Corporate Governance

Introduction

I am pleased to present to you this year's Corporate Governance Report. In the statement below, I set out our approach to governance, and how the Board and its committees operate.

In March 2018 the London Stock Exchange amended AIM Rule 26. This requires AIM quoted companies to:

  • give details of a recognised corporate governance code it has decided to apply;
  • to explain how it complies with its chosen code; and,
  • an explanation of why, where it departs from its chosen code.

There are two widely recognised codes: the FRC’S UK Corporate Governance Code and the Quoted Companies Alliance’s (QCA) Corporate Governance Code 2018 (the ‘QCA Code’). The Board chose to apply the latter as it is more suitable for small and mid-size companies.

The QCA Code includes ten governance principles and a set of disclosures. The Board has considered how we apply each principle to the extent appropriate. Below we provide an explanation of the approach taken in relation to each.

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

The purpose of the Netcall Group (‘Netcall’ or the ‘Group’) is to help organisations transform their customer engagement activities and enable digital transformation faster and more efficiently, empowering them to get a return by driving improved customer experiences and operational efficiencies.

We achieve this by delivering intuitive software which is powerful, easy to use and highly functional. Our customer engagement capabilities are delivered via our Liberty platform and MATS, our industry leading Low-code platform.

This is underpinned by our business model which is to provide proprietary software and software-as-a-service marketed within a flexible and viable commercial framework.

Our key strategies are to:

  • integrate Liberty and Mats capabilities creating a Low-code enabled customer engagement suite;
  • continue to invest in and transition to Cloud business while maintaining lucrative premise based business;
  • leverage our enhanced product offering to unlock the potential from Netcall's existing customer base with up- and cross-sales;
  • take advantage of the Cloud and Low-code market opportunity to acquire new customers;
  • enhance distribution, including international presence, via new channels including the MatsSoft App-store;
  • provide a flexible and viable commercial framework making it easy for customers to buy from us; and,
  • manage organisational and operational flexibility within a robust financial, control and compliance framework.

The objective is that this strategic framework will result in a growing, profitable and highly-valued business which will benefit all stakeholders.

The key challenges, being addressed within the strategic framework, include:

  • Maintaining leading edge products in rapidly moving and changing technological markets – the Group stays in close contact with customers and leading industry analysts to assisting in the creation of our technology roadmap which is developed and delivered by our qualified staff.
  • Maintaining and improving high levels of quality across the business value chain – we have adopted a quality management system and are continuously increasing our use of technology to assist in improving quality. The quality management system is independently audited.
  • Ensuring security of our customers’ data – the safekeeping of customer data is of vital importance. Our IT services are regularly audited for security by external parties. Netcall is continuously developing its internal systems and framework to improve and reduce risks. In addition features to reduce risks are implemented throughout our proprietary software and systems.
  • Delivering continuous availability – a failure in the Group’s systems could lead to an inability to deliver services. This is addressed by operating redundant systems across multiple availability zones, a comprehensive disaster recovery programme and employment of experienced staff.
  • Recruiting and retaining suitable staff – the Group’s ability to execute its strategy is dependent on the skills and abilities of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages are competitive in the market.

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

The CEO and the CFO are the key shareholder liaison contacts. Shareholders can approach the Chairman or Non-Executive Director should they have any questions about Executive Directors.

The Company has open communications with its shareholders about its strategy and performance. We communicate with shareholders through: the Annual Report and Accounts; full-year and half-year announcements; trading updates; the annual general meeting (AGM); and, face-to-face meetings. A range of information is also available to shareholders and the public on our website.

The AGM is the principal forum for dialogue with private shareholders. We encourage all shareholders to attend and take part. The Notice of AGM is sent to shareholders at least 21 days before the meeting. All directors whenever possible attend the AGM and answer questions raised by shareholders. Shareholders vote on each resolution, by way of a poll. For each resolution, we announce the number of votes received for, against and withheld and publish them on our website.

The Directors seek to build a mutual understanding of objectives with institutional shareholders. Our CEO and CFO give results presentations to analysts and institutional investors. We communicate with institutional investors via meetings, investor conferences, roadshows and informal briefings with management. The Group’s Nominated advisor arranges the majority of these meetings, following which they provide anonymised feedback from analysts and fund managers met. This together with direct feedback allows us to understand investor motivations and expectations.

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

The long-term success of the Group relies upon good relations with a range of different stakeholders including our staff, customers, suppliers and shareholders.We engage with these stakeholders to obtain feedback as follows:

  • Staff – management’s close day to day connection with staff combined with periodic engagement surveys and “town hall meetings” ensure good relations with, and between, colleagues. These activities allow staff to share their views on ways in which the Group can improve products, processes and outcomes.
  • Customers – delivering great customer service is a core attribute of the Group. Our success and competitive advantage are dependent upon fulfilling their requirements, particularly in relation to experience, integrity and quality of our software and services. We seek feedback on our software and services frequently including: via our account managers, product owners and executive sponsors; project delivery boards; as well as, through a formal customer satisfaction survey programme.
  • Suppliers – our key suppliers provide technology, which is incorporated into our software, and technology services, which enable the delivery of our Cloud platform and IT equipment support for on-premise solutions. We operate a formal supplier process covering supplier selection, onboarding and ongoing relationship management. This includes regular updates on our suppliers’ strategies and inputs into our product and services design and development.
  • Shareholders – our approach to obtaining feedback is set out in Principle 2 above.

Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Directors are responsible for risk assessment and the systems of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s systems are designed to provide the Directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately.

  • Company management: The Board has put in place a system of internal controls, set within a clearly defined organisational structure with well understood lines of responsibility, delegation of authority, accountability, policies and procedures. Managers assume responsibility for running day-to-day operational activities with performance regularly reviewed and employees are required to follow procedures and policies appropriate to their position within the business.
  • Business risks: The Board is responsible for identifying, evaluating and managing all major business risks facing the Group. To facilitate the assessment of risks, monthly reports on non-financial matters are received by the Board covering such matters as sales and operations performance and research and development progress.
  • Financial management: An annual operating budget is prepared by management and reviewed and approved by the Board.Monthly accounts comparing current year performance with budget together with key performance metrics are received and discussed by the Board. The Group has in place documented authority levels for approving purchase orders, invoices and all bank transactions.
  • Quality management: The Group is focused on meeting the highest levels of customer satisfaction. Quality procedures for the development of products, services and maintenance support are documented and reviewed frequently.
  • Internal audit: The Directors do not currently believe that an additional separate internal audit function is appropriate for the size and complexity of the Group but will continue to review the position. The Group is ISO9001 and ISO27001 accredited which has been independently audited.

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

The members of the Board have a collective responsibility and legal obligation to promote the interests of the Group. They are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board consists of four directors of which two are executive and two are non-executives. The Executive Directors work full-time for Netcall. The Non-Executive Directors are expected to commit 1 to 2 days per month. The relevant experience and skills that each Director brings to the Board are set out below.

The QCA Code notes that it is usually expected that at least half of the directors on a board are independent non-executive directors. The Company does not comply with the QCA Code as neither non-executive is independent as:

The Board has three committees: audit, remuneration and nomination. The Board does not comply with the QCA Code’s recommendation that the Chairman of the Board should not sit on any of the Board's committees. The Chairman’s participation is necessary due to the limited number of Non-Executive Directors.

Notwithstanding the above, the Non-Executive Directors have sufficient industrial and public markets experience in order to constructively challenge the Executive team and help drive value for all stakeholders. There are currently no female non-executive directors. and the board remains confident both that the opportunities in the Company are not excluded or limited by any diversity issues (including gender) and that the board nevertheless contains the necessary mix of experience, skills and other personal qualities and capabilities necessary to deliver its strategy. As part of the Board’s evolution the Company are actively seeking a further Non-Executive Director.

The Board meets regularly during the year. More meetings are arranged as necessary for specific purposes. It has a schedule of regular business, financial and operational matters. Each Board committee has a schedule of work to ensure that it addresses all areas for which it has responsibility during the year. To inform decision-making the Chairman is responsible for ensuring that Directors receive accurate, sufficient and timely information. The Company Secretary provides minutes of each meeting. Every Director is aware of the right to seek independent advice at the Group’s expense where appropriate.


Meetings held during the period under review and the attendance of Directors is set out below:

Board meetings

Audit Committee

Remuneration

Committee

Nomination Committee

Possible

Attended

Possible

Attended

Possible

Attended

Possible

Attended

Executive Directors

Henrik Bang

12

12

-

-

-

-

-

-

James Ormondroyd

12

12

-

-

-

-

-

-

Non-executive Directors

Michael Jackson

12

12

2

2

2

2

-

-

Michael Neville

12

12

2

2

2

2

-

-

Principle 6 - Ensure that the Directors collectively have all appropriate skills, capabilities and experience

All four members of the Board bring relevant sector experience in technology, all have at least nine years of public markets experience and two members are chartered accountants. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend seminars and other regulatory and trade events to ensure that their knowledge remains current.

Michael Jackson, Non-Executive Chairman

Term of office: Appointed as Chairman on 23 March 2009; chairman of the Nomination Committee and member of the Audit and Remuneration Committees.

Background and suitability for the role: Michael Jackson studied law at Cambridge University, and qualified as a chartered accountant with Coopers & Lybrand before spending five years in marketing for various US multinational technology companies. He founded Elderstreet Investments Limited in 1990 and is its executive chairman where for the past 28 years, he has specialised in raising finance and investing in the smaller companies quoted and unquoted sector. From 1983 until 1987 he was a director and from 1987 until 2006 was chairman of FTSE 100 company The Sage Group plc. He was also chairman of PartyGaming plc, another FTSE 100 company.

Michael Neville, Non-Executive Director

Term of office: Joined as Non-Executive Director on 30 July 2010; Chair of the Audit and Remuneration Committees and member of the Nomination Committee.

Background and suitability for the role: Michael Neville was appointed to the Netcall Board on 30 July 2010 following the acquisition of Telephonetics plc where he served as a Non-Executive Chairman from July 2005. He has extensive experience in capital markets and serves as a Non-Executive Director for a number of AIM quoted companies. His background is in the telecommunications, technology and media arenas.

Henrik Bang, CEO

Term of office: Appointed CEO on 13 February 2004.

Background and suitability for the role: Henrik was previously Vice President in GN Netcom 1999-2004, part of the Danish OMX listed GN Great Nordic Group.Before that he held a number of international management positions in IBM and AP Moller-Maersk Line.

James Ormondroyd, Group Finance Director

Term of office: Joined as Group Finance Director on 30 July 2010.

Background and suitability for the role: James studied physics at University of Manchester, and qualified as a chartered accountant with PwC. He was appointed to the Netcall Board on the acquisition of Telephonetics plc, a speech recognition and voice automation software provider, on 30 July 2010 where he served as the Finance Director and Company Secretary for 5 years. Prior to that he was the Finance Director and Company Secretary at World Television Group Plc a multi-national media and technology business.

Directors are initially appointed until the following Annual General Meeting when, under the Company’s Articles of Association, it is required that they be elected by shareholders. The Company’s Articles require that one third of the current Directors must retire as Directors by rotation. The QCA Code recommends that independent directors who have served for more than nine years should be re-elected on an annual basis.The Company does not follow this recommendation due to the current size of the Board and considers the experience of the Company’s current non-executive directors to be more than sufficient for the Company’s needs.

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

The performance and effectiveness of the Board, its committees and individual Directors are reviewed by the Chairman and the Board on an ongoing basis. The performance and effectiveness of the Chairman is reviewed by the other Board members. Training is available should a Director request it, or if the Chairman feels it is necessary. The performance of the Board is measured by the Chairman with reference to the Company’s achievement of its strategic goals. The Board does not undertake a formal evaluation of its performance, as this is constantly under review given its size.

The Board continually assesses the candidacy of Netcall staff with respect to succession planning for Executive Management and has in place a short-term plan to be instigated in the event of the loss or incapacity of either CEO or CFO.A number of senior managers are directors of subsidiary company boards and we continue to evaluate their progress.

Principle 8 - Promote a corporate culture that is based on ethical values and behaviour

The Group’s long term growth is underpinned by a set of value based operating principles. These have regularly been reviewed and adapted as the Group has developed and centres on customer focus, innovation, integrity, quality and teamwork. The culture of the Group is characterised by these values, and they are communicated widely including within the Group’s competency framework (which sets out how we want our colleagues to work within Netcall to deliver our vision) and promoted throughout the organisation by managers in their daily work. .

We monitor the culture through the use of employee and customer surveys and have in place comprehensive policies and procedures to support ethical behaviour. The Board reviews the findings of these and determines what action is required and considers its culture is positive.

The Board believes that a culture based on these core values is consistent with fulfilment of the Group’s mission and execution of its strategy.

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

The Board sets the Group's vision, strategy and business model to deliver value to its shareholders. It maintains a governance structure appropriate for the Group's size, complexity and risk and ensures this structure evolves over time in line with developments of the Group.

The Board defines a series of matters reserved for its decision. It has terms of reference for its audit, remuneration and nomination committees, to which it delegates certain responsibilities. The chair of each committee reports to the Board on the activities of that committee.

The Audit Committee monitors the integrity of the financial results. It reviews the need for internal audit and considers the engagement of external auditors including the approval of non-audit services. The Audit Committee comprises the Non-Executive Directors under the chairmanship of Michael Neville. It meets at least twice per year.An Audit Committee report is set out below. The terms of reference of the Audit Committee is available here.

The Remuneration Committee sets and reviews the compensation of Executive Directors including the targets and performance frameworks for cash- and share-based awards. The Remuneration Committee comprises the Non-Executive Directors under the chairmanship of Michael Neville. It meets at least once per year. A Remuneration Committee report is set out below. The terms of reference of the Remuneration Committee is available here.

The Nomination Committee reviews the structure, size and composition of the Board. It considers succession and identifies and nominates Board candidates.It comprises the Non-Executive directors under the chairmanship of Michael Jackson. The Nomination Committee did not meet formally during the year however members of the committee discussed these matters regularly in Board meetings. The terms of reference of the Nomination Committee is available here.

The primary responsibility of the Chairman is to lead the Board and to oversee the Group's corporate governance. He ensures that:

The CEO provides leadership and management of the Group. He:

  • leads the development of objectives and strategies;
  • delivers the business model within the strategy agreed by the Board;
  • monitors and manages operational performance and key risks to ensure the business remains aligned with the strategy;
  • leads on investor relations activities to ensure good communications with shareholders and financial institutions; and
  • ensures that the Board is aware of the views and opinions of employees on relevant matters.

The Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge. They scrutinise the performance of management and provide constructive challenge to the Executive Director. They ensure that the Group is operating within the governance and risk framework approved by the Board.

The Company Secretary ensures that clear and timely information flows to the Board and its committees. He supports the Board on matters of corporate governance and risk.

The matters reserved for the Board include:

A copy of the Matters Reserved for the Board is available here.

As part of the Board’s evolution, the addition of a further Non-Executive Director is in progress.

Audit Committee Report

During the year, the Audit Committee has continued to focus on the effectiveness of the controls throughout the Group. The committee met twice, and the external auditor and the CEO and CFO were invited to attend these meetings. Consideration was given to the auditor’s pre- and post-audit reports and these provide opportunities to review the accounting policies, internal control and the financial information contained in both the annual and interim reports. The committee reviewed the independence and performance of the external auditor.

Remuneration Committee Report

During the period under review the Remuneration Committee:

  • undertook an annual review of the Executive Directors remuneration packages and ensured that individual compensation levels, and total Board compensation, were comparable with those of other AIM-listed companies;
  • considered and set the financial and individual performance targets, in light of the strategic framework, for the Executive Directors’ annual bonus plans; and,
  • it reviewed the granting of unapproved options to key staff with the objective of motivating and retaining them over the mid to long term, designed to incentivise delivery of the Group’s growth objectives.

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

This Corporate Governance Report is available on the Netcall website. The Board will review and update it annually.

Copies of the Annual Report & Accounts, AGM notices, outcomes of AGM votes and other governance materials are available on the Netcall website.

Michael Jackson

Chairman


Information last updated: 27 September 2018

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