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Corporate Governance

Laing O’Rourke is committed to achieving corporate governance standards and ethical business practices that meet the highest possible levels of integrity and compliance for a privately owned enterprise.

We evaluate the effectiveness of our decision making, accountability and audit processes against similarly sized publicly listed corporations. We believe this is the best way of ensuring sustainable long-term growth and the success of the Group.

CORPORATE GOVERNANCE FRAMEWORK

As a large privately owned, internationally focused engineering and construction group, Laing O’Rourke aspires to the highest standards of governance. For that reason, the Board seeks to ensure that the Group’s corporate governance arrangements align with those principles set out in the UK Corporate Governance Code which are deemed to be applicable and appropriate given the private ownership of the Group. The Group’s businesses operate within an established and externally benchmarked corporate governance framework that is underpinned by the Group’s vision and values. A key function of Laing O’Rourke’s corporate governance framework is the identification, management and mitigation of operational and financial risks. At every governance level, we ensure the necessary decision-making processes are functioning correctly, in line with developments in company laws, corporate governance and best practice.

The framework is reviewed annually to ensure that the committee structure and delegations of authority continue to meet the needs of the business and provide the Board and management with the necessary oversight of the Group’s affairs. The current terms of reference of the Board and its various committees and subcommittees are set out below.

1. BOARD OF DIRECTORS

The Board determines the strategic direction of the Group and allocation of necessary resources to ensure the implementation of the Group’s strategy. It retains oversight of operations through regular reports by the Group Chief Executive on behalf of management. It has overall responsibility for the management of risk and reviews the effectiveness of internal controls and risk management procedures at Group level through reports by the Audit Committee Chairman.

Certain key decisions are the preserve of the Board and are identified in a schedule of reserved matters for its prior approval. These include changes to the Group’s capital structure; approval of material mergers, acquisitions and disposals; significant investments, capital expenditure, debt facilities, contracts and bids. Authority for the day-to-day running of the Group is delegated to the Group Executive Committee.

The Board is responsible for ensuring that the Group’s accounts give a true and fair view of the business using suitable accounting standards and judgements and determining whether the Group is a going concern. It also has responsibility for approving the Annual Review and ensuring compliance with Cyprus company law (where the company is registered) and other applicable legislation.

The Board is composed of directors providing an appropriate balance of skills, experience, independence and diverse backgrounds. In addition to Ray O’Rourke, the current members of the Board are Christakis Klerides, Victor Papadopoulos, Stelios Anastasiades and Anna Stewart.

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2. AUDIT COMMITTEE

The Audit Committee provides an element of independent assurance to the Board regarding the management of the Group’s affairs and oversees the Group’s financial reporting, risk management and internal controls. It also provides a formal reporting link with the external auditors, PricewaterhouseCoopers.

Main responsibilities:

  • Monitoring the integrity of the financial statements and formal communications relating to the Group’s financial performance.
  • Reviewing significant financial reporting issues and accounting policies and disclosures in financial reports.
  • Reviewing the effectiveness of the Group’s internal control procedures and risk management systems.
  • Considering how the Group’s internal audit requirements shall be satisfied and making recommendations to the Board.
  • Making recommendations to the Board on the appointment or reappointment of the Group’s external auditors.
  • Ensuring that an effective whistleblowing procedure is in place.

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3. GROUP EXECUTIVE COMMITTEE

The GEC is responsible to the Board for the day-to-day management of the Group’s operations and creating sustainable shareholder value through the management by the Hub Executive Committees (see page 86) of the Group’s constituent businesses. Its role includes recommending to the Board the Group’s overall business strategy and driving its implementation, driving the Group’s human capital agenda, driving safety and sustainable development performance across the Group, reviewing and monitoring the performance of management, and setting, and ensuring compliance with, the Group’s internal controls and risk management procedures. The internal risk assurance function reports to the GEC through the Chairman of the Audit Committee on a regular basis. The members of the GEC are set out on pages [89] to [91].

The GEC has further delegated authority to a series of subcommittees which focus on particular Group-wide matters.

Main responsibilities:

  • Recommending the Group’s overall strategy to the Board.
  • Approving material acquisitions and disposals, material contracts and bids, major capital expenditure projects and budgets.
  • Overseeing the Group’s succession planning.
  • Overseeing the Group’s corporate governance and compliance arrangements.
  • Recommending the Group’s corporate policies to the Board for approval.

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4. GROUP MANAGEMENT COMMITTEE

A subcommittee of the GEC, the GMC has operational responsibility for coordinating the preparation of the Group strategy and Group budget and business plan. It also has accountability for the day-to-day implementation of the Group’s strategy and associated plans as approved by the GEC and the Board. Its remit further includes recommending the prioritisation of projects and business development opportunities, and determining the appropriate allocation of capital within the limits of the Board-approved Group budget and business plan.

Main responsibilities:

  • Coordinating the implementation of the Group’s strategy and monitoring excellence plus performance.
  • Coordinating the Group’s budget and business plan process.
  • Allocating capital across the Group within Board and GEC-approved limits.
  • Coordinating the development of Group policies and standards.
  • Maximising Group synergies, including practices, resources and procurement.
  • Driving senior talent management and development (in liaison with the GEC and the Human Capital Committee).

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5. SAFETY AND SUSTAINABLE     DEVELOPMENT COMMITTEE

A subcommittee of the GEC, this forum ensures risks and opportunities associated with safety and sustainability are given the highest priority within the Group. It also directly supports the delivery of business strategy through the management of sustainable development issues covering social, economic and environmental matters.

Main responsibilities:

  • Reviewing the development of policies and guidelines for managing safety and sustainable development (SD) issues.
  • Reviewing the implementation and performance of the Group with regard to these policies.
  • Monitoring reports covering matters relating to material safety and SD risks and liabilities.
  • Monitoring incidents, including key impacts and mitigation actions and, where appropriate, ensuring these are communicated Group-wide.
  • Considering domestic and international regulatory and technical developments affecting safety and SD management.

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6. HUMAN CAPITAL COMMITTEE

This subcommittee of the GEC is co-chaired by the Group Chairman and the Group Chief Executive, with members drawn from the GEC and relevant functional disciplines. The main purpose of the committee is to lead the formulation and endorsement of the Group’s people and organisation agenda, and ensure total alignment with Group business strategy.

Main responsibilities:

  • Setting guidelines for the types of skills, experience and diversity of human capital necessary to achieve the Group’s strategic goals.
  • Ensuring the human capital function works with management to carry out regular reviews of talent and succession plans.
  • Ensuring the necessary investment in development and education activities, including the Guns (executive development) programmes and education networks to meet current and future talent requirements.
  • Overseeing the Group’s recruitment and resource mobilisation plans to meet operational demands in the field.
  • Establishing and developing the Group’s general policy on employee remuneration.
  • Considering legal and regulatory developments affecting human capital management.

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7. INVESTMENT COMMITTEE

The subcommittee is chaired by the Group Investment Director, and is responsible for investment and treasury policy decisions. It oversees the commercial prioritisation and development of Private Finance Initiative (PFI)/Public Private Partnership (PPP) investment opportunities and the Group’s capital expenditure programme for sanction by the GEC. Investment funding for acquisition, disposal, partnering and joint venturing transactions, and related commercial decisions are also managed by this committee.

Main responsibilities:

  • Proposing the Group’s investment strategy to the GEC and monitoring the implementation of the investment policy and procedures.
  • Monitoring compliance with legislation, rules and regulations affecting the Group’s investment activities.
  • Considering and recommending to the GEC for approval the appointment of external investment advisers, managers of the company’s investments and/or custodians, including agreeing remuneration, approving engagement terms, and monitoring performance.
  • Considering all investment and divestment proposals. Approving internal processes relating to investment transactions.

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8. ENGINEERING EXCELLENCE GROUP     (EnEx.G)

The EnEx.G is chaired by the Group Chairman and led by the Group’s Chief Engineering Adviser, Professor Robert Mair. Its membership comprises the EnEx.G technical engineering specialists. It is responsible for leading the development and execution of the Group’s innovation agenda by devising engineering strategies to give us competitive advantage and, ultimately, drive industry-wide transformation.

Main responsibilities:

  • Identifying, proposing, prioritising and monitoring areas where engineering excellence can add value to existing projects, new bids and opportunities.
  • Collaborating with clients, supply chain partners, government bodies and other organisations (including charities and not-for-profit entities) to generate goodwill, loyalty and new opportunities.
  • Leading the research agenda to innovate across the Group’s target sectors and markets, including extending DfMA capabilities into new product areas.
  • Partnering with leading universities and research providers to support our research agenda, complemented by our commercialised in-house R&D capability.
  • Overseeing programmes utilising existing and new partner universities to support mentoring of graduate engineers, junior and senior engineers, technical and construction specialists, project managers and management across the business.

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9. EUROPE HUB EXECUTIVE COMMITTEE

This hub-level executive committee has primary authority for the day-to-day management of business operations across the constituent territories within agreed limits set by the GEC. Its members are drawn from senior management in our construction, infrastructure and specialist services businesses and key supporting functions. The committee is also responsible for driving the implementation of health, safety and sustainable development policies and monitoring the performance of related activities.

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11. BUSINESS UNIT/FUNCTIONAL COMMITTEES

As subcommittees of the main hub-level executive committees (9 and 10), these forums have delegated authority for the day-to-day management of individual business unit operations or functions, ensuring the alignment of business plans with strategic targets and that operational performance is in line with, or ahead of, approved budget plans.

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10. AUSTRALIA HUB EXECUTIVE COMMITTEE

This hub-level executive committee has primary authority for the day-to-day management of business operations across the constituent territories within agreed limits set by the GEC. Members are drawn from senior management in its various regions and key supporting functions. The committee is also responsible for driving the implementation of health, safety and sustainable development policies and monitoring the performance of related activities.

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11. BUSINESS UNIT/FUNCTIONAL COMMITTEES

As subcommittees of the main hub-level executive committees (9 and 10), these forums have delegated authority for the day-to-day management of individual business unit operations or functions, ensuring the alignment of business plans with strategic targets and that operational performance is in line with, or ahead of, approved budget plans.

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12. PROJECT GOVERNANCE

Tender and post-tender review boards
These governance forums are chaired by the commercial and project delivery leads on each tender, and membership consists of delivery-side project representatives, accountable senior management from finance, commercial and other key supporting functions, and client-side representatives as appropriate.

The review boards are responsible for ensuring the financial integrity of the project pre-delivery phase and are supported by appropriate project controls to assure the achievement of pre-agreed financial targets during all stages of construction.

Project delivery review boards
Project boards are governed by the standardised processes and practices of The LOR Way – a systematic approach to risk management and quality assurance in the tendering and delivery stages of all projects, whatever their scale and complexity.

Through the Core and Enabling Processes (Laing O’Rourke’s approved business quality management system), the project boards ensure project activities are performed in line with legislation, regulations, codes of practice and the requirements of BS EN ISO 9001:2008 quality management assurance accreditations.

Continual improvement is achieved through the implementation of business objectives, audits, data analysis, corrective and preventive actions and management reviews.

Effectiveness
All directors are advised regularly of likely time commitments and are asked to seek approval from the Board if they wish to take on additional external appointments. The ability of individual directors to allocate sufficient time to the discharge of their responsibilities is considered as part of the directors’ annual performance review process overseen by the Group Chairman. Any issues concerning the Group Chairman’s time commitments are dealt with by the Board.

An induction programme is agreed for all new directors aimed at ensuring that they are able to develop an understanding and awareness of the company’s governance structure and Core and Enabling Processes, its people and businesses. In addition to the above, as part of the induction process, new directors will typically visit the Group’s principal operations in order to meet employees and gain an understanding of the Group’s projects and services. Ongoing training is provided for individual directors as required. Directors are supplied with mobile tablet-based information in a timely manner that is in a form and of a quality appropriate to enable directors to discharge their duties. In the normal course of business, such information is provided in a regular report to the GEC and the Board that includes information on operational matters, strategic developments, reports on the performance of Group operations, financial performance relative to the business plan, business development, corporate responsibility and client/stakeholder relations.

Independent assurance
The financial statements are independently assured by external auditors PricewaterhouseCoopers. The Group’s internal risk and audit function provides assurance to the Audit Committee and, through it, the Board of the adequacy of the internal control environment across all of Laing O’Rourke’s operations. This includes ensuring that efficient and effective control processes are in place to identify, manage and, to the greatest extent possible, mitigate business risk across the Group’s operations.

The independent external auditors report to the members of Laing O’Rourke Corporation Limited and the Board of Directors, on the financial position of the Group. Their audit opinion on the financial statements is set out on page 95 of this Annual Review. Additional independent assurance and accreditation is also carried out on the Group’s position and statements pertaining to business risk and its health, safety and sustainable development performance.

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