Essay written in 2020 for the course “International Corporate and Financial Law”, held by prof. Thomas Bachner at WU – Wirtschaft Universitat Wien. Evaluated with highest honors, and chosen as example of model essay to be followed by future law students in WU
Introduction
This essay will analize how Rolls-Royce Holdings plc has complied during 2019 financial year – and is currently complying – with the UK Corporate Governance Code 2018. It will therefore critically analize the relevant parts of its Annual Report 2019 and other documents published on the company’s website, with a special focus on: one instance of non-compliance with the Code and relationship between corporate governance and company purpose (sec. 1); strategic transformation and stakeholders engagement (sec. 2); committees’ work (sec. 3); remuneration design, particularly in respect to long-term sustainability (sec. 4).
By carrying out Rolls-Royce governance’s analysis, this essay will also demonstrate that corporate governance is a rather flexible concept: even though the UK CGC was born with the main purpose of mitigating the agency problem between investors and directors, it has later evolved as to consider sustainability issues as well, for which complex corporate structures favoring engagement of all relevant stakeholders are the most valuable.
Furthermore, since corporate governance is still in constant evolution and not every issue is thus specifically addressed by the Code, sometimes additional measures can be found elsewhere, whose choice will also depend on each company’s specific features, as outlined in Section 2.
Section 1: UK Corporate Governance Code compliance: corporate governance and company purpose
UK CGC compliance
Corporate governance has increasingly become crucial, in the last few decades, to understand how companies are controlled and operate, and Rolls-Royce is no strange to these matters. Since failures of corporate giants like Enron and Parmalat, respect of the UK CGC has in fact been considered to be of outmost importance to ensure “long-term sustainable success of a company” (Principle A).
Accordingly, Rolls-Royce has committed itself to UK CGC compliance: on page 58 of Annual Report 2019, Rolls-Royce’s Chairman Sir Ian Davis stated that all UK CGC’s provisions have been complied with but Provision 32 (third period), because newly-appointed chair of the Remuneration Committee, Irene Dorner, at the date of her appointment had not served yet on that committee for the minimum period of 12 months required by the Code – having been appointed to the Committee only on 1 August 2019. Sir Davis however explained the rationale for non-compliance with that specific provision – following the “comply or explain” approach[1] – on page 59: the former chair of the Committee, Ruth Cairnie, had to step down because of her sudden appointment as chair of Babcock International Group plc. It was thus necessary to appoint another chair for that Committee. The “clear rationale” for subsequent appointment of Irene Dorner, therefore, is to be found in her skills and experience, – deemed sufficient to chair the committee despite her not fulfilling Provision 32’s requirement – which Sir Davis clearly mentioned on the same paragraph: for instance, her familiarity with both long and short-term incentive schemes, having served on the Audit committee for four years, and her knowledge about new 2020 Remuneration policy; – making her an optimal candidate for ensuring remuneration policies and practices are enforced with the aim to “support strategy and promote long-term sustainable success”[2] – or her role as Employee Champion[3] – important since it strengthens alignment between Executive remuneration and broader company values, including employees engagement.
Very important provisions of UK CGC which instead Rolls-Royce has fully respected are those relating to independent Non-Executive Directors (NEDs)[4], constituting more than half of Board members (Provision 11). Their role is crucial to ensure good corporate governance, which is built upon constructive Board relations between Executive and Non-Executive Directors (Principle F) and to review, along with the Chairman, management’s performance (Provision 13) – in order to reduce the agency problem due to separation, in large companies, between ownership and control, i.e. shareholders and directors.
Corporate governance and company purpose
Links between corporate governance and company’s purpose and strategy, outlined by Code’s Principle B, have been recognised by Rolls-Royce’s directors themselves in several parts of the Annual Report (e.g., p. 67). This is especially important when the Board is required to balance between short-term and long-term objectives, because such corporate decisions who might favor some subjects in the short-term might not prove that good in the long run. This is esemplified by engine Trent 1000[5] case: this new engine the company developed, indeed, did not meet the quality levels Rolls-Royce’s customers expected, and that generated a loss of customers. Obviously, short-term objective would thus be to fix Trent 1000 to meet customers’ expectations, but this would be extremely costly and could conflict with Rolls-Royce’s long-term aim to be the “world’s leading industrial technology company”, which would instead require engines more environmentally friendly than Trent 1000 to be developed, in the light of society’s fight against climate change. Still, even though the UK Code places a greater emphasis on long-term, some short-term objectives should be taken into account as well: companies, in fact, cannot work without money, and therefore current and short-term potential customers, which generate cash flows, cannot be disregarded. That should probably be considered the reason why Trent 1000 fixing will still be on the 2020 agenda.
However, long-term has not been completely forgotten by the company, because a specific route aimed at generating value in the long-term, by focusing on some relevant stakeholders, is already being followed: company’s recent strategic transformation process.
Section 2: Strategic transformation and stakeholders engagement
Rolls-Royce’s strategic transformation process[6], started in 2018 and continuing in 2019 and 2020, is based:
- on one hand on organizational restructuring, within the context of self-defined “freedom within a framework” governance model, mainly favoring customers and suppliers;
- on the other hand on enhancing workforce – i.e., another relevant stakeholder – engagement by several means.
Freedom within a framework model
The organizational restructuring Rolls-Royce decided to undertake was not merely for headcount reduction’s sake, but was aimed at simplifying the way the company makes decisions in order to generate long-term value (Principle B, first period). Rolls-Royce’s framework has in fact historically been a rather complex one: there are four businesses (Civil Aerospace, ITP Aero, Power Systems, Defence) withing a broader Group framework, and it is in the interest of the Group that all of them maintain the same standards and values, also in order to keep some key stakeholders – such as customers and suppliers – satisfied with products quality and less uncertainty in decision-making. Within this “freedom within a framework” model[7], thus, the Board and some delegated Board committees have ultimate responsibility for leadership and risk management[8], and besides generating value for costumers and suppliers, such a model could also help lowering costs, due to reduction of bureaucracy. However Rolls-Royce recognises, in the light of Provision 5, UK CGC[9], that customers and suppliers are not the only relevant stakeholders: especially for some of the businesses (i.e. Civil Aerospace and Defence), local communities and government bodies come into consideration as well. Therefore, the four businesses would nonetheless enjoy high freedom and accountability in carrying their day-to-day activities – but still within this top-down framework developed by the Board and the Executive Team.
Workforce engagement
Obviously, workforce engagement requires very specific considerations as well.
Employees are deemed to be a key stakeholders group for Rolls-Royce’s success, especially for company’s purpose to “retain and develop the best talent”[10]. The company has thus developed a number of measures – mainly informal, due to the simplification process descripted above – to take into account their views on its most relevant decisions[11]:
- Throughout the strategic transformation, impact on employees has been considered: there have been many informal “let’s talk” sessions, involving more than 3000 employees. Furthermore, since over 96.000 hours of employee time have been devoted to local communities and STEM projects[12], this also led to developing a different workforce reward design (Provision 2, UK CGC);
- According to Principle E and Provision 6, “Ethics & Compliance” is a core area of workforce engagement: the transformation process has in fact also dealt with bullying and harassment, for instance by specific ethics training and granting employees the possibility to “speak up”, in confidence, to 150 local ethics advisors[13];
- Rolls-Royce also decided to adopt both the second and the third measures suggested by Provision 5: first, the company allows employees to get their voice heard in “employee forums”; secondly, it designated two independent NEDs as “Employee Champions” (Irene Dorner for the UK, Beverly Goulet for Rolls-Royce North America[14]). Regarding Irene Dorner, who is an expert in Diversity & Inclusion and risk management, having served on the Audit Committee for four years, she appears very qualified for this role. She[15]: regularly meets with employees and discusses with the “employee stakeholder engagement group”; attends ESG and HSE events suggesting measures to enhance workforce engagement and wellbeing, also through powerful social media channels[16]; is available via e-mail to address any questions;
- According to Principle D, the Board itself engages with the workforce through specific “Meet the Board” events and informally engaging with employees’ representatives and Unions. This kind of engagement would coexist with that of Provision 5 and is not intended to replace it.
- Directors also take into consideration anonymous employee feedbacks via Glassdoor’s online platform, and include gender pay reporting and CEO pay ratio in their Annual Report[17].
Even though all these engagement systems are in place, relationships with employee representatives are, as said above, mostly informal and a legal workforce representation on a separate board, like what happens in Austria and Germany within the supervisory board[18], is currently neglected by Rolls-Royce. As a result, even though Rolls-Royce’s “Sustainable Employee Engagement Score” has been coming closer to the High Performance norm Score[19] in the last few years, it is still below it.
Nonetheless, valuing the importance of more effective workforce engagement, Rolls-Royce is currently developing an engagement enhancing plan for the next three years[20]. It is in fact focusing on further developing the employee stakeholder engagement group’s role, and has already adopted a new employee survey, Gallup Q12, in 2019, whose results are strongly linked to Executive remuneration[21].
Alternative governance models: complexity theory and sustainability agenda
What Rolls-Royce is doing in regard to workforce however raises a specific consideration: our society is going towards a system where, regardless of the corporate governance theory a country chooses, whether shareholders-oriented or pluralist approach, stakeholders are more and more to be taken into account. Stakeholders’ importance is in fact acknowledged by the UK CGC itself, even though the United Kingdom is a mostly shareholders-oriented country, and even though the Code was originally spurred by institutional investors for their own sake![22] Current version of the Code, in fact, states in its Introduction the importance of all stakeholders to ensure long-term sustainability, and this is also recalled by its Principle D. This is especially true for companies like Rolls-Royce, whose activities impact on a wider-than-average range of stakeholders.
In this context, simplified governance models which place ultimate responsibility on the unitary Board – like “freedom within a framework” model – do not consider stakeholders’ views enough, not least because productivity gains more from specialization of labour[23] than from centralization. Such centralized models will thus usually benefit from stakeholders engagement enhancing measures, according to supporters of the “complexity absorption” theory (inter alia, Pirson and Turnbull, 2012).
In particular, “effective” stakeholders engagement (Provision 5, UK CGC), in complexity theorists’ view, could be reached only via stakeholders representation on a separate board[24] – not differently from what happens in Austria and Germany with workforce representation. Claiming the need for a separate “Stakeholders board” would however be too far in a system like that outlined by s. 172 UK Companies Act (2006) – more of an “Enlightened Shareholders Value”[25] model than a “Pluralist approach”, i.e. other stakeholders’ interests are considered only insofar as they contribute to shareholders’ value.
Nevertheless, not even the UK CGC itself does always give enough guidance to ensure all relevant stakeholders’ interests are considered, since sustainability is a relative recent issue[26]. In fact, while in several Provisions it takes into due consideration the workforce, the same cannot be said for ESG matters, for which it gives very little guidance.
Therefore, Rolls-Royce has looked somewhere else, for instance to what international business practice recommends[27], in order to find alternative measures which are suitable for its own unique issues, needs and values: it holds ESG-specific events[28], invests in local communities and included “climate change” among its principal risks[29]. Furthermore, it is providing for deeper shareholders empowerment: not only with the purpose of enhancing shareholders value, – thus respecting UK CGC Provision 3 – but also to generate value for other stakeholders as well: in fact, insofar as shareholders’ interests are aligned with ESG matters[30], shareholders empowerment can have positive effects on enviroment and sustainability, as assessed by the EU Commission itself[31].
Section 3: Committees’ work
Nevertheless, some other times the UK Code can be quite specific and even address structural matters, like it does within its Sections on Board committees. The role of the committees is in fact of undoubtebly importance in corporate governance, not least because of the process of decentralization they contribute to carry on.
Furthermore, being Rolls-Royce a FTSE 350 company, the Board and its committees’ effectiveness is reviewed by an independent external evaluator, Belinda Hudson Ltd (according to Provision 21 of the Code)[32].
The three core Rolls-Royce’s committees governed by the Code are:
- the Nominations & Governance Committee;
- the Audit Committee;
- the Remuneration Committee (which will be analized in sec. 4).
Nominations & Governance Committee[33]
Composed by only independent NEDs (Provision 17) and chaired by the Chairman of the Board, its most important areas of focus regard:
- Board nominations, composition and evaluation of Chairman, CEO and NEDs[34];
- Succession;
- Diversity & Inclusion;
- Governance.
Concerning the formal procedure for appointments (Principle J), Committee’s Terms of Reference[35] are very clear in prescripting possible conflicts of interest shall be identified[36] and Diversity & Inclusion matters shall be considered also when making appointment recommendations – this is evident, for instance, with appointment of women like Dame Angela Strank in order to reach company’s long-term target of 33% women representation on the Board. According to Code’s Provision 20, moreover, the Committee employs independent MWM Consulting to find professionals to recommend as directors. It is also interesting to mention that Provision 18, first period, is respected as well: in art. of association 112, it is written that “At every annual general meeting all the directors […] shall retire from office”. That provision has also the effect of preventing the adoption of a “staggered board”, sometimes used as embedded defence against hostile takeovers.
Focusing on Board nominations and composition, the most challenging issue faced in 2019 by the Committee was certainly the review of Irene Dorner’s appointment as chair of the Remuneration Committee (see above, p. 1). The Committee reviewed her appointment in the light of ISS[37] parameters on directors’ time (Principle H and Provision 15), especially considering she is still carrying on her role as Employee Champion. However, she is still meeting all the parameters and has attended 100% of the meetings in 2019[38], and therefore her appointment has been approved.
Interesting considerations also regard the skills-diversification required by Code’s Principle K, in order to develop a diverse talent pipeline: for instance, due to company’s purpose of enhancing the finance function[39], it recommended George Culmer’s appointment as NED because of his significant experience in finance and accounting. For the same purpose it also recommended his inclusion in the Audit Committee and recommended that former Audit Committee chair, Lewis Booth, another finance expert, remain as member of that committee as the new Chairman takes over the role.
Skills and talent diversification is also crucial, according to Provision 17, for succession planning: this is the reason for Rolls-Royce’s development of a “Board apprentice programme”, aimed at selecting the most talented employees who would eventually constitute future leadership of the company. Furthermore, Diversity & Inclusion issues are considered not only for current Board composition but also for succession purposes, e.g. concerning selection for Board apprentice[40].
Finally, the Nomination Committee also deals with governance: in fact, it has been one of the core committees in articulating Rolls-Royce’s strategic transformation process, having approved all relevant amendments to establish “freedom within a framework”. It also considered, in the light of Provision 5, the impact of the strategic transformation on employee engagement, and thus reviewed the effectiveness of the engagement enhancing plan.
Audit Committee
According to Provision 29, UK CGC, one of the Audit Committee’s core functions is to monitor and review company’s risk management system (RMS). It also reviews some of the principal risks undertaken by the company. It follows that nowadays, in these times of uncertainty for businesses all over the world due to Covid-19 pandemic, Committee’s role in reviewing risk management is even more crucial for Rolls-Royce’s success. It is however important to note that Rolls-Royce’s RMS is not intended to completely eliminate risks, but to identify and “manage” them, i.e. to mitigate them (Provision 28) to levels of uncertainty[41] the company is “willing to take in order to achieve its long-term objectives” (Code’s Principle O). In particular:
- “Principal risks” are assessed by individual risk owners, which report them to the Executive Team and are later reviewed by the competent Committee – or by the Board itself. Principal risks are then mitigated through the procedures set out in the Annual Report – for 2019, at pp. 51-54. For instance, to mitigate “Market and financial shock” risk the company currently provides for performance reviews by a specific financial risk sub-committee, tax teams etc.
- For “emerging risks” there are additional systems to identify them, such as workshops or digital surveys.
A list of company’s principal risks is contained on pp. 50 ff. of the Annual Report 2019 (Provision 28).
Before Covid-19, “Cyber threat” was expected to be addressed as Rolls-Royce’s principal risk in 2020[42], and for this purpose the company established a Data Security sub-committee. Obviously cyber threat still remains a very serious issue in the light of the strong links existing between Rolls-Royce’s activities and many government bodies, especially in the Defence sector, but this risks-graduatory should probably be rewritten now, given the current situation. It would be in fact natural to consider “Market and financial shock”[43] as company’s current major risk, due to Brexit’s expected effects on the British market – addressed by a specific Rolls-Royce steering committee – and, even more importantly, to Covid-19. Furthermore, due to engine Trent 1000’s issues (see above, p. 2) faced by Rolls-Royce’s Civil Aerospace during 2019, “Business continuity” is a matter of some concern as well. Trent 1000 failure is, for instance, the reason why Rolls-Royce decided to enhance its finance function by appointing George Culmer as new member of the Audit Committee, as mentioned in the previous paragraph. This means that, right now, four out of five Committee’s members – all NEDs – have “recent and relevant financial experience”, and the Committee as a whole meets the requirements of Code’s Provision 24.
According to Code’s Provisions 25 and 26, the Audit Committee has also other two main functions, for which it enjoys ultimate responsibility[44]:
- to monitor and review the effectiveness of internal and external audit systems;
- to evaluate the Annual Report and its financial statements.
In regard to the internal audit function, along with the central Audit Committee, established at Board-level, in Rolls-Royce each business has also got its own specific “risk and internal audit committee”, according to company’s “freedom within a framework”. Directors of these committees meet at least twice a year and then regularly report to the central Committee on the most significant issues, such as directors’ compliance with the expense policy, proposing work plans for the following year[45].
Rolls-Royce has also got an external auditor[46], PwC, whose performance is reviewed by the Audit Committee each year. The review is carried on also considering FRC’s findings on PwC’s audit – e.g. last evaluation was in 2018 – in order to improve external auditor’s activity. Since PwC’s independence shall be preserved, according to Code’s Principle M, Rolls-Royce prefers not to make use of any non-audit-related service PwC might provide, unless the company is required by the law to accept such services.
Furthermore, the Annual Report is eventually directed to Rolls-Royce’s shareholders, for whose benefit the Audit Committee’s work is actually carried out. It is therefore required by Code’s Principle N to make an assessment of Annual Report’s fairness, balancedness and understandability[47]. It should always be kept in mind, in fact, that the UK CGC did not come out of the blue[48]: it was the result of investors’ strive for better governance levels, and therefore it is in their interest that many of its Principles and Provisions have been designed.
The RMS, internal and external audit and Annual Report’s reviews are therefore intended to understand whether the company has sufficient ground to believe it will be able to continue its business while still paying its dues on time in the next future (Code’s Provision 31). Thus, in order to assess Rolls-Royce is not running towards winding up, in its Annual Report 2019 the Audit Committee analized several risk scenarios for 2020[49] – e.g. involving Covid-19 – and considered company’s prospects for the next 5 years[50] in deciding to adopt the “going concern” basis for accounting, according to Provision 30.
Other committees
Two additional Rolls-Royce’s committees addressing specific issues shall also be briefly mentioned: the “Safety, Ethics & Sustainability” and the “Science & Technology” Committees.
The former reviews management of the following risks:
- Product Safety;
- Recently introduced “climate change” risk;
- Company’s compliance with relevant regulations – e.g. addressing airworthiness.
It also engages with the Nominations & Governance Committee in considering the impact of the strategic transformation on a wide range of stakeholders and oversees HSE governance and the impact of company’s activities on sustainability[51].
The Science & Technology Committee, instead, oversees company’s engineering innovation, in the light of its aim of reaching net-zero by 2050[52].
Section 4: Remuneration design and sustainability
Remuneration Committee
With a mostly dispersed ownership structure and dual-class shares[53], Rolls-Royce is no strange to the agency problem. This very typical governance problem, because of which corporate governance codes like the UK CGC were born in the first place, can be addressed by adopting a remuneration plan seeking to align – especially – Executive Directors’ and shareholders’ interests.
Since, however, the UK Code has later evolved as to consider sustainability issues as well[54], remuneration policies and practices (Principle P) are also required not to lose sight of what could be best in the long-term for all relevant stakeholders.
The Remuneration Committee thus acquires a key strategical function since it is not for directors (Principle Q), but for the Committee itself, to design Executive remuneration. Rolls-Royce has accordingly provided its Committee with delegated responsibility to do so, as required by Provision 33[55]. The Committee has also been advised, both in 2019 and in 2020, by an independent executive compensation advisor, Deloitte LLP, according to Provision 35[56].
Non-Executive Directors’ remuneration is instead determined by the Chairman and the Executive Directors, taking into account schemes designed by companies of similar size and complexity[57].
As regards Committee’s membership, this essay already dealt with Rolls-Royce’s non-compliance with Provision 32, last period, but other than that the Provision has been respected, since Committees’ members are five independent NEDs[58].
Remuneration design
As mentioned in the previous paragraph, Executive Pay is the most important part of the remuneration design: it is in fact necessary to seek alignment with long-term sustainability, as required by Code’s Principle P. This has thus been a major area of focus for both the former remuneration policy followed from 2017 to 7 May 2020, and the current one, as approved at AGM 2020[59].
Rolls-Royce’s Executive Pay is based upon two main components: a fixed and a variable element.
Only fixed pay, which has not been changed in new Remuneration policy 2020, is pensionable, according to Provision 38. Furthermore, Rolls-Royce’s pension rates for existing Executives are different from newly-hired ones’, thus reflecting the difference between existing and newly-hired workforce’s rates[60]. The company’s salaries are also very competitive in order to support its strategy to retain the best talents.
The variable element is instead composed by the Long-term Incentive Plan (LTIP) and the annual bonus plan, both depending on a performance evaluation conducted by the Remuneration Committee.
Rolls-Royce’s Long-term Incentive Plan (LTIP) has not been subject to significant changes from 2019 to 2020. It has been designed looking at Code’s Provision 36: it in fact awards shares to Executives reaching specific performance targets, ranging up to a maximum award of 300% of salary for the CEO and 250% for other Executives from 2020[61]. At the same time, it imposes on them a total vesting and holding period of 3+2 years, i.e. 5 years. Needless to say, LTIP thus counters short-termist approaches – e.g. stock-options – which might have destructive effects in the long-term[62]. Notwithstanding this, notice periods for executives-contracts never go beyond 12 months, like Code’s Provision 39 requires[63]. In order to counter possible short-termist effects of such notice periods, Remuneration policy 2020 – in accordance with Code’s Provision 36 – thus included a post-employment shareholding requirement for Executives to retain a percentage of their beneficially-owned shares for 12 months from leaving date[64].
Coming to the annual bonus plan, it has instead a rather dualistic nature: it is strongly linked on one hand to company’s global performance (80%), and on the other hand to Executives’ individual performance (20%). The Committee enjoys discretion – as recognised by the Code in its Principle R and Provision 37 – in evaluating both. Furthermore, as regards the evaluation of company’s global performance, not only financial elements such as profit and cash flows are considered, but also non-financial key measures like customer satisfaction and employee engagement[65]. In fact, even though above-mentioned Provision 36 only deals with shareholders’ interests, this would be not enough to meet Principle P’s long-term sustainability’s objective. The UK Code thus requires not only effective engagement with shareholders, but also with the workforce (Provisions 40-41): for example, Rolls-Royce includes, in the interest of its employees[66] gender pay reporting and the CEO pay ratio in its Annual Report[67].
Notwithstanding this, the Code does not provide instead specific measures to be embedded in the remuneration plan in order to address ESG matters. Rolls-Royce has thus felt the need to go somewhat beyond the Code in some cases, for instance by including also environmental and social performance among LTIP targets and outlining additional triggers for malus and clawback[68], e.g. in case of breach of environmental issues or of company’s Code of Conduct[69].
Conclusions
At the end of this detailed analysis of Rolls-Royce’s governance it will be evident, on one hand, that the UK CGC has increasingly become a very useful instrument to spread among large British companies the need to focus on long-term sustainability. It also gives detailed guidance to ensure some key stakeholders are considered, for instance with its Provisions on workforce engagement and remuneration.
On the other hand, since sustainability is a fairly recent issue, when it comes to other stakeholders the Code appears rather unfocused. Companies like Rolls-Royce, whose activities impact on a wider-than-average range of stakeholders, might thus look for alternative measures, such as those outlined in Section 2 of this essay.
Finally, Code’s evanescence on ESG matters should not be necessarily considered a negative feature: corporate governance is in constant evolution, and what is valuable today could be disregarded tomorrow. Companies should therefore keep a significant freedom in choosing how to assess such sustainability matters for which little or no guidance is given by the Code, in the light of their own unique issues, needs and values.
[1] UK CGC, Introduction, p. 2
[2] UK CGC, Principle P
[3] A. R. 2019, p. 86
[4] A.R. 2019, p. 63
[5] A.R. 2019, p. 4
[6] A.R. 2019, p. 9
[7] A.R. 2019, p. 61
[8] Rolls-Royce Board Governance, 2019, p. 6
[9] That for the first time in 2019 requires a specific “s. 172 UK CA statement” in the Report; see Annual Report 2019, p. 56
[10] A.R. 2019, p. 56
[11] Provision 5, UK CGC
[12] A.R. 2019, p. 46
[13] A.R. 2019, p. 49
[14] A.R. 2019, p. 63; indeed, Rolls-Royce operates also there
[15] A.R. 2019, p. 71
[16] Rolls-Royce Stakeholder engagement, p. 2; FRC Guidance on Board Effectiveness 2018, point 44
[17] See below, p. 10
[18] Bachner, “Stakeholder & principals”, p. 2
[19] https://www.rolls-royce.com/sustainability/performance/target-progress.aspx#sustainable-employee-engagement-index
[20] A.R. 2019, p. 71
[21] See below, p. 10
[22] Tuch, pp. 1475 ff.
[23] Adam Smith, “An Inquiry into the Nature and Causes of the Wealth of Nations”, 1776
[24] Pirson and Turnbull, 2012, p. 24
[25] Verdam, 2014, p. 2
[26] Enron’s and Parmalat’s scandals date back to 2001 and 2003 respectively: https://www.smh.com.au/national/parmalat-enron-reveal-differences-20040105-gdi3of.html#:~:text=Both%20the%20Parmalat%20and%20Enron,administrators%20or%20stock%20exchange%20authorities.
[27] Inter alia, Halvorssen, 2014, p. 4
[28] A.R. 2019, p. 70
[29] A.R. 2019, p. 52
[30] Halvorssen, 2014, p. 1
[31] Clarke, 2014, p. 1
[32] A.R. 2019, p. 74
[33] A.R. 2019, pp. 75-78
[34] All with positive outcomes in 2019
[35] Rolls-Royce Board Governance, 2019, pp. 12-13
[36] Like on p. 100, A.R. 2019
[37] Institutional Shareholder Services group
[38] A.R. 2019, p. 64
[39] More on this in next paragraph
[40] Board Diversity Policy 2020, p. 2; Annual Report 2019, p. 48
[41] A.R. 2019, p. 50
[42] A.R. 2019, p. 79
[43] This risk had unfortunately already been increasing since last year, A.R. 2019, p. 53
[44] A.R. 2019, p. 83
[45] A.R. 2019, p. 84
[46] A.R. 2019, p. 85
[47] A.R. 2019, p. 81
[48] See footnote 19
[49] A.R. 2019, p. 55
[50] A.R. 2019, p. 83
[51] A.R. 2019, p. 105
[52] A.R. 2019, p. 4
[53] A.R. 2019, p. 206; Articles of association, pp. 6 ff.
[54] For example after Enron and Parmalat failures, see above, p. 1
[55] A.R. 2019, p. 85
[56] A.R. 2019, p. 86
[57] A.R. 2019, p. 92
[58] A.R. 2019, p. 86
[59] AGM Results at: https://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/investors/AGM/2020-agm-gm-poll-results.pdf
[60] A.R. 2019, p. 93
[61] A.R. 2019, p. 92
[62] Johnston, p. 65, 2014
[63] A.R. 2019, p. 103
[64] A.R. 2019, p. 88
[65] A.R. 2019, p. 89
[66] Rather than of its shareholders, Bachner, p. 2, 2020
[67] A.R. 2019, pp. 101-102
[68] A.R. 2019, p. 89
[69] UK CGC, Provision 37, second period