Statement Of Compliance With The QCA Corporate Governance Code

Details Last Updated 2nd February 2022

Changes To Corporate Governance Regime

The Board of Directors has a strong commitment to high standards of corporate governance, integrity and ethics. Although no longer an AIM-quoted company (even though it was not formally required to do so), the Group had followed the principles of the UK Corporate Governance Code so far as was deemed practicable and appropriate for the nature and size of the Group. In line with the London Stock Exchange’s changes to the AIM Rules for Companies requiring all AIM-quoted companies to adopt and comply with a recognised corporate governance code, the Board adopted the Quoted Companies Alliance (QCA) Corporate Governance Code (“the Code”). This statement sets out in broad terms how the Company seeks to comply with the Code and its ten principles.

Principle 1: Establish a strategy and business model which promote long-term value for shareholders

The Group provides permanent and contract specialist recruitment services to selected industry sectors, with offices in London and Manchester, Hong Kong, Dubai, Houston, Dusseldorf, Johannesburg, Singapore and Frankfurt.

The built environment represents the Group’s largest business segment, which is served through its main subsidiary, Macdonald & Company. During 2017, the Group’s Hong Kong subsidiary acquired a majority holding in Command Recruitment Group (HK) Limited, extending the Group’s capabilities and reach in the built environment sector both in Asia and the Middle East.

Through investment in people and technology, the Group seeks to provide progressive returns to shareholders by offering its clients innovative approaches to recruitment and a globally connected service. The Group continually reviews growth opportunities for establishing new revenue lines from new service areas and in new geographical locations, both organically and through acquisition. All businesses within the Group undertake detailed planning and budgeting each financial year, and the Board believes that this process drives the Group’s core activity.

The Group’s Annual Reports provide further detail on the Group’s strategy and business model, as well as the key challenges faced by the Company in achieving its goals. Details on how these challenges are addressed are set out below in relation to principle 4.

Principle 2: Seek to understand and meet shareholder needs and expectations

The Group has no significant institutional shareholders, and provides shareholders with updates of performance through the publication of its annual reports. Corporate information is available to shareholders, investors and the public on the Company’s website.

While the Group’s AGM is the main forum for dialogue with shareholders, Executive Board Members are readily available for, and welcome, conversation with all stakeholders. The chairs of the Board and all committees, together with all other Directors, routinely attend the AGM and are available to answer questions raised by shareholders.

Robert Macdonald, Chairman, is primarily responsible for shareholder liaison and can be contacted, as required, via email at

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success

Engaging with our stakeholders strengthens our relationships and helps us make better business decisions to deliver on our commitments and to underpin the Group’s long-term success.

Aside from our shareholders, suppliers and customers, our employees are our most important stakeholder group, and the Board therefore closely monitors and reviews the results of the Company’s employee engagement activity as well as any other feedback it receives to ensure alignment of interests with shareholder objectives and the Group’s staff. The Group has a decade long history of entering the ‘Best Companies’ review of staff engagement. In all recent years, the Group has consistently been ranked in the Sunday Times Best 100 Small Companies to Work For.

Suppliers are contracted with on purely commercial terms but recognizing that their margins must allow for them to sustain their businesses if the Group is to continue to benefit from their services. The Group considers itself to be a ‘prompt payer’.

As a service business, customer relations are critical to success. The Group’s commitment to providing feedback to customers is a duty it takes seriously. With the Group’s focus both historic and current on the built environment sector, the annual RICS and Macdonald & Company Rewards and Attitudes Survey – in its [twenty-second year at the date of this statement – is an important contribution made by the Group to its customer base.

For the wider community, encouragement and leadership in charitable fund raising, notably for ELIFAR (Every Life Is For A Reason) where the Company is an annual corporate supporter and has raised many tens of thousands of pounds in recent years.

The Group recognises its responsibilities for the environment and gives due consideration to the possible effects of its activities on the environment. As such, our environmental impact comes from the running of our business generating carbon emissions through the consumption of gas and electricity, transport activities and commuting, as well as office-based waste such as paper and toners. We do not consider that the Group’s activities have a major effect on the environment. However, it is the Group’s aim to reduce the environmental impact of its activities and to operate in an environmentally responsible manner. We are, therefore, committed to the following principles to ensure the business operates in an environmentally sensitive manner:

Encouraging the re-use and re-cycling of products and waste from our offices

Ensuring efficient use of materials and energy; and

Purchasing environmentally friendly materials where appropriate.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organization

Risk management is an important part of the management process throughout the Group. The composition of the Board is structured to give balance and expertise when considering the principal risks and uncertainties of the Group. The Group’s strategy is designed to allow the business to grow without increasing risk beyond an acceptable limit. The profile of risks fluctuates from time to time and, whilst the Group cannot eliminate risk altogether, the actions being taken to manage and control risks are intended to mitigate the effects on the business. The Board reviews the principal risks and uncertainties facing the Group on a regular basis. The Board’s approach is to ascertain the key risks and develop plans to reduce the potential effects of these risks on the business. The principal risks identified are as follows:

Dependence on Key People
The sustainable success of the Group is dependent on the continued service of senior management and key people. The loss of the services of the senior management and other key people could have a material effect on the business. To address this, the Group has put in to place an internal talent acquisition function and invested in management information systems, training and development programmes, competitive pay structures and long- term remuneration plans, the aim of which is to retain the key employees.

The Group’s focus is on specialist, niche sectors where clients need expert knowledge and high levels of service. We concentrate on markets where there is a shortage of supply of suitable candidates and opportunities to build strong and fruitful long-term relationships with clients.

The Directors monitor the legal and regulatory environment in all Group markets. By investing in the Group brands and markets, the executive management reacts to changes in legislation, as well as making it easier to attract candidates because of the brand reputation and knowledge. The Directors believe that the Group is well positioned in its chosen markets. Whilst the Group seeks to continue to improve its competitive positions, the actions of current, or indeed potential, competitors may adversely affect the Group’s business.

Macro-economic factors
Constrained growth in the global economy has effects that trigger reduced output, and with it, demand and investment. There is strong correlation between our business performance and the political and economic situation of the regions in which the Group operates. The Board seeks opportunities for development and will continue to invest in areas where growth can be delivered at acceptable levels of profitability, increasing cash generation and growing Group revenue. The Group is geographically diversified, which reduces reliance on the success of any single market. The global Covid- 19 pandemic has highlighted the significant challenges to trading created by outbreaks of this nature. Prolonged impact on our business cannot be ruled out as a result of Covid- 19 and future pandemics. The Group complies with local guidance and client requirements in place in response to Covid- 19. Where possible alternative recruitment practices such as video interviewing are being employed to maintain recruitment activity.

Regulatory position
The increase in regulatory scrutiny and demands on compliance have an effect on hiring. The Group is aware of continuing challenges as procurement practice evolves but remains committed to being fully compliant in each of the regions in which it operates. In order to reduce the legal and compliance risks, fee earners and support staff receive training and updates on changes in legal and compliance requirements.

Information Technology
The Group is highly dependent on certain technology systems and the infrastructure on which they operate in order to maintain its client and candidate database. These systems rely on specific suppliers who provide the technology infrastructure and disaster recovery solutions. The performance of these suppliers is continually monitored to ensure that the services are available and maintained. The Group is aware of the increasing potential challenges to data integrity and security from both internal and external sources. Therefore, the systems and infrastructure are regularly reviewed and upgraded to ensure appropriate provision of functionality and resilience to support the business as it develops.

Foreign Exchange Risk
The Group’s international operations account for a material part of its revenues. Consequently, the Group has a degree of translation exposure in accounting for overseas operations. The Group’s policy is not to hedge against this exposure, as there is a degree of natural hedge from the Group geographical diversification. However, the Group seeks to minimise this exposure by converting into sterling cash balances received in foreign currency that are not required for local short-term working capital needs. The Group will continue to monitor its policies in this area to be able to react if rates move adversely.

Treasury Policies, Liquidity and Financial Risk
Although the financial risks to which the Group is exposed are currently considered to be minor, future interest rate, liquidity and foreign currency risks could arise. An additional bout of exchange rate depreciations in emerging market economies and a sharp decline in capital inflows could force a rapid compression of domestic demand. Depreciation of Sterling might have tangible impact on UK business. The Board continues to focus on cash flow forecasting and to manage financial and foreign exchange risk in order to define and understand the Group foreign exchange exposures and to ensure the quality of information on each exposure. The Board will continually review its existing policies and make changes as required to limit the financial risks of the business.

Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The principal credit risk arises from the Group’s trade receivables. Client credit terms and cash collections are managed carefully, and cash balances and cashflow forecasts are reviewed weekly. Monthly credit evaluation is performed on the financial condition of accounts receivable based on payment history and third-party credit references with appropriate provisions being made.

Internal Controls
The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness which, by its nature, can only provide reasonable and not absolute assurance against material misstatement or loss. When undertaking their review, the Directors have considered all material controls including operational, compliance and risk management, as well as financial.

Key elements of the system of internal control are as follows:

Annual Business Plan
The Group has a comprehensive budgeting system with an annual budget approved by the Board.

Monthly Forecasting
The Group prepares monthly fee income forecasts by individual businesses which are compared to budget.

Financial Reporting
Detailed monthly reports are produced showing a comparison of results against budget, forecast and the prior year with performance monitoring and explanations provided for significant variances. Any significant adverse variances are examined, and remedial action taken where necessary.

Capital Expenditure
Capital expenditure requests are reviewed by the Board at the time the annual budget is approved and ad hoc during the financial year if requested outside the approved budget.

Levels of authority
There are clear levels of authority, delegation and management structure.

Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chair

The Board of Directors meets up to six times a year and more frequently when required, focusing mainly on strategic issues, operational and financial performance. The Directors have in place an organisational structure with clearly defined levels of responsibility and delegation of authority.

The Board comprises the Chairman, two Executive Directors and two Non-Executive Directors. None of the Company’s Non-Executive Directors is deemed to be independent given the length of their tenure or shareholdings in the Company, and the Company therefore deviates from the requirements of principle 5 of the QCA Code. Nonetheless, the Board considers that, by virtue of their broad corporate experience, professional qualifications and seniority, the Non-Executive Directors of the Company bring the requisite objectivity to bear and provide appropriate challenge to the executive directors of the Company.

The Board is satisfied, given the size of the business and the proportion of shares in the directors’ hands, that it has a suitable balance between independence on the one hand, and knowledge of the Company on the other, to enable it to discharge its duties and responsibilities effectively. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational.

The Board is aware of the other commitments and interests of its Directors and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

The number of meetings of the board and its committees during the year, together with the attendance record of each director, are set out in the Company’s Annual Report.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience. All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. The business reports monthly on its headline performance against its agreed budget, and the Board reviews the monthly update on performance and any significant variances are reviewed at each meeting.

The Board considers and reviews the requirement for continued professional development. The Board seeks to ensure that their awareness of developments in corporate governance and the regulatory framework is current, as well as remaining knowledgeable of any industry-specific updates. All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary.

The Board’s non-executive directors are professionally qualified, one being a Chartered Accountant and one being a non-practicing commercial Solicitor. Both have been or are currently directors of other public companies.

All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association. The Group’s latest Annual Report provides further detail on the Company’s directors, including their relevant skills and experience.

Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

Board effectiveness and individual performance are considered regularly by the Board on an informal basis, via feedback to the Chairman. Directors are encouraged to provide feedback on all areas of the board efficacy, having due regard to the balance of skills, experience, independence and knowledge contributed by members of the Board, as well as the successful operation of the Board as a unit, its diversity and other factors relevant to its effectiveness.

Given its size, the Company does not have formal succession planning processes in place, but the development of its employees is kept under continual consideration by the Company’s senior management. The Board is comfortable that, were an Executive Director to leave the Company, the Company’s senior management would be able to support the running of the business on an interim basis, in advance of a permanent replacement being found.

Principle 8: Promote a culture that is based on ethical values and behaviours

The Board aims to lead by example and do what is in the best interests of the Company and its stakeholders. The statements set out under Principle 3 are indicative of how the culture is consistent with the company’s objectives, strategy and business model, as well as how the board seeks to determine and recognise ethical values and behaviour and promote a healthy corporate culture.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board sets direction for the Company through a formal schedule of matters reserved for its decision. Prior to the start of each financial year, a schedule of dates for that year’s six Board meetings is compiled to align as far as reasonably practicable with the Company’s financial calendar The Board and its Committees receive appropriate and timely information prior to each meeting; a formal agenda is produced for each meeting, and Board and Committee papers are distributed before meetings take place. Any Director may challenge Company proposals and decisions are taken democratically after discussion. Any Director who feels that any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, which are then circulated to all Directors. Any specific actions arising from such meetings are agreed by the Board or relevant Committee and then followed up by the Company’s management.

Roles of the Board, Chairman and Chief Executive Officer

The Board is responsible for the long-term success of the Company. It is responsible for overall Group strategy; approval of major investments; approval of the annual and interim results; annual budgets; dividend policy; and Board structure. It monitors the exposure to key business risks and reviews the strategic direction of all trading subsidiaries, their annual budgets and their performance in relation to those budgets. There is a clear division of responsibility at the head of the Company. The Chairman is responsible for running the business of the Board and for ensuring appropriate strategic focus and direction. The Chief Executive Officer is responsible for proposing the strategic focus to the Board, implementing it once it has been approved and overseeing the management of the Company through the Executive Team.

All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. The business reports monthly on its headline performance against its agreed budget, and the Board reviews the monthly update on performance and any significant variances are reviewed at each meeting. Senior executives below Board level attend Board meetings where appropriate to present business updates.

Executive Team

The Executive Team consists of the Chairman, the Chief Executive and the Commercial Director. They are responsible for formulation of the proposed strategic focus for submission to the Board, the day-to-day management of the Group’s businesses and its overall trading, operational and financial performance in fulfilment of that strategy, as well as plans and budgets approved by the Board of Directors. It also manages and oversees key risks, management development and corporate responsibility programmes. The Chief Executive Officer reports to the Board on issues, progress and recommendations for change. The controls applied by the Executive Team to financial and non-financial matters are set out earlier in this document, and the effectiveness of these controls is regularly reported to the Audit Committee and the Board.

Board committees

The Board is supported by the Audit and Remuneration committees but not, given the size and nature of the Group, a Nomination committee. Each committee has access to such resources, information and advice as it deems necessary, at the cost of the Company, to enable the committee to discharge its duties.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Group communicates with shareholders through the Annual Report and Accounts and the Annual General Meeting (AGM). The Board receives the views of shareholders through ad hoc briefings and reports from the Chairman, Chief Executive Officer and Commercial Director.

The Company completes regular employee surveys to maintain an open dialogue with employees. The Group maintains a comprehensive intranet website accessible by all employers where all standard operating procedures are set out, within intranet website there is a ‘whistle-blowing’ portal.

The Group’s latest Annual Report, which can be found on the Company’s website together with historical annual reports and other governance-related material, includes Remuneration and Independent Auditor’s reports.