We have reconsidered our purpose as a company. As a provider of an essential service in our region our purpose is to provide great water and more for the North West. Our culture of behaving responsibly has been part of the United Utilities ethos for many years, and aligns with our purpose.
Sir David Higgins
- Sir David Higgins met the independence criteria as set out in provision 10 of the 2018 UK Corporate Governance Code (the Code) when he was appointed.
- The Code requires that at least half of the board, excluding the chair, should be non-executive directors whom the board considers to be independent. At United Utilities, six out of the remaining eight directors are independent non-executive directors.
- The company secretary attends all board and committee meetings and advises the Chairman on governance matters. The company secretariat team provides administrative support.
- The directors' biographies (see Corporate governance report) include specific reasons why each director's contribution is, and continues to be, important to the company's long-term sustainable success.
- All directors are subject to annual election at the annual general meeting (AGM) held in July. It was concluded, from both the analysis of the results of the individual evaluation of board members and the evaluation of the board holistically, each director continues to contribute effectively to board meetings and engaged fully with the evaluation process. As a result, the board recommends that shareholders vote in favour of those standing for a further term at the forthcoming AGM, as they will be doing in respect of their individual shareholdings.
I write to you for the first time as Chairman, having assumed the role on 1 January 2020. I can tell you, unequivocally, that what matters to the board during this difficult time is ensuring we do whatever we can to keep our employees safe, supporting our customers and communities and playing our part in dealing with the tragedy of the COVID-19 pandemic. We provide a vital service to our customers and, in doing so, our front line operational employees, indeed defined as 'key workers' by the Government, have continued to work to ensure our customers can rely on our services in a time that is anything but 'business as usual'. Yet again, as I know they have done on many previous difficult occasions, United Utilities' employees have risen to the challenge. As a business, the impact on our financial performance will not fully be known for some months but we are very well aware of that many customers and suppliers have been put under severe financial difficulty, and we are reminded of the enduring position the company has in the communities it serves in the North West. Measures have been put in place to help customers struggling to pay their water bills and those who may need extra support through our Priority Services offering. We are supporting our supply chain partners by altering payment terms to pay, on a temporary basis, within seven days wherever possible, rather than 14 to assist with their cash flow. Furthermore, we intend to support all of our workforce and have no intention of using the government's furlough scheme.
The board has been kept fully informed of the implementation of changes to normal ways of working. Wherever possible employees have worked from home and social distancing has been facilitated for those unable to work from home and among our operational employees.
As a business we were challenged again during the year by the weather, most notably Storm Ciara, when a supply pipe burst resulting in a loss of water to customers in the Eden Valley in Cumbria. We were able to put quickly contingency plans in place delivering supplies to customers that had registered for our Priority Services, and to around 100 livestock farmers impacted by the incident. Our employees worked relentlessly throughout the dreadful weather conditions to minimise disruption to customers.
The board has conducted its meetings, and those of its committees, remotely through audio or video calls since March 2020 and, while perhaps not as efficient or as satisfactory as face-to-face meetings, it has enabled the board to continue to function. We are comfortable that the integrity of our governance structure will be maintained during this period, not with standing the practical changes that have been made. A diagram showing the interrelationships of the various board committees can be found at Corporate governance report. Reports from each of the committee chairs about their work can be found on the following pages. The diagram also includes the group's principal management committees.
In the following pages of this corporate governance report we have set out how we have applied the principles and reported against the provisions of the 2018 UK Corporate Governance Code.
Purpose and culture
During the year we have reconsidered our purpose as a company. As a provider of an essential service in our region our purpose is to provide great water and more for the North West. Our culture of behaving responsibly has been part of the United Utilities ethos for many years, and aligns with our purpose. The board has a number of opportunities to consider cultural metrics, particularly in relation to its business as usual reporting on employees, customers and risk, but has also undertaken a more holistic review of the company's culture, developing a dashboard as the basis to assess and monitor culture in future years (see Corporate governance report).
The strategic themes of the group have remained unchanged as the board believes that its approach will promote the group's long-term sustainable success, our customers' interest, create value for shareholders and take account of our other stakeholders. The board's intention is to hand over the business to our successors in a better and more resilient position for the future. Within our region, our activities often have multiple touch points on individuals' lives. United Utilities is a monopoly supplier of water and wastewater services to domestic households. Many customers are also our shareholders, either directly or indirectly holding shares through pension scheme investments. Indeed, many of our employees are also customers, shareholders and future pensioners, and have an interest in the group's long-term success. As individual directors we are mindful of our statutory duty to act in the way each of us considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, as set out in s172 of the Companies Act 2006 (the Act). There are times when difficult decisions must be taken requiring each of us to exercise independent judgement and apply reasonable care, skill and diligence in the decision-making process. As the board of directors, we recognise our responsibilities to our different but mainly interrelated stakeholder groups and our wider societal responsibilities. As required by s414CZA of the Act, our s172(1) Statement is set out in Promoting the success of the company for the benefit of all.
The board has reached the stage in its life cycle, consistent with the beginning of the new asset management period, when there are a number of board changes to report. After over 11 years as Chairman, Dr John McAdam stepped down on 31 December 2019. Both Russ Houlden, our chief financial officer and Sara Weller, chair of the remuneration committee will be leaving the board following the AGM. Steve Fraser also left the company during the year. On behalf of the board I would like to express our thanks to these board colleagues for the contributions they have made to the business. Details of the board's succession planning and efforts concerning diversity can be found in the report of Nomination committee.
Our approach toward risk is very much aligned with our culture. We are an organisation that provides a vital service to its customers and we recognise the responsibilities of this, and our intention is to act responsibly towards our stakeholders, in particular our customers, in the provision of our services to them. As a board, we must take long-term decisions to ensure our successors are able to operate the business efficiently for customers, and we need to build our assets to meet future demand and circumstances. We are a commercial organisation operating within a regulated framework and accepting some level of risk is a normal consequence of doing business. It is the board's and the executive team's role to understand the risks associated with each activity of the business and ensure that actions are taken to mitigate these risks.
We are in regular contact with our large investors through a regular scheduled programme of meetings attended by either our CEO or CFO, or both. I have also offered meetings to major shareholders this year which I will progress as soon as restrictions allow. The programme is supported by the activities of our investor relations team who are readily available to address investors' queries. Feedback is regularly shared with board colleagues.
Sir David Higgins
Compliance against the 2018 UK Corporate Governance Code