforce. This can only be achieved by having a comprehensive two-way engagement between colleagues and management, to foster a culture or trust and good work ethics. The Group achieves this through regular engagement of the various operating divisions, a supportive training schedule, a pro-active encouragement to engage in professional qualifications, as well as an annual appraisal process.
Our main external stakeholders are our customers, intermediaries, regulators and suppliers, such as our banking partners. It is our duty to operate with all these parties in a correct and pro-active manner ensuring that we meet prescribed timelines for submissions of information, as well as ensuring that any communications are comprehensive. When dealing with certain types of communication and services, we intend to operate to pre-agreed service levels so that each stakeholder is able to understand what can be expected of STM.
In relation to our customers, the interests of this key stakeholder are at the forefront of our minds, ensuring that we treat our customers fairly. We ensure that we have suitable mechanisms in place so that our customers can tell us if they are not happy, and any such case would follow our normal complaint procedures..
STM has an open-door policy towards all our stakeholders and we encourage feedback, both positive and negative, so that we can improve how we do things. This can be done through the contact form at https://www.stmgroupplc.com/contact/contact-us.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board is ultimately responsible for the Group's risk management framework, requiring it to identify and address all relevant risks in order to execute and deliver on its strategy. Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take.
During the past year the Group has introduced a formal risk management framework which has been embraced in the various jurisdictions in which the Group operates. This risk management framework and appetite is embedded in the Group (and subsidiaries') management and governance processes and is overseen by the Board. In addition the Board has adopted a formal Risk Appetite Statement and other relevant policies. These have been cascaded down and adapted, as appropriate, and adopted by the various operating subsidiaries. Each subsidiary board maintains its own risk register, and puts in actions to effectively mitigate that risk, where applicable.
The Risk Management function oversees the implementation of any new policies throughout the Group. The compliance function in each of the jurisdictions provides assurance to the Group Audit & Risk Committee on regulatory and reputational risk through the completion of an annual compliance monitoring plan.
The directors of STM Group Plc confirm that they carry out an assessment of the principal risks facing the Group, including those that could threaten its business model, performance and solvency. The audit and risk committee meet quarterly at least and formally report to the board on the various risks across the Group. The review of risks is embedded within the agenda, and is thus continually reviewed as part of an ongoing process.
Further assurance that our risk management processes are embedded throughout the business is obtained via our Internal Audit team.
The table below sets out the principal risks and uncertainties facing the Group and how they are currently mitigated.
Description of risk
Examples of mitigating activities
Distribution and market demographics
The businesses operate primarily in the British expatriate market which is serviced by a limited number of intermediaries and product providers thus creating a competitive environment.
A circumstance could arise which would adversely impact on the Group's reputation, including adverse publicity from the activities of legislators, pressure groups and the media.
Loss arising from regulatory changes in the markets within which the Group operates or breach of existing laws and regulation.
The Group could be adversely affected if there was a loss of key personnel or an inability to recruit individual with the appropriate skills set.
Cyber security, denial of service and data loss
Failure to adequately manage cyber threats could result in operational disruption, data loss and consequently reputational damage and financial loss.
The Group has exposure to the following financial risks:
These risks are addressed within Note 22 of the financial statements
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair
The Board is responsible to shareholders for the proper management and governance of the Group and has certain matters specifically reserved to it for decisions on such topics. These include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business and approval of budgets and financial statements.
The roles of Chairman and Chief Executive are distinct, as set out in writing and agreed by the Board. The Chairman is responsible for the effectiveness of the Board, directing strategy and ensuring communication with shareholders. He also takes overall responsibility for the conduct of the Board, and adherence to its stated policies, including the governance framework. The Chief Executive is responsible for overseeing the delivery of the strategy and the day-to-day management of the Group by the senior executive team. The Board is committed to continually developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business. The Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. Further details on the Board can be found on page https://www.stmgroupplc.com/company/board.
The Non-Executive Directors provide a strong independent element to the Board and bring experience at a senior level of business operations and strategy. The Company Secretary is responsible for ensuring that Board procedures and applicable rules and regulations are observed.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The current Board composition and profiles of the individual board members can be found on https://www.stmgroupplc.com/company/board. All members of the board have relevant experience which they bring to the business.
The STM board have, in their opinion, an appropriate balance of sector, financial and public market skills and experience, as well as an appropriate balance of personal qualities and capabilities to successfully execute the Group's strategy. The Board fully supports and funds any training, formally or otherwise, that is required by any individual board member so as to ensure that their knowledge and experience remains relevant and effective.
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
A formal external evaluation of the Board will be conducted every three years commencing in 2019, with an internal process being in place for the other years. STM are developing a process to evaluate the various members of the board and of the board effectiveness as a unit. This will encompass the completion of a questionnaire about the effectiveness of the board, and a self-assessment of their own contributions which will then be returned to the chairman. It is envisaged that this will then be used by the chairman for one-to-one discussions, followed by a collective de-brief.
To date, board evaluation has been carried out internally, and in an informal manner.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board must promote a corporate culture that is based on sound ethical values, standards and behaviours. This culture is visible in the board's actions and decisions, as well as those of the executives and senior management team. These corporate values guide the objectives and strategy of the business. These corporate values form the backbone of our Code of Conduct policy for the business. Our long-term growth expectations are underpinned by the principles within this code of conduct.
The Group is promoting a culture of a good customer experience and that a fair customer outcome is at the heart of the decision making process, aligned to a positive and pro-active relationship with our stakeholders.
This culture has been communicated to all members of the business and is reinforced by the training program which all staff participate in. This starts with the code of conduct forming part of any new member of staff's induction program, and the application of the code of conduct is considered as part of all STM employees' annual appraisal process.
It is important for the Board to ensure that any acquisitions, both past and future, are instilled with the same corporate values and culture that STM aspires to. In this regard any new company joining the Group will receive an induction to STM and its code of conduct and principles which would be required to be adopted by all members of staff.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The board members have a collective responsibility and legal obligation to promote the interests of the group, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chairman of the board.
The Board comprises three executive and four independent non-executive directors (including the Chairman) and the Board committees are comprised only of non-executive directors. The independence of directors will be assessed periodically as part of the external evaluation process of the Board and its individual members. All non-executive directors have been appointed from outside of the STM Group, and have no beneficial interest in the Group, and are thus deemed truly independent. In addition all non-executive directors are professionals in their respective fields and have their own institutional ethics and guidelines to abide by.
One executive director is female the other two executive directors are male, as are all the NEDs.
The Board meets at least six times during the year. To enable the Board to discharge its duties, all directors receive appropriate and timely information. Briefing papers are distributed to all directors in advance of the Board meetings. There is a formal agenda followed at all board meetings which ensures discussions and decisions to be made on all strategic, financial and operational matters affecting the business.
The recruitment of a Chief Operating Officer has given more depth to the Board and is part of building a more robust structure, and it is also recognised that this will give a roadmap for succession planning within the Group.
The Board has established an Audit and Risk Committee and a Remuneration Committee both with formally delegated duties and responsibilities. The Directors do not consider that, given the size of the Board, it is necessary at this stage to have a nomination committee. The Audit and Risk Committee comprise Malcolm Berryman, as the Chairman, Robin Ellison and Graham Kettleborough. The Remuneration Committee comprises all the Non Executive Directors, with Malcolm Berryman also as Chairman. These committees will meet prior to the main board meetings so that any recommendations flowing out from them can be reported to the Board, where appropriate.
Audit & Risk Committee
The Audit & Risk Committee reviews the integrity of the financial statements of the Group, announcements relating to financial performance, accounting policies, the application of critical accounting judgements and practices, the operation of internal controls, the effectiveness of the financial reporting policies and systems and has delegated power from the Board to exercise the power from shareholders to agree fees for external auditors. It is responsible each year for satisfying itself on the independence and objectivity of external auditors. The Audit Committee meets at least four times a year.
The Audit & Risk Committee reviews the Group's risk appetite and framework, its policies, methodologies, systems, processes and procedures and the monitoring of all these areas (through a three lines of defence model, the first line being the business systems and controls in place to prevent and detect errors, the second provided by compliance monitoring and the third by internal and external audit review).
The Audit & Risk Committee has primary responsibility for the Group's Risk Appetite Statement which sets out the Group's attitude to risk and the limits of acceptable risk taking. The Committee establishes the high level qualitative Risk Appetite Statement for the Group and requires the Subsidiaries to link their own Risk Appetite to the Group version. The subsidiaries are required to identify and manage Key Risk Indicators. The statement is subject to annual review by the Risk Committee and the Group Board. The Committee makes recommendations to the Board in respect of all risks faced by the Group outside of its declared risk appetite.
The Audit & Risk Committee is responsible for the Risk Framework with all risks identified being recorded in the Corporate Risk Register and reviewed by the Committee on a biannual basis.
The terms of the Audit and Risk committee can be found at https://investorcom.sitefinity.cloud/docs/librariesprovider45/archive/governance/stm-remuneration-committee-tor.pdf
The Committee meets at least twice in each year and at such other times as the Chairman of the Committee sees fit. The Chairman of the Committee is appointed by the Board. The quorum for the Committee is two.
The duties of the Committee are to:
- determine and agree with the Board the policy for the remuneration of the Chairman, Executive Directors and other members of the Group Executive team;
- determine individual remuneration packages including bonuses, incentive payments, share options and any other benefits;
- determine the contractual terms on termination and individual termination payment;
- be informed of and advise on changes in benefit structures in the Group; and
- agree the policy for approving expense claims of the Chief Executive and the Chairman of the Board.
The terms of the Remuneration committee can be found at https://investorcom.sitefinity.cloud/docs/librariesprovider45/archive/governance/stm-remuneration-committee-tor.pdf
A table of the attendance record for the year to 31 March 2019 is shown below.
|Board meetings *||Audit and Risk Committee||Remuneration Committee*|
1 Michael Riddell resigned on 23 May 2018
2 Graham Kettleborough was appointed on 10 August 2018
3 Duncan Crocker was appointed on 3 September 2018
4 Pete Marr was appointed on 30 January 2019
Principle 10: Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
A healthy dialogue between the STM board and all of its stakeholders, including shareholders, is paramount in enabling all interested parties to come to informed decisions about the business. The Board will attempt to ensure that this happens at all times.
In particular it is imperative that appropriate communication and reporting structures exist between the board and all constituent parts of the shareholder base. How the Board achieves this is addressed above. Announcements relating to Annual Reports and Notices of AGMs can be found in the investor section of our website at https://www.stmgroupplc.com/media/media
Furthermore, the Board will always publish the results of any voting decisions by the shareholders; this will primarily be at the Annual General Meeting. The latest voting decisions are published on the website at
https://www.stmgroupplc.com/html/investor/shareholder_profile#Shareholder.Where there is significant divergence of voting opinion then the Board commits to analysing such divergence to understand the various opinions of the shareholders.
This QCA Statement was reviewed and approved in March 2019.