Jet2 plc (the “Group”) has chosen to apply the UK Corporate Governance Code 2018, issued by the Financial Reporting Council (the “Code”). A copy of the Code can be found here.
An explanation of how the Group has complied with the Code is set out below and also in the Audit Committee Report on pages 63 to 65 of the Company’s 2021 Annual Report and Accounts (the “Annual Report”) and the Remuneration Committee Report on pages 66 to 71 of the Annual Report.
BOARD LEADERSHIP AND COMPANY PURPOSE
The Board is responsible for the long-term success of the Group and is collectively accountable to shareholders for its proper management. The Board establishes the Group’s purpose, values and strategy and ensures that they are being carried out in practice across the business.
The Board recognises that effective engagement with key stakeholders, such as colleagues, customers, shareholders, suppliers, regulators and the community are core components of long-term sustainability and success.
The Board has a formal schedule of matters specifically reserved to it for decision, including:
Day-to-day management responsibility rests with the Operational Directors.
The Board assesses and monitors the Group’s culture through regular interaction with management and other colleagues to ensure that its policies, practices and behaviours are aligned with the Group’s purpose, values and strategy. Throughout the Covid-19 pandemic, this interaction has proven to be more important than ever, given the unprecedented business interruption experienced by the Group and the consequent need to place many colleagues on temporary leave of absence (furlough).
The delivery of great service is at the core of the Jet2.com and Jet2holidays values, which are known internally as ‘Take Me There’. All Jet2.com and Jet2holidays colleagues take part in a one day induction to the business, which introduces these values: Be Present; Create Memories; Take Responsibility; and Work As One Team. Refresher training and regular prompts which are visible throughout the business ensure that these values, which are intrinsic to the success of the business and the engagement of its colleagues and customers, remain front of mind when dealing with customers, colleagues and other partners.
The Group’s performance during the Covid-19 pandemic has embodied these principles, ensuring that colleagues, customers and partners are treated with respect, recognising that their experiences will be remembered long after the immediate impact of the pandemic has receded. The Board recognised at an early stage that excellent customer service was a feature which could set the Group apart from its competitors, and therefore made significant efforts to ensure that, despite colleagues (including those in the Contact Centre) being required to work from home, customers were able to be refunded promptly. To support this, further investment was made in the Group’s IT functionality to improve the speed with which refunds could be processed, supplemented by the reassignment of operational colleagues to the Contact Centre.
The Board is supported by the Audit and Remuneration Committees, each of which has access, at the cost of the Group, to the resources, information and advice that it deems necessary to enable it to discharge its duties. Although not in compliance with the Code, for the reasons set out in the “New Appointments” section of this statement, there is no separate Nomination Committee.
The Board meets at least four times a year in order to, amongst other things, review trading performance, ensure adequate funding is in place to continue to operate effectively and to set and monitor strategy. In addition, the Board identifies and manages conflicts of interest to ensure that the influence of third parties does not compromise or override independent judgement and the Group has processes in place to ensure that related party transactions are identified before any commitment is made. If the Directors have concerns about the operation of the Board or management of the Group that cannot be resolved, their concerns would be recorded in the Board minutes.
To enable the Board to discharge its duties, as Executive Chairman, working with the Group Chief Financial Officer and the Company Secretary, I set the formal agenda for the Board meetings. Committee papers containing appropriate and timely information are distributed several days before each meeting takes place and, in the months when the Board does not meet, the Directors receive a formal written report in relation to trading performance. Additional meetings are called if and when required. The number of full Board and committee meetings scheduled, held and attended by each Director during the year was as follows:
|Board meetings||Ad hoc Board meetings†||Remuneration Committee meetings||Audit Committee meetings|
** Stephen Heapy resigned from the Audit Committee following the completion of the audit for the year ended 31 March 2020 and now attends meetings by invitation only.
† Additional Board meetings took place during the year in connection with transactions undertaken, including the two equity placings, the CCFF and the sale of Fowler Welch.
The Business & Financial Review on pages 20 to 24 of the Annual Report includes a detailed review of the Group’s business and future developments. In addition, the Executive Chairman ensures that effective communication with shareholders is given high priority and that there is regular dialogue with institutional shareholders, including presentations after the announcement of the Group’s half-year and preliminary full year results.
During the past twelve months there has been significant engagement with the Group’s largest shareholders as a result of two equity placing transactions which were undertaken in May 2020 and February 2021. These transactions were undertaken to provide incremental liquidity in the face of the unprecedented disruption brought on the Group’s business by the Covid-19 pandemic. The Board recognised the dilutive effect of the transactions and therefore made every effort to ensure that shareholders were fully aware of the reasons for this course of action. In addition, for the second equity placing, the Board placed a proportion of shares by way of retail offer via Primary Bid to ensure that existing smaller investors also had the opportunity to participate.
Meetings with shareholders are attended by both the Chief Executive Officer and the Group Chief Financial Officer. In addition, both the Executive and Non-Executive Directors have the opportunity to meet with other shareholders at the Annual General Meeting and on further occasions during the year as required.
The Board customarily uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation, and the Executive Chairman ensures that the Chairs of the Audit and Remuneration Committees are present to answer questions. This year, due to the Covid-19 restrictions, the Annual General Meeting took place as a closed meeting, though questions from shareholders were invited which could then be dealt with directly. In the coming year, it is expected (subject to any restrictions applicable in connection with the Covid-19 pandemic) that the usual Annual General Meeting proceedings will resume, with a question and answer session following the conclusion of the formal business of the meeting hosted by the Executive Chairman, which provides a valuable opportunity to hear from members of the Board about developments within the Group, and to receive their views on issues which are of most interest to the shareholders present.
Details of resolutions to be proposed at the Annual General Meeting are included in the Notice of Annual General Meeting and related papers, which are sent to shareholders in advance of the meeting in accordance with the Group’s Articles of Association. All votes received for general meetings are properly recorded and counted and details of proxy appointments and voting instructions are provided at the meeting. Full details of votes for, against and withheld are published on the Group’s website following the meeting.
If a resolution receives 20% or more of votes cast against, the Board will consult with shareholders to understand the reason behind the result.
The Group’s website (www.jet2plc.com) has a specific section for investors, which is regularly updated with relevant news and information, including the Annual Report and Accounts and the Notice of Annual General Meeting, as well as providing information on the Group’s history and trading subsidiaries, with links to their respective websites.
The Board recognises that it is important to engage with colleagues to ensure that the Group is fostering an environment that they are happy to work in, supports their personal wellbeing and enables them to understand the rationale for key decisions. The Group does not currently use the workforce engagement methods prescribed by the Code, but instead operates an Information and Consultation Agreement and Protocol, consisting of five separate agreements as detailed on page 49 of the Annual Report which cover every UK-based colleague and set out how Jet2.com and Jet2holidays will inform and consult with them.
Despite the pandemic, working group meetings have continued to take place on a quarterly basis with Senior Managers and Directors, with our Executive Chairman often in attendance. We have ensured that this has continued despite the Colleague Representatives not being in the workplace as it has become even more important to engage as much as possible. We have continued to have positive engagement and attendance, and, in some areas, we are supplementing these meetings with more informal and regular calls with the Colleague Representatives to encourage feedback from their business areas and to answer any questions. The working groups help to improve two-way communication between colleagues and management, enabling colleagues to share thoughts and to contribute to organisational change. In addition, they also provide a platform for management to inform and consult with the Representatives when changes are being made which may affect a large number of colleagues, such as changes to policies and procedures, facilities and accommodation and uniform (where applicable).
Additionally, the Group keeps colleagues regularly informed on matters relating to their employment through a variety of weekly and monthly information bulletins and newsletters covering a broad range of topics. Although the Covid-19 pandemic has prevented face to face presentations, in the last year these have been supplemented by online presentations by the Senior Management Team, which include an opportunity for colleagues to raise questions direct with the Chief Executive Officer, Group Chief Financial Officer and other directors.
A mailbox entitled ‘Ask Steve’ allows colleagues at any level of the organisation to write directly to the Chief Executive Officer of Jet2 plc regarding any matter or concern they may have, providing a direct method of communication with a key member of the Board and enabling issues raised to be added to the Board agenda for discussion as required.
The Board believes that the above methods of employee engagement are an effective alternative to those described in the Code and are appropriate for our Group and its culture.
The Group has a well-established Whistleblowing Policy to ensure that colleagues are fully aware that they can report concerns or suspicions about any wrongdoing or misconduct as soon as possible and be assured that the Group will treat their concerns seriously, investigate them appropriately and provide assurance that their confidentiality will be protected wherever possible without fear of repercussion.
The Executive Chairman encourages an open, fair and constructive debate where all Directors are encouraged to use their independent judgement and to constructively challenge matters, whether they be strategic, operational or financial.
The Executive Chairman, with the support of the Company Secretary, is responsible for the Director induction process and ensuring that the Directors receive appropriate training as necessary.
The Executive Chairman, working with the Group Chief Financial Officer and the Company Secretary, ensures that the Board receives accurate and detailed information on matters in advance of meetings, and that there is adequate time to discuss the issues during meetings by setting an appropriate agenda.
The roles of the Executive Chairman and the Chief Executive Officer of the Leisure Travel business are clearly defined and separate.
In line with the Code, executive responsibility for the day-to-day running of the Group sits with the Chief Executive Officer, Stephen Heapy.
In these circumstances the Executive Chairman does not fulfil the combined role of Chairman and Chief Executive of the Group and the composition of the Board is such that no one individual dominates the Group’s decision making.
The Board comprises:
Mark Laurence is Chair of the Remuneration Committee and a member of the Audit Committee and has now served for more than nine years from the date of his first election to the Board. Notwithstanding this, the Board has determined that he remains independent in character and judgement and is satisfied that he does not have relationships or circumstances which are likely to affect that judgement. He continues to provide valuable challenge as a non-executive director and brings a breadth of financial experience to the Board.
Following a rigorous search process using external independent search consultants, Robin Terrell was appointed to the Board on 14 April 2020 as an independent non-executive director and is Chair of the Audit Committee and a member of the Remuneration Committee. Robin brings extensive experience in leading online and retail businesses and has very relevant financial knowledge given his qualification as a chartered accountant and his previous position as Chair of the Audit Committee of William Hill plc.
Richard Green was appointed to the Board on 6 September 2018 as a non-executive director and is a member of the Audit Committee. Prior to his appointment, Richard worked as a consultant for Jet2.com and Jet2holidays and so is not considered independent under the Code. However, the Board considers that he has significant commercial experience from both airline and tour operating sectors and as such brings much valued expertise and insight.
Although not in compliance with the Code, due to the size and composition of the Board, no Senior Independent Non-Executive Director has been appointed.
Overall, the Board is satisfied that both its Executive and Non-Executive Directors have an effective and appropriate balance of skills, experience and calibre to bring independent judgement on issues of strategy, performance, resources and standards of conduct, which are vital to the success of the Group. The biographies of the Directors appear on page 62 of the Annual Report.
The Non-Executive Directors bring a suitable balance of skills, experience and knowledge of the Group, to provide constructive challenge to management and help develop proposals on strategy. In addition, their independence of character and integrity prevents any individual or small group from dominating the decision making of the Board as a whole. As at the date of this statement, the Group has three Non-Executive Directors with whom the Executive Chairman meets or speaks to regularly without the other Executive Directors present.
All Non-Executive Directors are required to devote sufficient time to their role as a member of the Board in order to discharge their responsibilities effectively and this is kept under continuous review. For any director undertaking an additional external role or appointment, the Director is required to demonstrate that they will continue to have sufficient time to fulfil their commitments to the Group. Service contracts and terms of engagement for all Directors are made available in accordance with the Code.
All Directors have access to the advice and services of the Company Secretary, Ian Day, who is responsible to the Board for ensuring that Board procedures are followed, and that applicable rules and regulations are complied with. The appointment and removal of the Company Secretary is a matter for the Board as a whole.
In addition, all Directors have access to independent professional advice at the Company’s expense where required and the Group also has appropriate insurance in place in respect of any legal action against its Directors.
Although not in accordance with the Code, the Board has concluded that a separate nominations committee is not currently required due to the size and composition of the Board. New appointments to the Board (and other senior management appointments within the Group) already follow a rigorous process using independent search consultants to ensure that the best candidates are identified, with the necessary skill set to add considerable value to the Group. Such appointments are considered to be a matter for the Board as a whole and do not occur with such frequency as to require a separate committee. Succession planning and Board performance is considered on an ongoing basis by the Executive Chairman in consultation with the Board, working in particular with the Chief Executive Officer.
The Executive Chairman considers succession planning on an ongoing basis in consultation with the Board, working in particular with the Chief Executive Officer. As the founder of the Group, the Executive Chairman has served on the Board for more than nine years from the date of election and owns 22.05%1 of the issued share capital of the Group. Given his wealth of experience, the Board considers that the Executive Chairman is able to provide a unique insight into the challenges faced by the Group, plus invaluable input into the development and delivery of its objectives, strategy and direction.
The Board is committed to promoting diversity and ensuring equality of opportunity for all within the Group, regardless of age, disability, gender reassignment, marriage or civil partnership status, pregnancy and maternity, race (including colour, nationality, and ethnic or national origin), religion or belief, sex or sexual orientation and its policy on new appointments is based on merit.
1 As at 30 June 2021
Whilst not in compliance with the Code, Directors are submitted for re-election at regular intervals, subject to satisfactory performance. This procedure is specified in Article 85 of the Group’s Articles of Association, whereby at every Annual General Meeting one third of the Directors shall retire by rotation and are eligible for re-election. Newly appointed Directors are subject to re-election at the first Annual General Meeting after their appointment.
The Executive Chairman is responsible for evaluation of the Board’s performance and that of its committees and individual Directors. This evaluation is made on an ongoing basis using feedback from the Group as a whole, supplemented by regular discussions with the Directors in question.
The Board has an established Audit Committee which during the year comprised of two independent Non-Executive Directors and one Non-Executive Director. In line with the Code, Stephen Heapy resigned from the Audit Committee following the completion of the audit for the year ended 31 March 2020 and now attends meetings by invitation only.
The Audit Committee is chaired by Robin Terrell, an independent Non-Executive Director, and meets no less than three times per year, reporting back to the Board on key issues discussed at each meeting. The Board is satisfied that the Chair of the Audit Committee has recent and relevant financial experience, being a qualified Chartered Accountant and having held the position of Chair of the Audit Committee of William Hill plc from March 2019 to April 2021, and that the Committee continues to be effective in fulfilling the primary functions described below.
The Executive Directors, the Group Legal Director and Company Secretary, the Group Financial Controller and Head of Treasury, as well as the external and internal auditors are invited to attend meetings. The Committee’s primary function is to assist the Board in:
The Audit Committee Chair also engages with both the external and internal auditors, without the Executive Directors or members of the Finance team present.
Whilst KPMG LLP (“KPMG”) have been the Group’s auditor since the year ended 31 March 2005, the Audit Committee and the Board continue to believe this is in the best interests of shareholders as KPMG have developed an extensive knowledge of the Group. However, in order to ensure good governance, the Committee has determined that it is appropriate for an audit tender process to be conducted commencing no later than September 2023. The Committee will continue to keep the exact timings of the audit tender under review given the current Covid-19 pandemic.
The fee paid to KPMG for the statutory audit of the Group and Company financial statements and the audit of Group subsidiaries pursuant to legislation was £0.5m. A breakdown of fees paid to KPMG during the financial year is set out in Note 8. Resolutions to reappoint KPMG as auditor and to authorise the Directors to agree their remuneration will be put to shareholders at the AGM.
A detailed Audit Committee Report is set out on pages 63 to 65 of the Annual Report .
The Independent Auditor’s Report can be found on pages 74 to 81 of the Annual Report.
The Board of Directors is responsible for the Group’s system of internal control and for reviewing its effectiveness. Any such system is designed to manage, rather than eliminate the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss.
The Board of Directors has carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, liquidity or solvency, which can be found on pages 27 to 36 of the Annual Report.
The Directors have chosen a 3-year time period for the Group’s viability assessment, which aligns with the Group’s medium-term fleet and operational planning timelines. The Viability Statement can be found on page 37 of the Annual Report.
The risk management process and the system of internal control necessary to manage risks are assessed and monitored by the Audit Committee.
The Board maintains processes for identifying, evaluating and managing the risks faced by the Group which take account of the recommendations set out in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.
To ensure compliance with laws and regulations, and to promote effective and efficient operations, the Board has established an organisational structure with clear operating procedures, lines of responsibility and delegated authority.
Comprehensive guidance on financial and non-financial matters for all managers and employees is given in the Group Management Manual, within which there are clear procedures for:
The Group has an independent Internal Audit department, which provides independent assurance by performing full and regular monitoring of the Group’s procedures, promoting robustness of controls, highlighting departures from procedures and suggesting relevant key performance indicators for future monitoring. Other areas of risk assessment and monitoring which may normally be carried out by an Internal Audit department are, in the main, covered by the Board either as a whole or within the various meetings highlighted.
Group Risk Management is the responsibility of the Group’s Operational Directors, who meet regularly with Internal Audit to review and monitor the Group Risk Register and to discuss existing and emerging risk. The Directors report their findings to the Audit Committee.
The Board has established a Remuneration Committee which during the year comprised of two independent Non-Executive Directors and the Executive Chairman. The Group’s Remuneration Committee was chaired by Mark Laurence.
Although not in line with the Code, the Executive Chairman is a member of this Committee due to him being the founder of the Group, plus the insight that he brings into the engagement and reward of the top talent within the business. The Executive Chairman does not receive a bonus or share award and abstains from any discussion about his own remuneration at these meetings, so the Board does not consider that his membership compromises the effectiveness of the Committee’s work.
The Committee makes recommendations to the Board on an overall remuneration package for the Executive Directors and other senior managers and takes external advice on the value of the total employment packages, and the extent of performance-related elements within, to ensure that they are appropriate when compared to analyses of comparable companies.
Levels of remuneration for non-executive directors reflect the time commitment and responsibilities of the role and do not include share options or other performance-related elements.
The Remuneration Committee is responsible for making recommendations to the Board, within agreed terms of reference, on the Group’s framework of executive remuneration and its cost. The Committee determines the contractual terms, remuneration and other benefits for the Executive Directors, including performance-related bonus schemes, pension rights and compensation payments.
Further details are set out in the Remuneration Committee Report on pages 59 to 62 of the Annual Report.
Remuneration outcomes are aligned with strategic priorities and the long-term success of the Group. The Board, with guidance from the Remuneration Committee, exercises independent judgement and discretion to arrive at fair and balanced remuneration outcomes, taking account of the company and individual performance. When setting senior executive pay, the Board considers both external pay relativity and wider workforce remuneration and conditions.
BOARD APPROVAL OF THE STATEMENT OF CORPORATE GOVERNANCE
This Corporate Governance Statement is approved by the Board and signed on its behalf by:
This statement was last reviewed on 10 August 2021.
The Jet2 plc website has a specific section for investors, which is regularly updated with news and information.
Details of Significant Shareholders of the Company can be found here.
Jet2 plc's Constitutional Documents
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Low Fare Finder House
Leeds Bradford Airport
Company number: 01295221
Jet2 plc was incorporated in the United Kingdom in January 1977.