The Group has complied with the provisions of the UK Corporate Governance Code (September 2012) throughout 2014 and to the date of this document. The Group also achieved full compliance with the requirements of section 404 of the Sarbanes- Oxley Act 2002 (US) for the ninth successive year. The Company's American Depositary Shares are listed on NASDAQ and we are therefore subject to and comply fully with NASDAQ rules, US Securities laws and Securities and Exchange Commission rules to the extent that they apply to foreign private issuers. We explain in the reports below how we applied the provisions and principles of the FCA Listing Rules, the Disclosure and Transparency Rules, and the UK Corporate Governance Code throughout the year.
The Board is collectively responsible for the overall conduct of the Group's business.
The Board has a formal schedule of matters specifically reserved for its decision, which include:
The schedule was reviewed in February 2015.
Composition and operation of the Board
At the end of 2014, the Board comprised three executive directors (the Chief Executive Officer, the Chief Financial Officer and the Chief Technology Officer), the Chairman, and five independent non-executive directors. Stuart Chambers became Chairman on 1 March 2014 having been appointed to the Board as Chairman designate on 27 January 2014. Their biographies appear on pages 6 and 7.
The Board is fully aware of the other commitments of the Chairman and the executive and non-executive directors. All directors have completed conflicts of interest questionnaires and any planned changes in their directorships outside the Group are subject to prior approval by the Board. No conflicts of interest arose in 2014 or to date in 2015, and no other situations have been identified that might lead to a conflict of interest. In circumstances where a potential conflict arises, the Board (excluding the director concerned) would consider the situation and either authorise the arrangement in accordance with the Companies Act 2006 and the Articles of Association or take other appropriate action.
Non-executive directors' expertise
Kathleen O'Donovan has been the Senior Independent Director since January 2011.
John Liu (who is based in Beijing), JaniceRoberts (who is based in Silicon Valley), Larry Hirst, and Andy Green all have a broad understanding of the Group's technology and the practices of major international technology companies. Kathleen O'Donovan is a financial expert with a strong financial background. Directors' biographies are set out on pages 6 and 7 and their beneficial interests in the share capital of the Company are set out in the Directors' Remuneration Report.
The Board reviewed the independence of the non-executive directors on appointment and continues to do so on an ongoing basis. Kathleen O'Donovan, who has now served for eight years, remains highly committed and continues to be regarded as independent.
The other non-executive directors have shorter service and are regarded as independent in character, judgement and behaviour, based on both participation and performance at Board and Committee meetings. There are no relationships or circumstances that are likely to affect the judgement of any of them. It is the policy of the Board to review the continued appointment of non-executive directors after six years' service. Stuart Chambers was regarded as independent at the time of his appointment as Chairman.
Board and Committee papers are circulated electronically before each meeting.
In the event that a director is unable to attend a meeting or participate by conference call, they receive and read the documents for consideration at that meeting, and have the opportunity to relay their comments and, if necessary, to follow up with the Chairman or the Chief Executive Officer after the meeting.
The non-executive directors are encouraged to suggest matters for Board discussions, and in 2014 they were active in contributing to the agenda for the strategy review and ensuring the amount of time spent on strategic and operational issues was appropriately balanced. The September 2014 strategy meeting enhanced the Board's understanding of the competitive landscape and agreed short- and longer-term strategic objectives. The meeting focused on the Group's current and future activities in China. Three guest speakers with in-depth knowledge of the technology landscape in China gave presentations and participated in question and answer sessions with the Board and local management. An additional strategy meeting has again been scheduled during 2015 and strategy will continue to be covered regularly at Board meetings during the year.
During 2014, the non-executive directors encouraged the executive team to allocate resources to accelerate the development of technology in the Internet of Things arena and to explore new business areas for investment.
Key senior executives attend Board meetings throughout the year, which gives the nonexecutive directors visibility of executive talent below executive director level, direct information about business developments, and informs them about potential management succession. In particular, each year the general managers of the IP group present a review of past performance against key objectives and KPIs, and their proposals for the coming year.
During 2014, the Chairman held three meetings with the non-executive directors without the executives present, and the non-executive directors met on one occasion without the Chairman being present.
The table on this page shows directors' attendance at scheduled Board meetings, conference calls and ad hoc meetings which they were eligible to attend during the 2014
Stuart Chambers joined the Board on 27 January 2014 and took over from Sir John Buchanan as Chairman on 1 March 2014. He is Chairman of Rexam plc and an independent non-executive director of Tesco plc.
The Chairman has primary responsibility for running the Board and the Chief Executive Officer has executive responsibility for the operations and results of the Group, and also for making proposals to the Board in relation to the strategic development of the Group. The Board recognises that the roles of the Chairman and Chief Executive Officer are distinct (as described below) and also the importance of maintaining an excellent working relationship between them.
During 2014, there were regular meetings and calls between the Chairman and the Chief Executive Officer outside Board meetings, including a visit by the Chairman to the Group's office in San Jose. These discussions provided and continue to provide opportunities for the exchange of information, mentoring and regular updates on the business objectives and priorities that the Chairman set for the Chief Executive Officer for 2014. These priorities are described in more detail on pages 12 and 41.
The Chairman participated in various Group events during 2014 to meet managers and employees across the organisation, including the Global Engineering Conference attended by around 600 ARM engineers and a conference held by the IT team. He also met with shareholders during the year, attended the Analyst and Investor Day and the Annual Partner Meeting, which is the Group's major customer event.
Main responsibilities of the Chairman include:
Chief Executive Officer
Main responsibilities of the Chief Executive Officer include:
Patricia Alsop acts as Secretary to the Board and Board Committees and all Board members have individual access to her advice. She ensures that the Board receives all relevant information in a timely manner, organises induction and training programmes for new directors, and facilitates the Board evaluation in years when this is conducted internally. She is also responsible for ensuring that the correct Board and Committee procedures are followed and advises the Board on corporate governance matters. The established procedure under which directors can, where appropriate, obtain independent legal or other professional advice at the Group's expense is also administered through her.
Philip Davis will take over the Company Secretary role on Patricia Alsop's retirement from the Group in May 2015. This is in addition to his responsibilities as General Counsel.
Annual Report, information and communication with shareholders and other stakeholders
The ultimate responsibility for reviewing and approving the Annual Report and the quarterly earnings releases, and for ensuring that they present a balanced assessment of the Group's position, lies with the Board.
The Board delegates day-to-day responsibility for managing the Group to the Executive Committee and has a number of other Committees, details of which are set out on the following pages.
The Board makes considerable efforts to establish and maintain good relationships with shareholders and the wider investment community. There is regular dialogue with institutional investors during the year, except during close periods. The main channel of communication continues to be through the Chief Executive Officer, the Chief Financial Officer and the VP of Investor Relations. The Chairman, the Senior Independent Director and the other directors are available to engage in dialogue with major shareholders as appropriate.
The Board encourages communication with private investors and part of the Group's website is dedicated to providing information for all investors, including responses to frequently asked questions, the investment case, product information, press releases, RNS and Securities and Exchange Commission (SEC) announcements, and an interactive online version of theAnnual Report.
At present, over 30 sell-side analysts write research reports on the Group and their details appear on the Group's website. Shareholders can also obtain telephone numbers from the website, enabling them to listen to earnings presentations and audio conference calls with analysts. In addition, webcasts or audiocasts of key presentations are made available through the website.
Members of the Board develop an understanding of the views of major shareholders through any direct contact that may be initiated by shareholders, or through analysts' and brokers' briefings. The Board also receives feedback from the Group's brokers and financial PR advisers, who in turn obtain feedback from analysts and brokers following investor roadshows. All shareholders can register to receive the Group's press releases via the internet.
Annual General Meeting
The Board actively encourages participation at the AGM, scheduled for 30 April 2015, which is the principal forum for dialogue with private shareholders. The Circular and Notice of AGM are being sent to shareholders concurrently with the distribution of this report, which is well in advance of the required 20 working days before the meeting. A presentation is made outlining recent developments in the business and an open question-and-answer session follows to enable shareholders to ask questions about the business in general. The Chairman, who chairs the Nomination Committee, will be present at the AGM. He will arrange for the respective chairs of the Audit and Remuneration Committees to be available to answer questions and for all directors to attend.