Managing the Business

Board of Directors

The Stagecoach Board is accountable to shareholders for the Group’s activities and is responsible for the effectiveness of corporate governance practices within the Group. It is committed to maintaining a corporate governance structure appropriate to the Group and its strategy.

Good corporate governance remains central to delivering the Group’s objectives. We have reviewed the effectiveness of the Board and its Committees and we consider the corporate governance structure to remain appropriate for the Group.

Composition of the Board

The composition of the Board, which has not changed since 1 May 2011, is as follows:

	Independent Chairman	Independent Non-Executive Director	Other Director
Sir George Mathewson Chairman	√
Ewan Brown Non-Executive Director		√
Helen Mahy Non-Executive Director		√
Garry Watts Senior Independent Non-Executive Director		√
Phil White Non-Executive Director		√
Will Whitehorn Non-Executive Director		√
Ann Gloag Non-Executive Director			√
Sir Brian Souter Chief Executive			√
Martin Griffiths Finance Director			√

The Code suggests that independent non-executive directors should make up at least half of the Board (excluding the Chairman). Throughout the period from 1 May 2011 to 30 April 2012, the Board considers that it complied with this Code requirement. The current position is shown in the above table.

In determining the independence of non-executive directors, the Board considers a number of factors. In particular the Board satisfies itself on the following questions:

• Does the director provide a robust and effective challenge to executive management?
• Is the director prepared to challenge others’ beliefs, assumptions and viewpoints for the overall good of the Group and its shareholders?
• Does the director effectively contribute to constructive debate by the Board and its Committees?
• Is the director willing to defend his or her own beliefs and viewpoints for the overall good of the Group and its shareholders?
• Does the director have a sufficiently sound and detailed knowledge of the Group’s business that enables him or her to effectively question strategy and executive management’s running of the business?

Ewan Brown, one of the five independent non-executive directors, has served on the Board since 1988 and is a non-executive director of Noble Grossart, which is an advisor to the Company. The Company recognises and understands investor concerns over longer-serving non-executive directors but nevertheless continues to regard Ewan Brown as independent. Ewan Brown’s long association with the Group enables him to provide a robust and effective challenge to management because of the sound and detailed knowledge of the Group’s business that he has developed. The Board believes that Ewan Brown’s length of service, when taken in the context of the Board as a whole, enhances his effectiveness as a non-executive director and that he remains independent in character and judgement. Five of the eight members of the Board, excluding the Chairman, are considered by the Board to be independent. Even if Ewan Brown is not treated as independent; the composition of the Board complies with the recommendations of the Code.

In recognition of the factors suggested by the Code for determining independence, Ewan Brown does not serve on the Remuneration Committee or the Audit Committee. Following the introduction of the Code, all directors stood for election or re-election at the 2011 Annual General Meeting and will do so again at future Annual General Meetings.

Operation of the Board

The Board is generally scheduled to meet six times each year. Additional meetings of the Board are held to consider matters arising between scheduled Board meetings, where a decision of the Board is required prior to the next scheduled meeting. In addition to the formal meetings of the Board and its Committees, the Directors are in more frequent but less formal contact with each other and with the Group’s management on a range of matters.

The Chairman ensures that meetings of the Board and shareholders are properly conducted and is responsible for setting and moving forward the Board’s agenda. Leadership of the Board (by the Chairman) is not the same as the leadership required (from the Group Chief Executive) to turn the Board’s strategic and policy decisions into actions. The Group Chief Executive has dayto- day responsibility for all business of the Group and carries out the agreed strategy and policies of the Board. The split of the Chairman’s and Chief Executive’s responsibilities is in writing and has been approved by the Board.

The Directors' biographies appear on pages 26 and 27 of this Annual Report and illustrate the Directors’ range of experience, which ensures an effective Board to lead and control the Group. The Non-Executive Directors bring an independent viewpoint and create an overall balance.

The Executive and Non-Executive Directors have a complementary range of experience that ensures no one director or viewpoint is dominant in the decision-making process. The Chairman and the Non-Executive Directors periodically meet without the Executive Directors being present. In addition, the Non-Executive Directors, led by the Senior Independent Non-Executive Director, meet without the Chairman at least annually.

All the Directors meet regularly with other senior management and staff of the Group, have access to confidential advice from the Company Secretary and may take independent legal or other professional advice at the Group’s expense where it is considered necessary for the proper discharge of their duties as directors. The Company Secretary, whose appointment and removal is a matter for the Board as a whole, is responsible to the Board for ensuring the Board procedures are complied with.

Each director receives induction training on appointment and subsequently such training, briefings and site visits as are considered necessary to keep abreast of matters affecting their roles as directors. The Chairman reviews the Directors’ training and development needs in conjunction with the Company Secretary. Training can encompass health, safety, environmental, social and governance matters. The Chairman endeavours to ensure that all the Directors attend the Annual General Meeting, providing an opportunity for shareholders to meet the Directors and to address questions to them.

The number of full Board meetings during the year was seven. The full Board typically meets once a year at an operational location and regular communication is maintained by the Chairman with other directors between meetings to ensure all directors are well informed on strategic and operational issues. In May 2011, the Board visited the Group’s North American operations. Some of the Directors also attended health and safety meetings of operating companies during the year. The Health, Safety and Environmental Committee visits operating locations around the Group to gain greater understanding of the how the Group addresses health, safety and environmental matters.

The Board has a number of matters reserved for its consideration, with principal responsibilities being to agree the overall strategy and investment policy, to approve major capital expenditure, to monitor performance and risk management procedures of senior management, to ensure that there are proper internal controls in place and to consider major acquisitions or disposals. The Directors have full and timely access to information with Board papers distributed in advance of meetings. Notable matters that the Board considered during the year ended 30 April 2012 included:

• Approval of the return of cash to shareholders made in October 2011
• Consideration of invitations to tender for rail franchises
• Disposal of the Group’s school bus operations in Wisconsin
• Disposal of Stagecoach Metrolink Limited
• Expansion of the Group’s Megabus operations in North America
• Virgin Rail Group’s bid for the new West Coast rail franchise
• The Alliance between Network Rail and South West Trains
• The planned acquisition of businesses and assets from Coach America.
• Group-wide strategy and succession planning

The Board keeps the roles and contribution made by each director under review and changes in responsibilities are made where necessary to improve the Board’s effectiveness. To provide a more manageable process and better control, certain of the Board’s powers have been delegated to committees.

Minutes are taken of each meeting of the Board and its Committees. Where any director has significant concerns that cannot be resolved about the running of the Group or a proposed action, these concerns are recorded in the minutes. It is also the Group’s policy that where a director resigns, the director is asked to provide a written statement to the Chairman of any concerns leading to his or her resignation.

Operational management of the Group

The Board delegates the operational management of the Group to the Group Chief Executive and Group Finance Director (“Executive Directors”). The Executive Directors maintain day-to-day contact and meet regularly face-toface or in video conferences with non-board senior management. There are three principal operating divisions (UK Bus: headed by a Managing Director, North America: headed by a Chief Operating Officer and UK Rail: headed by the Group Finance Director,) which each comprise a varying number of autonomous business units, each headed by a chairman or managing director who is responsible for the day-to-day performance of the business unit. Each chairman or managing director is supported by his/her own management teams.

Two of the joint ventures in which the Group has an interest, Virgin Rail Group and Twin America LLC, are managed independently of the Group. Each is headed by its own Chief Executive. The Group has two representatives on the Board of Virgin Rail Group and three representatives on the Board of Twin America LLC. The other trading joint venture in which the Group has an interest, Scottish Citylink Coaches Limited, has a joint board. The Group is responsible for the day-to-day management of that business.

Performance evaluation

The Board assesses its own performance and the performance of each individual Board member; this assessment is co-ordinated and directed by the Chairman with the support of the Company Secretary. The Senior Independent Non-Executive Director co-ordinates the Board’s assessment of the performance of the Chairman. As part of the assessment process, the Non- Executive Directors meet without the Executive Directors being present. The Non-Executive Directors also meet without the Chairman being present. The Chairman obtains feedback from each individual director on the performance of the Board and other Board members – this involves the completion of a questionnaire and a follow-up discussion. In the same way, the Senior Independent Non-Executive Director obtains feedback from each individual director on the performance of the Chairman. A similar process is undertaken to assess the performance of each of the Board’s committees. From the effective date of the Code, the Group plans to use external facilitation of its performance evaluation no less frequently than every third year.

The Directors have reviewed the effectiveness of the Board as a whole and its committees. Each director has assessed the effectiveness of the Board and each committee of which he or she is a member. The assessment of effectiveness included consideration of:

• The effectiveness of the formal Board and committee meetings;
• The nature and extent of the Board’s interaction with the management of the Group;
• The timeliness, relevance and accuracy of the information provided to the Board and its committees;
• The allocation of the Board’s time between differing priorities including the time spent on strategic considerations relative to other matters; and
• The composition of the Board and its committees.

The Board has considered the results of these assessments and has concluded that overall the Board and its committees continue to operate in an effective and constructive manner.