How the board complied with its Section 172 duty
The Companies (Miscellaneous Reporting) Regulations 2018 (‘2018 MRR’) require Directors to explain how they considered the interests of key stakeholders and the broader matters set out in section 172(1) (A) to (F) of the Companies Act 2006 (‘S172’) when performing their duty to promote the success of the Company under S172. This includes considering the interest of other stakeholders which will have an impact on the long-term success of the company. The Board welcomes the direction of the UK Financial Reporting Council (the ‘FRC’). This S172 statement, which is reported for the first time, explains how Continental Tyre Group Directors:
The S172 statement focuses on matters of strategic importance to CTG, and the level of information disclosed is consistent with the size and the complexity of the business.
Delegation of authority
The board believes governance of CTG is best achieved by delegation of its authority for the executive management of CTG to the Senior Management Team (SMT), subject to defined limits and monitoring by the board. The board routinely monitors the delegation of authority, ensuring that it is regularly updated, while retaining ultimate responsibility.
This includes the principles which outline:
The framework is reviewed to ensure it is best suited to support the evolving strategy and CTG’s purpose, ambition and aims.
The current framework covers the following principal areas:
1. Company purpose:
Pursuing CTG’s purpose and accountability to its stakeholder and shareholders for the company’s actions. This means focusing primarily on strategic issues, while having considered economic, political and social issues and other relevant external matters which may influence or affect the development of CTG’s business and its expectations for the conduct of the CTG business and its employees.
Responsibility for establishing and reviewing the long-term strategy and the annual plan (the plan) for CTG, based on proposals made by the SMT for achieving CTG’s purpose.
3. Monitoring decisions and actions of the SMT and the performance of CTG:
Including implementation of, and performance against, the strategy and the plan; and the exercise of authority delegated to the SMT. The board satisfies itself that emerging and principal risks to CTG are identified and understood, systems of risk management, compliance and controls are in place to mitigate such risks and the expected conduct of CTG’s business and its employees is reflected in a set of values established by the SMT.
Ensuring systems and processes are in place for succession, evaluation and compensation
of the SMT and other members of the organisation.
Those delegated to by the directors to take decisions have access to functional assurance support to identify matters which may have an impact on a proposed decision.
S172(1) (A) “The likely consequences of any decision in the long term”
The Directors understand the business and the evolving environment in which we operate, including the challenges of navigating through the industry megatrends. Therefore to support the business in meeting its strategic ambitions the Board along with the SMT regularly review its strategy to ensure it is harmonised with the wider Corporate Strategy whilst also meeting the short-term business demands. The objective is to always achieve sustainable value creation within our operations.
The Directors recognise that CTG employees are fundamental and core to our business and delivery of our strategic ambitions. All employees share four fundamental Corporate Values and framework. They form the roots of our corporate culture: Trust, Passion To Win, Freedom To Act and For One Another. The success of our business depends on attracting, retaining and motivating employees. From ensuring that we remain a responsible employer, from pay and benefits to our health, safety and workplace environment, the Directors factor the implications of decisions on employees and the wider workforce, where relevant and feasible.
For our strategy to continue to be delivered we are clear we need the support of suppliers, customers as other external stakeholders. Likewise, with our products and services we create value not only for ourselves but our business partners, employees and society in general. To ensure consistence within the Corporation worldwide to reinforce this the Business Partner Code of Conduct conveys the important of standards which are consistent with our values that we expect business partners to adhere to.
This aspect is intrinsic with the business strategy. As such, the board receives relevant data to make decisions (e.g. investments or divestments proposals and business strategy reviews) and to provide ongoing overviews at the board level. Corporately one such initiative is the Taraxagum Project which seeks to supply an alternate source to natural rubber from dandelion plants. Locally in the UK with the addition of Bandvulc Group to the Continental family the business now has a local retread solution to meet the local requirements. Every retreaded tyre produced in the plant in Ivybridge saves the environment 68 litres of oil. Wider information can be found with the Corporate Social Responsibility (CSR) publication.
S172(1) (E) “The desirability of the company maintaining a reputation for high standards of business conduct”
Our spirit and ethics (e.g. integrity, honesty and compliance with the law) are documented in the Corporations Code of Conduct which was revised in 2019 which are fully adhered to locally. The Board reviews Code of Conduct as well as the Modern Slavery Statements, to ensure that its high standards are maintained both within the business and the business relationships are maintained.
S172(1) (F) “The need to act fairly as between members of the company”
After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy through the long-term, taking into consideration the impact on stakeholders. In doing so, our Directors act fairly as between the Company’s members but are not required to balance the Company’s interest with those of other stakeholders, and this can sometimes mean that certain stakeholder interests may not be fully aligned.