Tullett Prebon plc Annual Report 2010
performance of the business and actively engages with senior executives and internal specialists in understanding how the risks are monitored and controlled. The Business Review includes a detailed analysis of our risks. It is not possible to eliminate risk in any business but, provided this one continues to be competently managed and led, the nature of its trading activities and the controls in place should not give rise to unacceptable levels of risk. Remuneration The Remuneration Report is set out on pages 32 to 38. The Remuneration Committee is chaired by my colleague Rupert Robson. One of the key areas of focus for the Remuneration Committee during the year was the FSA Remuneration Code (the ‘Code’) which was issued in ﬁnal form in December. The main principle of the Code is that remuneration policies must be consistent with and promote sound and effective risk management. The low risk nature of the business is recognised in our classiﬁcation as a Tier Four ﬁrm for the purposes of the application of the Code. In my statement last year I noted that after careful review of the relationship between remuneration and risk, undertaken with the beneﬁt of external expert advice, we concluded that the risk arising from our remuneration policies is low and that we did not believe that our approach to remuneration gives rise to an increase in risk – indeed since remuneration is performance based and losses can be rapidly identiﬁed it should discourage risk. We have reviewed our remuneration policies and the terms of reference for the Remuneration Committee in the light of the Code, in order to ensure that we were compliant with the policies and governance aspects by the end of the year. No signiﬁcant changes were required. Board composition and governance The Company beneﬁts from having a strong and experienced Board of directors who work well together in guiding the long term success of the Company. The Board has carefully considered its composition during the year. Michael Fallon MP resigned as a non-executive director of the Company in June following the general election as a precautionary measure in the event that his other commitments might have prevented him from serving effectively as a director. When it became clear that this would not be an issue, we invited Michael to rejoin the Board, and he was re-appointed in September. His depth of experience with the Company and the perspective he brings on City matters generally and on regulation in particular are very valuable to the Board and I am delighted he was able to rejoin us. My colleague David Clark has been associated with the Tullett business as a non-executive director since 2000, and joined the Board of Collins Stewart Tullett in 2003 following the acquisition of the Tullett business. He has therefore served as a director for eight years and as Senior Independent Director since June 2007. David has kindly agreed to continue to serve as the Senior Independent Director until we complete the process of identifying his successor.
The Board has continued to consider succession planning both to ensure that the Company has developing managers to take leadership roles and to plan the succession of the nonexecutive team. With effect from the beginning of this year the Company is subject to the new UK Corporate Governance Code. One of the new provisions is that all directors of FTSE 350 companies should be subject to annual re-election by shareholders. We expect that we will transition to adopting this policy for the AGM in 2012 when we will also seek shareholder approval to amend the Articles of Association to replace the current requirement for directors to retire by rotation after three years with a requirement for directors to seek annual re-election. Outlook The world’s ﬁnancial markets remain unsettled, and although it is difﬁcult to predict market conditions, it seems reasonable to expect that there will continue to be periods of volatility. Underlying revenue, adjusting for the impact of the closure of the six satellite ofﬁces in North America, is 3% higher in the ﬁrst two months of the year than a year ago. This reﬂects the beneﬁt of the rebuilding in North America and the continued recovery in Asia. We will continue to invest in the development of the business across all three regions. The enduring strength of the business is the valuable service it provides to clients through its ability to create liquidity through price and volume discovery to facilitate trading in a wide range of ﬁnancial instruments. We believe that the introduction of the various regulatory proposals affecting the OTC markets will be positive for our business as the proposals formalise the role of the intermediary in those markets. The changes in the regulatory environment will result in changes in the way in which some trades are executed, reported and cleared. We believe that we are well positioned to continue to provide a valuable service to clients and that our offering can be developed to meet the requirements being proposed. Keith Hamill Chairman 8 March 2011