The Group has complied with all the provisions of the UK Corporate Governance Code throughout 2015 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 tenth successive year. The Group'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 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. For more detail, please refer to our 2015 Governance & Financial report.
The Board is collectively responsible for the overall conduct of the Group's business.
The Board's core activities include:
The Board has a formal schedule of matters specifically reserved for its decision, which was last reviewed in February 2016. A copy of the schedule of matters reserved can be found on our website here: http://ir.arm.com/phoenix.zhtml?c=197211&p=irol-govboard
Composition and Operation of the Board
The Board is responsible for setting the level of delegated authority, whilst retaining overall responsibility for the governance of the Group. The reporting structure and composition of our Board and committees is discussed in more detail on page 13 of our 2015 Governance and Financial report.
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 2015 or to date in 2016, 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
Stuart Chambers, John Liu (who is based in Beijing), Janice Roberts (who is based in Silicon Valley), Larry Hirst, Stephen Pusey and Andy Green all have a broad understanding of the Group's technology and the practices of major international technology companies. Lawton Fitt is a financial expert with a strong financial background. Directors' biographies are set out on pages 6 and 7 of the 2015 Governance & Financial report and their beneficial interests in the share capital of the Company are set out in the Directors' Remuneration report.
The Board reviews the independence of the non-executive directors on appointment and continues to do so on an ongoing basis. It is the policy of the Board to review the continued appointment of non-executive directors after six years' service. Kathleen O'Donovan, having served for a total of nine years, retired from the Board on 31 December 2015. Two new independent non-executive directors have been appointed during 2015.
All our non-executive directors are regarded as independent in character, judgment 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 judgment of any of them. Stuart Chambers was regarded as independent at the time of his appointment as Chairman.
Board and Committee papers are circulated electronically before each meeting, utilising an online portal which also allows directors to share comments and items of interest. The business considered at each Board meeting includes the Chief Executive Officer's report on the status of the business, (incorporating industry and strategic developments) and the Chief Financial Officer's report (incorporating financial, market and investor-related information). On a cyclical basis, Board agendas also include detailed assessments of risk, governance, corporate responsibility, public affairs, performance of the business, competitive landscape, R&D and organisation/ succession planning. Strategy-focussed meetings are held at least twice per year.
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 2015 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.
During 2015, the non-executive directors supported the executive team to articulate and deliver the Group's strategy in relation to China, the IoT market and ARM's future investments. Key senior executives attend Board meetings throughout the year, which gives the non-executive 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 proposal for the coming year.
During 2015, 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. In addition the Chairman had at least one fact-to-face meeting individually with all directors of the Board and the Senior Independent non-executive Director (SID) also discussed the performance of the Chairman on an individual basis with each of the non-executive directors.
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 2015.
Stuart Chambers joined the Board on 27 January 2014.
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.
Main responsibilities of the Chairman include:
Chief Executive Officer
Main responsibilities of the Chief Executive Officer include:
Philip Davis took over the role of Secretary to the Board and Board committees from Patricia Alsop in May 2015 and all Board members have individual access to his advice. He ensures 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. He 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 him.
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 pages 13 and 14 of the 2015 Governance and Financial Report.
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 SEC announcements, and the Annual Report.
At present, over 29 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 here: http://ir.arm.com/phoenix.zhtml?c=197211&p=irol-alerts
Annual General Meeting
The Board actively encourages participation at the AGM, scheduled for 28 April 2016, 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 21 clear days before the meeting. At the AGM, 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.
All resolutions proposed at the 2016 AGM will be decided on a poll and the voting results will be published via RNS and the SEC, and made available on the Group's website at: http://ir.arm.com/phoenix.zhtml?c=197211&p=irol-agm. Details of the resolutions that will be proposed at the 2016 AGM can be found in the Directors' report disclosures starting on page 44.