Corporate Governance Code

As a result of deciding to apply the QCA Code, the corporate governance principles which now apply to us are those contained in the QCA Code. These are:

• Establish a strategy and business model which promote long-term value for shareholders
• Seek to understand and meet shareholder needs and expectations
• Take into account wider stakeholder and social responsibilities and their implications for long-term success
• Embed effective risk management, considering both opportunities and threats, throughout the organisation
• Maintain the Board as a well-functioning, balanced team led by the chair
• Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
• Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
• Promote a corporate culture that is based on ethical values and behaviours
• Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
• Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

Dear shareholders,

I am incredibly proud to have been part of the James Cropper story for many years now. Its success has not come without its challenges and has been against a continually changing legal and regulatory backdrop. A constant, however, has been the need to adapt and for the governance infrastructure that supports our business to evolve accordingly.

Back in 2007

Those, like me, who were shareholders back in 2007 may well remember that James Cropper moved from the Official List to AIM in August of that year. As a result, and as was explained at the time, the Combined Code (now known as the UK Corporate Governance Code) ceased to apply directly to us; no equivalent requirement applied to companies on AIM. The Combined Code set out standards of good practice for listed companies on board composition and development, remuneration, shareholder relations, accountability and audit.

Despite the Combined Code no longer applying to us, the board remained committed to good corporate governance in the management and operation of the group’s business; it continued the good habits instilled from our time on the Official List.

Annual Report 2018

In our 2018 Annual Report, I stated in the Corporate Governance Statement that as a Board, we remain committed to maintaining high standards of corporate governance. The Directors place a significant emphasis on ensuring that the Group has the appropriate governance structures in place. We acknowledged the importance of the principles set out in the UK Corporate Governance Code 2016, and intended to apply this code as far as we considered appropriate given the size of the Group.

Corporate Governance Code

In March 2018, the London Stock Exchange introduced a new rule applicable to James Cropper as a company on AIM: now, we are required to apply a recognised corporate governance code and to provide details of it on our website and then explain how we comply with that code and include reasons where we have departed from it. This information is to be reviewed annually and our website will need to include the date on which this was last done.

Towards the end of April 2018, the Quoted Companies Alliance (QCA) released a new and fully updated QCA Corporate Governance Code. As a Board, we considered this and its impact on the Group’s corporate governance arrangements. The Board felt that adoption of the QCA Code was more appropriate as the QCA Code adopted key elements of the UK Corporate Governance Code, policy initiatives and other relevant guidance and then applied those to the needs and particular circumstances of small and mid-sized quoted companies on a public market.

Ongoing

Under my leadership, it is the responsibility of each member of the Board, individually and collectively, to ensure that good standards of corporate governance are embraced throughout the Group. As a Board, we set clear expectations concerning the Group’s culture, values and behaviours. By way of example, each person starting employment within the Group receives a bundle of booklets designed to support them through their induction – this not only covers health, safety & environmental responsibilities, policies & procedures and conditions of employment but also leadership competencies, our vision and values and community relationships. We firmly believe that by encouraging the right way of thinking and behaving across all our people, our corporate governance culture is reinforced, enabling us to conduct business sustainably and responsibly and deliver value for our shareholders. We accept that simply setting expectations is insufficient and so the Board understands how important it is that it leads by example: it is therefore regularly seen out and about engaging with staff, customers and others, and the executive team, in particular, communicates regularly with staff through briefing meetings. Together, these lead the Board to believe that the group has a healthy corporate culture throughout the business.

Shareholder engagement

I am ever mindful of the need to ensure that we regularly engage with you, our shareholders. With this in mind I felt it was important to make you aware of our adoption of the QCA Code to continue to ensure that good corporate governance is maintained throughout the Group.

Mark Cropper
Chairman

Seek to understand and meet shareholder needs and expectations Disclosure.

Explain the ways in which the company seeks to engage with shareholders and how successful this has been. This should include information on those responsible for shareholder liaison or specification of the point of contact for such matters.

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Copies of our Annual Report and the notice of AGM are sent to all shareholders and copies of both the Annual Report and Interim Report can be downloaded from here – alternatively, they are available on request by writing to the Company Secretary at James Cropper Plc, Burneside Mills, Kendal, Cumbria. LA9 6PZ. Other information for shareholders (and other interested parties) is also provided on our website, including the preliminary and half-yearly results presentations to the City.

We have an on-going programme of individual meetings with institutional shareholders and analysts following the preliminary and half-year results presentations to the City. These meetings allow the Chief Executive and the Chief Financial Officer to update shareholders on strategy and the group’s performance. Additional meetings with institutional investors and / or analysts are arranged from time to time. All board members receive copies of feedback reports from the City presentations and meetings, thus keeping them in touch with shareholder opinion.

Mark Cropper and Patrick Willink are the key contacts with the Company’s family shareholders.

Martin Court, was recently appointed as the Senior Independent Director, and the other non-executive directors are all willing to engage with shareholders should they have a concern that is not resolved through the normal channels.

The Company Secretary can also be contacted by shareholders on matters of governance and investor relations.

The Board supports the use of the AGM to communicate, in particular, with private investors. The meeting is well attended and all shareholders are given the opportunity to ask questions and raise issues; this can be done formally during the meeting or informally with the directors after it.

At the AGM, separate resolutions are proposed on each substantially separate issue. For each resolution, proxy appointment forms are issued which provide voting shareholders with the option to vote in advance of the AGM if they are unable to attend in person. All valid proxy votes received for the AGM are properly recorded and counted by Link Asset Services, our registrars. Voting at the AGM is by a show of hands unless a poll is called for – in this regard, the Chairman is aware of the possible need to exercise his powers as Chairman and demand a poll to ensure that the vote represents the voting intentions of those shareholders who have appointed the Chairman as proxy as well as those present at the meeting.

Take into account wider stakeholder and social responsibilities and their implications for long-term success Disclosure

Explain how the business model identifies the key resources and relationships on which the business relies.

Explain how the company obtains feedback from stakeholders and the actions that have been generated as a result of this feedback (e.g. changes to inputs or improvements in products).

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For generations James Cropper has prized our relationships with stakeholders, be they customers, suppliers, bank, advisers, shareholders, pensioners or employees. Indeed we measure the longevity of these by the decade. What is changing, however, is the depth and scales of many. In recent years more and more of our growth has been underpinned by close collaborations with global corporations in sectors ranging from luxury retail to aerospace. All value us for our creativity and agility, often beyond what is possible within very large organisations, and we value them for the challenge and magnitude of potential they bring us.

Whilst we have long believed that ‘no man is an island’, this year is testimony that the same is true for business. James Cropper owes its 179 year history of success to the partnerships it has fostered with customers, suppliers and the local community. It is this collaborative attitude which allows us to claim a 40+ year partnership with one customer and a 100 year working relationship with a supplier, and at the same time creating new partnerships with new brands.

The highlights of the Group’s performance this year have been supported by partnerships; but they have also been driven by our collaborative approach to people, innovation and sustainability.

The Chief Executive currently conducts bi-annual performance reviews of the Executive Directors, supported by monthly 1:1 meetings and the Chairman, on behalf of the Board, reviews annually the performance of the other Directors, the Board as a whole, and the Committees, in collaboration with the committee chairmen.

The QCA Code states “the Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors”. The review involved the completion of a questionnaire on an anonymous basis – anonymity is intended to encourage more open and constructive comment. The purpose of the questionnaire is to help the Board assess how well it has performed over the last twelve months and to improve efficiency for the future. In particular, the process provided an opportunity for non-executive directors, through their exposure on boards of other major companies in the UK and overseas to draw on their experience to suggest areas of best practice. The procedure also provided an opportunity for Directors to raise any concerns about procedures and governance issues. Such information is important to the Chairman in his role of assessing the strengths and weaknesses of the Board and addressing balance and skills.

The areas covered under the evaluation exercise will include:

• Role of Directors and the Board
• Non-Executive Directors
• Executive Directors
• Board Meetings
• Committees of the Board
• Monitoring Performance
• Leadership and Culture
• Corporate Governance
• Corporate Social Responsibility
• Any Additional Comments

All Board members will be asked to provide a rating (on a scale of 1-5) across a variety of criteria under each area covered. Completed questionnaires will then submitted to the Company Secretary who will collate and consolidate the responses so that the Chairman can report back to the Board and the Board can have an open follow up discussion. The resulting discussion will lead to actions being agreed for areas that require improvement.

Succession planning is regarded by the Board as vitally important in maintaining the continued success of the business. Through regular reviews and management discussions, the Group’s future business leaders are identified and personal development plans put in place to harness their potential and plan for job growth and career progression.

In practice, the Chairman and the Chief Executive lead on any board nomination and appointment process, in conjunction with the Nominations Committee. The balance of skills, knowledge and experience on the board are reviewed and appropriate recommendations for consideration are made. During the year (2022-2023), one Executive Director resigned with a new Executive Director being appointed. Other senior appointments are made by the Chief Executive in discussion with the Chairman and other appropriate Directors.

As a Board, we set clear expectations concerning the Group’s culture, values and behaviours. By way of example, each person starting employment within the Group receives a bundle of booklets designed to support them through their induction – this not only covers health, safety & environmental responsibilities, policies & procedures and conditions of employment but also leadership competencies, our vision and values and community relationships. We firmly believe that by encouraging the right way of thinking and behaving across all our people, our corporate governance culture is reinforced, enabling us to conduct business sustainably and responsibly and deliver value for our shareholders. We accept that simply setting expectations is insufficient and so the Board understands how important it is that it leads by example: it is therefore regularly seen out and about engaging with staff, customers and others, and the executive team, in particular, communicates regularly with staff through briefing meetings. Together, these lead the Board to believe that the group has a healthy corporate culture throughout the business.

Clear statements of behaviour are issued by the Board. The Group also has an anti-bribery policy which confirms that the Group has a zero tolerance stance on bribery and they repeat the Board’s expectation that everyone behaves at all times honestly, professionally, fairly and with integrity. The policy is circulated to everyone within the Group. During the last year, a People Policy Framework was adopted, with a n updated Code of Ethics to be circulated shortly.

The Group’s published slavery and human trafficking statement also explains to the outside world that we seek to conduct our business honestly and with integrity at all times and that we recognise that it is not acceptable to put profit above the welfare and well-being of our employees and those working on our behalf. Steps to combat modern slavery are therefore taken seriously, and efforts to prevent abuses are fully embedded cross-departmentally throughout our organisation to ensure we play our part in helping to stamp out slavery and human trafficking.

The Group also has a whistleblowing policy in place. This allows staff to raise any concerns in confidence directly with a Director or Head of Human Resources.

Roles and responsibilities of the Chair, Chief Executive and any other directors who have specific individual responsibilities or remits (e.g. for engagement with shareholders or other stakeholder groups)

Mark Cropper, as Chairman, is responsible for leading an effective Board, fostering a good corporate governance culture and ensuring appropriate strategic focus and direction.

The Chief Executive, Steve Adams, has overall responsibility for proposing the strategic focus to the Board, implementing the strategy once it has been approved and managing the Group’s business.

Martin Court, the Senior Independent Director, and the other non-Executive Directors are all willing to engage with shareholders should they have a concern that is not resolved through the normal channels.

Mark Cropper and Patrick Willink are the key contacts with the company’s family shareholders.

All of the Executive Directors have particular roles and areas of responsibility: Steve Adams; Chief Executive Officer, Andrew Goody; Chief Financial and Operations Officer, and Patrick Willink; Chief Innovation Officer. As such, they continually engage with the Group’s stakeholders, whether these be shareholders, members of staff, customers, suppliers, regulators, industry bodies and creditors (including the Group’s lending banks). As one would expect, there is a degree of overlap here, with individual roles and responsibilities touching many areas of the business.

Roles of any committees (e.g. audit, remuneration and nomination committees)

Executive Committee: it is responsible for the daily running of the Group and the execution of approved policies and the business plan.

Audit Committee: its primary responsibility is for monitoring the quality of internal controls, ensuring that the financial performance of the Group is properly measured and reported on and reviewing reports from the Group’s auditors relating to the Group’s accounting and internal controls. Jim Sharp is the Chair of the Audit Committee.

Remuneration Committee: its primary function is to review the performance of the Executive Directors and determine their terms and conditions of service, including their remuneration and the grant of options. Lyndsey Scott is the Chair of the Remuneration Committee.

Nomination Committee: identifies and nominates, for approval by the Board, candidates to fill Board vacancies as and when they arise. Mark Cropper is the Chair of the Nomination Committee.

Pension Committee: its primarily responsible for reviewing and approving the objectives of the James Cropper Plc Pension Schemes. It monitors performance of the Schemes and considers recommendations and reports from management in relation to policy and strategy concerning pensions and investment matters. Steve Adams is Chair for the Pension Committee.

The terms of reference for the committees can be found in the Sub-Committees section.

Matters reserved for the board

The Board has a formal written schedule of matters reserved for its review and approval; this schedule includes those matters described in the following table.

Plans for evolution of the governance framework in line with the company’s plans for growth

Nothing at present.

Clear and transparent disclosure of voting outcomes

The AGM held in July 2022 passed all resolutions by a show of hands. The proxy votes received were in line with the show of hands passing all resolutions, however a significant proportion of negative votes against one resolution was received,

Explanation of actions where a significant proportion of votes (e.g. 20% of independent votes) is cast against a resolution at any general meeting

The Company received significant negative votes against the resolution to re-appoint Jim Sharp as a Director. Jim has been a member of the Board since Sept 2009. Since 2018, the re-appointment of Jim Sharp as a Director has been a resolution at every AGM. Jim brings a wealth of knowledge and experience from his background in investment banking, corporate finance, and significant experience in investment, managing and growing successful businesses, particularly in the luxury retail sector, an important market for James Cropper. His appointments elsewhere (including several chairmanships) only speak of the very high regard in which he is held in the wider business community and echo the considerable value he brings to James Cropper. Jim continues to challenge company strategy and execution without fear or favour and play a key role in ensuring governance and risk management is at the highest standard possible. Given his background and experience, Jim is considered to be the most appropriate non-executive director to act as Chair of the Audit Committee. His appointment as Chair is reviewed annually.

Inclusion of historical annual reports and other governance-related material, including notices of all general meetings over the last five years

The investors section includes this information and more. Notices of the annual general meetings held in the last five years are contained within the relevant Annual Reports. No other general meetings have been held within the last five years.