Our Governance

Chairman's introduction to Governance

James-Peters
"THE BOARD OF DIRECTORS’ PRIMARY REMIT IS TO PROVIDE DIRECTION TO HELP SHAPE THE STRATEGY OF THE GROUP AND ENSURE THAT THIS IS BEING EXECUTED EFFECTIVELY WITHIN A STRUCTURE THAT IS WELL CONTROLLED, MITIGATES RISK AND IS COMPLIANT WITH CORPORATE AND SOCIAL RESPONSIBILITY."

The Board of Directors' primary remit is to provide direction to help shape the strategy of the Group and ensure that this is being executed effectively within a structure that is well controlled, mitigates risk and is compliant with corporate and social responsibility. Good corporate governance emanates from the top which is why the Board gives continued prominence to this area.

The Financial Reporting Council has updated The UK Corporate Governance Code and this new update comes into effect for accounting periods beginning after 1 January 2019 (the “new Code”).  There are a number of areas where the new Code has ramifications to the Group, as follows, and we intend to be compliant with this new Code by the end of 2019.

We have tried to clearly lay out how we meet the five principles of the existing Code, namely: leadership, effectiveness, accountability, remuneration and relations with Shareholders. For the benefit of Shareholders who are not familiar with the existing Code we have set out the main principles of the existing Code in detail and have stated how we have addressed them in the Annual Report. We will adopt a similar approach in our 2019 Annual Report to demonstrate how we have addressed the new Code. In addition, we have supplemented our corporate governance report to explain how we address some of the key principles of the new Code

In the pages 66 to 105 we set out our approach to corporate governance. Under the Singapore Companies Act, Chapter 50, the Company is not required to follow the Singapore Corporate Governance Code.  The Company has voluntarily agreed to the principles of corporate governance contained in the UK Corporate Governance Code (the “Code”) as required under the Listing Rules of the Financial Services Authority of the United Kingdom.

James Peters
Non-Executive Chairman

Corporate Governance Report

Board-of-Directors

Leadership

A.1 The Role of the Board

Main principle:

Every company should be headed by an effective board which is collectively responsible for the long-term success of the company.

The Directors have considered the composition and structure of the Board and have concluded that it is appropriate for a company of the size and complexity of XP Power. Despite not being considered independent by the Corporate Governance guidelines, the involvement of James Peters (Non-Executive Chairman) as a founder with a substantial shareholding is considered of benefit to Shareholders, aligning the interests of Shareholders with the Board. The Senior Non-Executive Director is an independent Director.

The following matters are specifically reserved for the Board's decision:

  • Opinion of the Group's viability and going concern.
  • Approval of strategic plans, financial plans and budgets and any material changes to them.
  • Oversight of the Group's operations, ensuring competent and prudent management, sound planning, an adequate system of internal control and adequate accounting and other records.
  • Changes to the structure, size and composition of the Board.
  • Consideration of the independence of Non-Executive Directors.
  • Review of management structure and senior management responsibilities.
  • With the assistance of the Remuneration Committee, approval of remuneration policies across the Group.
  • Final approval of annual financial statements and accounting policies.
  • Approval of the dividend policy.
  • Approval of the acquisition or disposal of subsidiaries and major investments and capital projects.
  • Delegation of the Board's powers and authorities including the division of responsibilities between the Chairman, Chief Executive Officer and the other Executive Directors.

A.2 Division of Responsibilities

Main principle:

There should be a clear division of responsibilities at the head of the Company between the running of the Board and the executive responsibility for the running of the Company's business. No one individual should have unfettered power of decision.

The roles of Non-Executive Chairman (James Peters) and Chief Executive Officer (Duncan Penny) are separate and clearly defined. The Chairman is responsible for the running of Board meetings as well as taking the lead on strategy. The Chief Executive Officer is responsible for the day-to-day running of the Company and the execution of the strategy.

A.3 The Chairman

Main principle:

The Chairman is responsible for the leadership of the Board and ensuring its effectiveness on all aspects of its role.

The Chairman sets the calendar and agenda of the Board and facilitates the discussions. The Chairman also initiates and coordinates the processes defined below which evaluate the effectiveness of the Board and of the individual Directors.

A.4 Non-Executive Directors

Main Principle:

As part of their role as members of a unitary board, Non-Executive Directors should constructively challenge and help develop proposals on strategy.

Other than their normal attendance and participation in discussions at Board meetings the Non-Executive Directors actively participate in the Company's strategy meetings and are able to question, challenge and coach the managers attending these meetings.

During the year the Non-Executive Directors convened to assess the roles and responsibilities of the senior management team with effective succession plans.

Terry Twigger is the Senior Independent Non-Executive Director.

Effectiveness

B.1 The Composition of the Board

Main principle:

The Board and its Committees should have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.

The Directors consider that the Board and Committees have the appropriate balance of skills, experience, independence and knowledge to discharge their duties effectively.

The Board considers Terry Twigger, Polly Williams and Pauline Lafferty to be independent.

The Corporate Governance guidelines do not consider James Peters to be independent by virtue of his previous executive roles. However, as a founder and substantial Shareholder, his membership of the Board is considered beneficial to Shareholders as a whole.

B.2 Appointments to the Board

Main principle:

There should be a formal, rigorous and transparent procedure for the appointment of new Directors to the Board.

Nomination Committee

The Nomination Committee consists of James Peters (Chair), Terry Twigger, Polly Williams and Pauline Lafferty. The Committee reviews and considers the appointment of new Directors. All Non-Executive Directors are given the opportunity to interview any proposed candidates. Any appointment of a new Director is voted on by the whole Board.

The Nomination Committee met twice during the year. The attendees were as follows:

DateAttendees
31 July 2019All and
Duncan Penny (guest)
4 October 2019All and
Duncan Penny (guest)

The Terms of Reference of the Nomination Committee are available in the Corporate Governance section of the Company's website www.xppower.com

B.3 Commitment

Main principle:

All Directors should be able to allocate sufficient time to the Company to discharge their responsibilities effectively.

There were five Board meetings during the year. The attendees were as follows:

DateAttendees
1 March 2019All
10 May 2019All
31 July 2019All
4 October 2019All
3 December 2019All

 

B.4 Development

Main principle:

All Directors should receive induction on joining the Board and should regularly update and refresh their knowledge and skills.

Directors receive a full induction on joining the Board. The programme is tailored to the individual needs of each Director.

The Board visited three of the Group’s Asian facilities in 2019 and the Bremen sales office. This included our Singapore design centre and manufacturing facilities in China and Vietnam. This visit included a number of presentations by the function heads of those facilities and other functions within the Group. Non-Executive Directors were able to update and refresh their knowledge of the business first-hand and interacted with the management team and employees helping them gain a deeper understanding of the business and allowing them to contribute ideas.

As well as the site visits described above and the presentations received by the functional leaders of those sites, the Board also had a presentation from the head of engineering and head of the European sales business. Non-Executive Directors were able to update and refresh their knowledge of the business first-hand and interacted with the management team and employees helping them gain a deeper understanding of the business and allowing them to contribute ideas for expanding the Vietnam manufacturing facility, respectively.

 

The Board intends to visit the high voltage facility in Highbridge, New Jersey and Silicon Valley sales and engineering site in 2020.

B.5 Information and Support

Main principle:

The Board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.

The Board receives "flash" reports, detailed management accounts and detailed financial forecasts prepared on a monthly basis to enable it to review trading performance, forecasts and strategy implementation. Board meeting materials are provided in advance of Board meetings to allow Directors sufficient time to prepare adequately. The Board also received specific presentations and information from management during the year covering the results and actions of the employee survey, the results of a strengths, weaknesses, opportunities and threats review by the executive management team, compliance exception reports, insurance coverage and the sustainability policy and metrics.

B.6 Evaluation

Main principle:

The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors.

The Board’s evaluation of its own performance and that of its Committees is conducted annually using an online Board effectiveness questionnaire conducted by a third party. The questionnaire covered all aspects of effectiveness: capabilities and communication; culture and practice; process and organisation; as well as meeting rigour and relationships. With respect to continually improving Board effectiveness, the questionnaire also asked Directors to  comment on what it should stop doing, start doing and continue doing.

In 2019 the Board extended the evaluation process and commissioned an independent third party. As well as the questionnaires, each Board member was interviewed regarding the Board effectiveness and a report and presentation was then made to the Board on the findings.

 

There were no significant issues or concerns raised in the report.

B.7 Re-election

Main principle:

All Directors should be submitted for reelection at regular intervals, subject to continued satisfactory performance.

All Directors voluntarily offer themselves for re-election annually. This is in spite of the Company’s Articles of Association which require Directors to retire and offer themselves for re-election on a rotation at least every three years.

 

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.

Accountability

C.1 Financial and Business Reporting

Main principle:

The Board should present a balanced and understandable assessment of the Company's position and prospects.

The Board considers that both the Interim Report and Annual Report and Accounts, supported by quarterly trading updates which are timetabled at the beginning of each year, comprehensively fulfil this requirement. The Annual Report includes a detailed description of the Group's strategy and business model which has enabled it to generate significant value over a prolonged period of time. It also details the significant risks that the Group faces and how these are mitigated and includes the Board's assessment of the longer term viability of the Group.

The Company also makes available a number of videos on its investor relations website at the time of its interim and annual reporting as well as investor videos describing products, markets, strategy, business model, growth drivers and its investment proposition.

Going Concern

The Directors, after making enquiries, are of the view, as at the time of approving the accounts, that there is a reasonable expectation that the Company will have adequate resources to continue operating for the foreseeable future and therefore the going concern basis has been adopted in preparing these accounts. In addition, in accordance with C.2.2 of the revision of the Code, the Directors have considered the prospects of the Company over the longer term and provided a viability statement on page 47 of the Annual Report.

C.2 Risk Management and Internal Control

Main principle:

The Group has well-established annual and ongoing risk management processes to identify and assess risks.

The Group’s principal risks have been mapped onto a detailed risk universe from which key areas for business focus can be identified.

This helps facilitate further discussions on risk appetite and draws out the risks that require a greater level  of attention in terms of audit or assessment.

A robust risk assessment has been carried out at Board level and where possible actions set to mitigate and/or reduce the identified risk. The Board acknowledges that it is responsible for the Group’s internal controls and for reviewing their effectiveness. XP Power has an ongoing process for identifying, evaluating and managing the significant risks faced by the Group; these identified risks and processes are documented, reviewed and updated at Board meetings.

The key risks that have been identified and the mitigating actions are summarised on pages 43 to 46 of the Annual Report and classified according to:

  • The assessment of their level of impact to the viability of the business if they occurred – ranging from severe to minor;
  • The likelihood of a risk occurring – ranging from high to low; and
  • The direction in which they are trending – risks are classified according to whether they are assessed as becoming more likely to occur, less likely to occur or whether the risk of occurrence remains unchanged.

C.3 Audit Committee and Auditor

Main principle:

The Board should establish formal and transparent arrangements for considering how it should apply the corporate reporting and risk management and internal control principles, and for maintaining an appropriate relationship with the Company's Auditor.

The Audit Committee Report on pages 82 to 85 of the Annual Report sets out in detail the Group's arrangements to ensure corporate reporting complies with legal and accounting standards together with effective risk management and internal control processes and appropriate supervision and performance of the external Auditor.

The Terms of Reference of the Audit Committee are available in the Corporate Governance section of the Company's website www.xppower.com.

Remuneration

D.1 The Level and Components of Remuneration

Main principle:

Levels of remuneration should be sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of Executive Directors' remuneration should be structured so as to link rewards to corporate and individual performance.

The Remuneration Committee report on pages 86 to 88 of the Annual Report sets out in detail the Group's approach to remuneration.

D.2 Procedure

Main principle:

There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his or her own remuneration.

The Report of the Remuneration Committee on pages 86 to 88 of the Annual Report sets out in detail the Group's policy on remuneration and the remuneration packages for the Board. No Director participates in the deciding of their own remuneration. Polly Williams is Chair of the Remuneration Committee.

The Terms of Reference of the Remuneration Committee are available in the Corporate Governance section of the Company's website www.xppower.com.

Relations with shareholders

E.1 Dialogue with Shareholders

Main principle:

There should be a dialogue with Shareholders based on the mutual understanding of objectives. The Board as a whole has responsibility for ensuring that a satisfactory dialogue with Shareholders takes place.

The Group engages in two-way communication with both its institutional and private investors and responds quickly to all queries received. The Group uses its website www.xppower.com to give private investors access to the same information that institutional investors receive in terms of investor presentations. This includes video interviews with the Chief Executive Officer and Chief Financial Officer available on the morning of the day that the interim and annual results are published. The Company also makes available a number of informational videos on its investor relations website which cover products, markets, strategy, business model, growth drivers and its investment proposition.

XPPower-iPad

Interested parties are also able to register for the Group's email alert service on this website to receive timely announcements and other information published from time to time.

The Chairman and Senior Independent Director are available to meet Shareholders if required.

The Board members receive any feedback prepared by brokers or our financial PR company following meetings with Shareholders in order to keep in touch with Shareholders' opinions.

The Remuneration Committee consulted with major Shareholders in respect of significant decisions on Executive remuneration.

E.2 Constructive Use of the Annual General Meeting

Main principle:

The Board should use the Annual General Meeting to communicate with investors and to encourage their participation.

The Annual General Meeting is an opportunity to communicate with Shareholders and certain Directors are available to answer any questions.

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