Board Committee terms of reference
Audit & Risk Committee
1. Constitution and purpose
The Board has resolved to establish a Committee of the Board to be known as the Audit & Risk Committee. Its purpose is to assist the Board in reviewing the external financial reports of the business and its systems for managing operational risk and business conduct risk.
2. Membership
a. The Committee shall comprise of at least three, and not more than four, independent non-Executive directors, appointed by the Board. A quorum shall be two members.
b. The Chairman of the Committee shall be appointed by the Board.
c. At least one member of the Committee should at any time have recent relevant experience in relation to the Duties of the Committee.
3. Attendance at Meetings
a. The Chairman, Chief Executive, Head of Corporate Services and Head of Finance shall normally attend meetings. The Compliance Officer and a representative of the external auditors shall also attend meetings if required by either party. A representative of the internal auditors shall also attend meetings if requested by the Committee. Any member of staff may be required by the Committee to attend meetings. However, at least once a year the Committee shall meet with each of the external auditors, internal auditors and Head of Corporate Services without other Executives, management or staff present.
b. The Secretary shall be the Secretary of the Committee.
4. Frequency of Meetings
Meetings shall be held when necessary, and not less than four times a year. The internal or external auditors may request a meeting if they consider that one is necessary.
5. Authority
The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Internal Auditor has the right to direct access to any member of the Audit & Risk Committee if for any reason he does not wish to consult the Chief Executive.
6. Duties
The duties of the Committee shall be:
Risk and internal controls
a. to ensure that a satisfactory framework is in place for identifying and managing operational and business conduct risk within the business. Strategic risk and prudential risk are dealt with by the Board as a whole;
b. to review the internal control and relevant risk management systems, including internal financial controls, and ensure that these continue to be effective;
c. to review quarterly reports from the Executive Risk Committee;
d. to keep under regular review the steps taken by management to monitor, manage and mitigate operational and business conduct risk via appropriate risk registers;
e. in respect of these risks, to be aware of the business’s current risk profile and ensure consistency with the Board’s appetite for risk;
Financial reporting
f. to review the annual financial statements and semi-annual regulatory returns, and any formal announcements relating to the company’s financial performance, before submission to the Board, focusing particularly on:
i. any changes in accounting policies and practice
ii. major judgmental areas
iii. significant adjustments resulting from the audit
iv. the going concern assumption and compliance with accounting standards and legal requirements, including the regulations and guidance of the FSA
v. where appropriate, allocations between the Society’s funds;
External audit
g. to make recommendations to the Board, for it to put to the delegates for their approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external audit;
h. to discuss with the external auditor before the audit commences the nature and scope of the audit;
i. to discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary);
j. to review the external auditor’s management letter and management’s response;
k. to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;
l. to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;
Internal audit
m. to monitor the internal audit programme in the context of the overall risk management systems, including approving the programme and reviewing the reports produced,
n. to ensure co-ordination between the internal and external auditors, and that the internal audit function is adequately resourced and has appropriate standing within the Society;
o. to consider the major findings of any internal investigations and management’s response;
p. to review the effectiveness of the internal audit function and approve any significant changes in the provision of this service;
Regulatory compliance
q. to ensure that the operational and business conduct risk functions are adequately resourced and have appropriate standing in the organisation;
r. to review the annual work programmes of these functions;
s. to receive quarterly reports from the operational and business conduct functions in line with the standard format approved by the Audit & Risk Committee and to ensure that any matters raised are being appropriately addressed by management;
Other
t. to review arrangements by which staff may, in confidence, raise concerns about matters of financial reporting or other matters and to ensure that arrangements are in place for the proportionate and independent investigation of such matters; and
u. to consider other topics, as defined by the Board.
Reporting Procedures
The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board and any such other attendees as the Chairman of the Audit & Risk Committee shall direct. The Chairman shall report on the Committee’s activities to the next meeting of the Board.
Remuneration Committee
Constitution
The Board hereby resolves to establish a Committee of the Board to be known as the Remuneration Committee.
Membership
a. The committee shall comprise of three independent Non-Executive Directors, appointed by the Board, (one of whom should be the Chairman of the Audit and Risk Committee) and the Chairman of the Society. A quorum shall be three members.
b. The Chairman of the Committee shall be appointed by the Board.
Attendance at Meetings
a. The Chief Executive shall normally attend meetings. Any member of the Society staff may be required by the Committee to attend meetings.
b. The Chief Executive shall be Secretary of the Committee.
Frequency of Meetings
Meetings shall be held when necessary, and not less than once a year.
Authority
a. The Committee is authorised by the Board to investigate any activity within it’s the scope of its duties / responsibilities. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
b. The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.
Duties
The duties of the Committee shall be:
a. To have delegated responsibility from the board for the monitoring, review and setting the remuneration of the Executive Directors and other members of the Executive of the Society including policy in respect of pension rights and any compensation payments;
b. To have delegated responsibility from the Board for the monitoring, review and setting the remuneration of the Chairman of the Society;
c. To monitor and review the remuneration of the Non-Executive Directors of the Society and to recommend any changes to the Board through the Chairman.
Reporting Procedures
The Secretary shall circulate the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board.
Nomination Committee
1. Constitution
The Board hereby resolves to establish a Committee of the Board to be known as the Nomination Committee.
2. Membership
a. The Committee shall comprise of the Chairman of the Society and two independent non Executive directors, appointed by the Board, plus the Chief Executive.
b. The Chairman of the Society shall be the Chairman of the Committee.
3. Attendance at Meetings
a. The Chief Executive shall be Secretary of the Committee.
b. Any member of the Society staff may be required by the Committee to attend meetings.
4. Frequency of Meetings
Meetings shall be held when necessary, and not less than once a year.
5. Authority
The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
6. Duties
The duties of the Committee shall be:
a. to lead the process for Board appointments and make recommendations to the Board, taking into consideration the time commitments required of Non-Executive Directors and their independence;
b. to ensure that plans are in place for orderly succession for appointments to the Board and to the Executive, and make recommendations to the Board;
c. to evaluate the balance of skills, knowledge and experience on the Board and, in the light of this evaluation, prepare a description of the role and capabilities required for any particular appointment;
d. for the appointment of a Chairman, to prepare a job specification, including an assessment of the time commitment expected, recognising the need for availability in the event of crises;
e. on an annual basis, to evaluate the performance of each director, in order to show that each continues to contribute effectively and demonstrate commitment, including time commitment, to the role. The evaluation of the Chairman should be led by the senior independent director, taking into account the views of the executive directors;
f. to seek external professional advice as appropriate in fulfilling its duties; and
g. to consider other topics, as defined by the Board.
7. Reporting Procedures
The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board.
Investment Committee
Constitution
The Board hereby resolves to establish a Committee of the Board to be known as the Investment Committee.
Membership
a. The Committee shall comprise four members to include the Chairman and the Chief Executive Officer ex officio.
b. The other two members shall be a Non-Executive Director, (MR S E C Miller), who shall be Chairman of the Committee, and the Deputy Chief Executive, (Mr J Galbraith).
c. The quorum of the Committee shall be two, one of whom must be Mr Miller or Mr Galbraith.
Attendance at Meetings
a. Other Board Members shall have the right of attendance. Any member of Scottish Friendly staff may be required by the Committee to attend meetings.
b. The Head of Corporate Services shall be the Secretary of the Committee.
Frequency of Meetings
Meetings shall be held when necessary, and not less than twice a year.
Authority
The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee, and to appoint appropriate advisers on appropriate terms in order to assist the committee in carrying out its Duties.
Duties
The duties of the Committee shall be:
a. to make decisions on asset allocation and investment strategy of the main fund, sub-funds, and unit-linked and OEIC funds in line with the liabilities, relevant risk appetite and parameters established by the Board or by the relevant fund objective;
b. to monitor and if necessary review the operation of the risk appetite (as determined by the Board), investment parameters and fund objectives, and, where appropriate, make recommendations to the Board;
c. to monitor the performance of investments made and fund managers;
d. to review, if necessary, the authorisation regime for custody and settlement for Scottish Friendly;
e. to provide oversight of the investment activities and stewardship role of Scottish Friendly as an investor; and
f. to consider other topics, as defined by the Board.
Reporting Procedures
The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board.