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Board committees

The Board has established three principal committees, the Audit Committee, the Remuneration Committee and the Nomination Committee, to assist it in the execution of its duties. The Chairman of each Committee reports on the respective Committee’s activities at the subsequent Board meeting.

No person other than a Committee member is entitled to attend the meetings of these Committees, except by invitation of the Chairman of that Committee.

Remuneration committee

Terms of reference

The primary role of the Committee is to make recommendations to the Board as to the Company’s overall policy and framework for the remuneration of the executive directors and the Chairman of the Board. The remuneration and terms of appointment of the non-executive directors are determined by the Board as a whole.

In accordance with the Code, the Committee also recommends the structure and monitors the level of remuneration for the first layer of management below Board level. The Committee is also aware of, and advises on, the employee benefit structures throughout the Group and ensures that it is kept aware of any potential business risks arising from those remuneration arrangements.

The Committee has formal terms of reference which are reviewed annually and updated as required. These are available on the Company’s website at plc.rightmove.co.uk or on request from the Company Secretary.

Membership

The following independent non-executive directors were members of the Committee during 2016. During the year the Committee met six times and attendance at the meetings is shown below:

Committee Members

Number of meetings attended

Peter Williams (Chairman of the Committee)

6

Colin Kemp

6

Rakhi Goss-Custard

6

 

The quorum for meetings of the Committee is two members. The Committee will meet at such times as may be necessary but will normally meet at least five times a year.  The Company Secretary acts as Secretary to the Committee.

Only members of the Committee have the right to attend Committee meetings. The Chairman of the Committee has requested that the Chairman of the Board attend the meetings except during discussions relating to his own remuneration. The Chief Executive Officer may also be invited to meetings and the Committee takes into consideration his recommendations regarding the remuneration of executive colleagues and the first layer of management below Board level. No executive director is involved in deciding their own remuneration.

What has the Committee done during the year?

The Committee met six times during the year to consider and, where appropriate, approve key remuneration items including the following:


Pay and incentive plan reviews

  • annual review and approval of executive directors’ base salaries and benefits;
  • review of year-end business performance against relevant performance targets to determine annual bonus payouts and vesting of long-term incentives;
  • review and approval of appropriate benchmarks and performance measures for the annual performance related bonus and 2017 PSP awards to ensure measures are aligned with strategy and that targets are appropriately stretching;
  • ·ongoing monitoring of senior management remuneration structures; and
  • approval of share awards granted under the Deferred Share Bonus Plan (DSP) and the Rightmove Performance Share Plan (PSP).

     

    Governance and strategy

  • review of the Remuneration Policy for executive directors and consultation with major shareholders on the proposed policy before submitting it for shareholder approval at the 2017 AGM;
  • review and approval of the 2016 Directors’ Remuneration Report;
  • review of the 2016 AGM voting and feedback from institutional investors;
  • evaluation of the Committee’s performance during the year; and
  • review of the Committee’s terms of reference.

 

24 February 2017

Nomination committee

The Committee’s role is to regularly review the structure, size and composition of the Board with the objective of matching the evolving skills, knowledge and experience required by the business. The Committee seeks to optimise the Board’s performance and ensure the continued ability of the Group to compete effectively in the marketplace, and make recommendations to the Board with regard to any changes.

The terms of reference of the Committee were updated during the year with the key responsibilities as follows:

Membership

The Committee is comprised entirely of non-executive directors. As at 31 December 2016 three out of the four members of the Committee were considered by the Board to be independent. The quorum for meetings of the Committee is two members. At the request of the Committee Chairman, the Chief Executive Officer is normally invited to attend the meeting to discuss the annual organisation and succession plan.

The Chairman of the Company may not chair the Committee in connection with any discussion about the appointment of his successor. In these circumstances, the Senior Independent Director will take the chair.

Principal activities of the Committee during 2016

During the year the Committee has:

  • reviewed the Board composition;
  • reviewed the Board committees’ composition;
  • approved the plans for the organisation and succession of the executive directors and senior management;
  • agreed the process for and considered actions based upon the findings of the Board evaluation;
  • recommended the appointment of a non-executive director;
  • considered the diversity of the Board and updated the policy regarding gender diversity on the Board; and
  • conducted an annual review of its terms of reference. 

 

Board induction and training

All new non-executive directors joining the Board undertake a tailored induction programme to meet their individual needs. This covers for example: the strategic challenges and opportunities facing the Group, financial performance, operational activities (including meeting with members of the senior management team and spending a day on the road with a sales director meeting our customers), the role of the Board including the matters reserved to it for approval, and the responsibilities of the Board Committees.  New directors receive a comprehensive induction pack of corporate information and a briefing from the Company Secretary covering corporate governance, Group policies and relevant regulations.

Individual Board members have access to training and can seek the advice from independent professional advisers, at the Group’s expense, where specific expertise or training is required in furtherance of their duties.


Board effectiveness and evaluation

The Board is committed to undertaking annual reviews of its own performance and also the performance of its Committees and individual directors.

The Committee considered the conclusions of the Board Strategy Review externally facilitated by Korn Ferry in 2015, and agreed a candidate profile for a new non-executive director to join the Board in advance of Colin Kemp’s retirement following the 2017 AGM.  The Committee recommended the appointment of Jacqueline de Rojas as a recognised technology leader with relevant customer engagement experience and an advocate for increased opportunities for women and diversity in both the boardroom and technology workplace.  The Committee has also agreed a candidate profile and initiated a search by Korn Ferry for a non-executive director with suitable skills and experience to replace Ashley Martin, when he retires from the Board and as Audit Committee Chairman in May 2018.

The Board has undertaken an internal self-assessment during 2016. Directors were invited to provide feedback via the Company Secretary on Board and Committee performance and answer key questions relating to the Board’s strengths, improvements during the year and which business risks and development opportunities should receive more focus. The Committee and Board discussed the feedback at the Committee meeting in December 2016 and recommended a number of actions and areas of focus for the Board during 2017. It was agreed that the Board has benefited from access to members of senior management and such interaction should continue at future board meetings. Additionally, the Board seeks more opportunities to enhance its understanding of the customer perspective. 

The evaluation concluded that the Board and its Committees continue to operate effectively with strong individual contributions from executive directors, open, constructive debate and a good balance of support and challenge from the non-executive directors. 

An internally facilitated review of the performance of the Board and its Committees will again be conducted during 2017.

 

24 February 2017

Audit committee

The Committee consists entirely of independent non-executive directors. There has been no change to the composition of the Committee during 2016. The Board is satisfied that both Ashley Martin and Peter Williams have recent and relevant financial skills and experience. Both have professional qualifications with the Institute of Chartered Accountants of England and Wales. We consider that every member of the Committee has competence relevant to Rightmove’s business and the sector in which we operate.

The quorum for meetings of the Committee is two members. Appointments to the Committee are for a period of up to three years, extendable by no more than two additional three-year periods, so long as members continue to be independent.

The Finance Director and the Head of Finance are normally invited to attend the meetings as well as the external auditor, KPMG and the internal auditor, PwC. Other relevant people from the business are also invited to attend certain meetings in order to provide a deeper level of insight into certain key issues and developments. The Committee regularly meets separately with the external and internal auditors without others being present.

The Committee Chairman briefs the Board on the matters discussed at each meeting and minutes of the Committee meetings are circulated to the Board once approved. The effectiveness of the operation of the Committee was reviewed as part of the effectiveness review of the Board and its committees in December 2016, details of which can be found in the Nomination Committee report. Each Board member responded to key questions on Board performance and commented generally on the performance of Board Committees. The Board received positive feedback on the Committee’s performance, in particular, noting the improved engagement between Rightmove Assurance and the business during the year.

Financial reporting

The primary role of the Committee in relation to financial reporting is to review with the assistance of both management and the external auditor the half year results statement and the Annual Report and financial statements relating to the Group’s financial performance.

The key significant area of judgement considered by the Committee in relation to the 2016 Annual Report is revenue recognition; details of how this was addressed by the Committee are provided below.

Revenue recognition

The key area of judgement is the timing of revenue recognition in relation to the billing of subscription fees and additional products and services and the accounting for any membership offers to customers with discounted or free periods. This was a prime area of audit focus with KPMG performing detailed analytical procedures, including using computer assisted audit techniques, throughout the year on amounts billed to the two largest customer groups (Agency and New Homes), together with the billing of Overseas customers. KPMG investigated anomalies and outliers identified and provided detailed reporting to the Committee in this regard. The Committee discussed any reported anomalies highlighted by KPMG ensuring that adequate explanations were received from management in line with their business understanding. A separate review of billing and controls within the non-core revenue streams was also undertaken by Rightmove Assurance. In addition, the Committee received regular updates from management discussing current customer offers and their impact on revenue recognition.

The Committee was satisfied with the explanations provided and conclusions reached.

Fair balanced and understandable

At the request of the Board, the Committee was asked to consider whether the 2016 Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the necessary information for shareholders to assess the Group’s performance, business model and strategy.

The Committee was provided with an early draft of the Annual Report in order to assess the strategic direction and key messages being communicated. Feedback was provided by the Committee in advance of the February Board meeting, highlighting any areas where the Committee believed further clarity was required. The draft report was then amended to incorporate this feedback prior to being tabled at the Board meeting for final comment and approval.

When forming its opinion, the Committee reflected on the information it had received and its discussions throughout the year. In particular, the Committee considered:

Following its review, the Committee is of the opinion that the 2016 Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy.

Financial Reporting Council

During the year, Rightmove received a letter from the FRC to confirm that the Annual Report for the year ended 31 December 2015 had been subject to review by its Conduct Committee, which is responsible for reviewing and investigating the annual accounts, directors’ and strategic reports of UK public companies. The letter from the FRC communicated that following this review, no questions or queries have been raised. The FRC noted that its role was not to verify information, but to consider compliance with reporting requirements, and it did not take responsibility for reliance on its letter by any party.

Internal audit

The Group established an internal audit function during 2015 known as Rightmove Assurance which is outsourced to PwC. The aim of Rightmove Assurance is to provide independent and objective assurance on the effectiveness of internal control, risk management and governance processes. This includes assurance that underlying controls and processes are working effectively, as well as specialist reviews that focus on emerging risks in new and evolving areas of the business.

During the year and in accordance with the approved internal audit plan, Rightmove Assurance carried out work in the following areas:

  • financial controls: review of the risks and controls in relation to the revenue and billing processes within our other revenue streams, being all business units other than Agency and New Homes;
  • business continuity planning and Crisis Response: a comprehensive review and update of plans for the Milton Keynes and London offices, and testing of business continuity readiness;
  • review of non-financial reporting KPIs: including comparisons with public reporting by other quoted peers;
  • reward and incentivisation: an assessment of the structure and philosophy of reward within the Group for employees excluding directors; and
  • Senior Accounting Officer (SAO) regime: review of Rightmove’s tax risk framework in advance of Rightmove entering the SAO regime in 2017.

Reports setting out the principal findings of the Rightmove Assurance reviews and agreed management actions were discussed by the Committee.

Effectiveness of the internal audit process

The work of Rightmove Assurance has provided a key additional source of assurance and support to management and the Audit Committee on the effectiveness of internal controls as well as providing guidance and recommendations to further enhance the internal control environment, and provide specialist insight into areas of change in the business.

The first review by the Committee of the effectiveness of the Rightmove Assurance function took place in early 2016. The evaluation was led by the Committee Chairman and included consideration of stakeholder feedback on the quality of Rightmove Assurance activity, including from PwC themselves. The evaluation concluded that Rightmove Assurance had added value to the business in its first year in providing further assurance on financial controls and increasing the robustness of the risk review process. It was also seen as helpful in setting priorities for management and allowing access to specialist input that Rightmove does not have in-house. The evaluation had a number of recommendations for PwC and Rightmove that were incorporated into the 2016 Rightmove Assurance plan.

External audit

The Committee has primary responsibility for overseeing the relationship with, and performance of, the external auditor.

KPMG LLP was re-appointed as the Group’s auditor in 2013 following an audit tender and in accordance with the EU Audit Directive implemented in 2016, the Group will be required to put the external audit contract out to tender by 2023. The external auditor is required to rotate the audit partner responsible for the Group audit every five years. The current lead partner, Karen Wightman, has been in place for four years, and therefore the Committee and management will work with KPMG to ensure a smooth transition to a new audit partner, commencing during the 2017 audit process.

The Committee approved the fees of KPMG for the year as set out in Note 6 of the financial statements.

Effectiveness of the external audit process

The effectiveness of the external audit process is dependent on a number of factors. These include the quality, continuity, experience and training of audit personnel, business understanding, technical knowledge and the degree of rigour applied in the review processes of the work undertaken, together with appropriate audit risk identification at the start of the audit cycle.

The Committee evaluated the effectiveness of the audit process in addressing these matters together with input from management. Areas the Committee considered in this review included the quality of audit planning and execution, engagement with the Committee and management, quality of reporting and capability and experience of the audit team. For the 2016 financial year, the Committee was satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and concluded that the performance of KPMG remained efficient and effective.

Non-audit services

The Committee discussed its responsibilities to safeguard audit objectivity and independence as well as the needs of the business and agreed that it was practical in certain limited cases for the auditor to be assigned to other non-audit project work due to their knowledge and expertise of the business.

The Committee approved an updated non-audit fee policy in November 2015 in advance of the EU Audit Directive implemented in June 2016, and adopted by the FRC in its Revised Ethical Standard 2016. Following the introduction of updated FRC guidelines, the non-audit fee policy has been updated to give management the authority to incur permitted non-audit fees of up to £15,000 in any financial year without the prior approval of the Committee. Thereafter all additional fees will be referred to the Committee in advance, subject to a cap on permitted non-audit fees of 70% of the average audit fees over the three preceding financial years. Permitted non-audit services are any services which are not identified as prohibited services in the FRC Revised Ethical Standard 2016.

The level of non-audit fees as a proportion of the audit fee has typically been very low at Rightmove. The non-audit services provided by KPMG have historically related to tax advisory services which are now prohibited, and as a result, PwC were appointed as Rightmove’s tax advisors in 2016. Details of the non-audit fee services provided by KPMG can be found in Note 6 of the financial statements.

Additional areas of focus of the Committee during 2016

The Committee considers new and emerging risks as the business and regulatory environment evolves. This resulted in the following items being discussed by the Committee during 2016:

  • housing market: consideration of the potential impact on Rightmove of the greater level of uncertainty in the housing market following the vote to leave the EU;
  • data protection, and use of consumer personal data;
  • Modern Slavery Act 2015: review of the proposed steps to be taken prior to the publication of a Modern Slavery Act statement and approval of the draft statement; and
  • consideration of the adoption of IFRS 15 Revenue from Contracts with Customers on the Group’s financial statements.

Internal controls
The Board has overall responsibility for the Group’s system of internal controls and has established a framework of financial and other controls which is periodically reviewed in accordance with the FRC Internal Control: Guidance to Directors publication for its effectiveness.

The Board has taken, and will continue to take, appropriate measures to ensure that the chances of financial irregularities occurring are reduced as far as reasonably possible by improving the quality of information at all levels in the Group, fostering an open environment and ensuring that financial analysis is rigorously undertaken. Any system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Group’s management has established the procedures necessary to ensure that there is an ongoing process for identifying, evaluating and managing the significant risks to the Group. These procedures have been in place for the whole of the financial year ended 31 December 2016 and up to the date of the approval of these financial statements and they are reviewed regularly.

The key elements of the system of internal control are:

  • major commercial, strategic, competitive and financial risks are formally identified, quantified and assessed and discussed with the executive directors, after which they are considered by the Board;
  • a comprehensive system of planning, budgeting and monitoring Group results. This includes monthly management reporting and monitoring of performance against both budgets and forecasts with explanations for all significant variances;
  • an organisational structure with clearly defined lines of responsibility and delegation of authority;
  • clearly defined policies for capital expenditure and investment, including appropriate authorisation levels, with larger capital projects, acquisitions and disposals requiring Board approval;
  • a comprehensive disaster recovery and business continuity plan based upon:
  • co-hosting of the rightmove.co.uk platforms across three separate locations which is regularly tested and reviewed; and
  • the capability for employees to remote work from home or a third party location in the event of a loss of one of our premises which has been tested for the Milton Keynes office during the year;
  • regular testing of the security of the IT systems and platforms, regular backups of key data and ongoing threat monitoring to protect against the risk of cyber attack;
  • a treasury function which manages cash flow forecasts and cash on deposit and counterparty risk; and
  • whistleblowing and bribery policies of which all employees are made aware, to enable concerns to be raised either with line management or, if appropriate, confidentially outside their line management.

Through the procedures outlined above, the Board, with advice from the Committee, has considered all significant aspects of internal control for the year and up to the date of the Annual Report. No significant failings or weaknesses were identified during this review. However, had there been any such failings or weaknesses, the Board confirms that necessary actions would have been taken to remedy them.

24 February 2017