Governance, Committees and CSR

Corporate Governance


THE QUOTED COMPANY ALLIANCE (QCA) CODE

The Board is committed to best practice in corporate governance. Directors have agreed to comply with the provisions of the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies (“QCA Code”) to the extent which is appropriate to its nature and scale of operations. This report illustrates how the Group complies with those principles.

Jim Mellon, Executive Chairman

This disclosure was last reviewed and updated on 21st March 2023.

THE PRINCIPLES OF THE QUOTED COMPANY ALLIANCE (QCA) CODE

DELIVER GROWTH

QCA Code Principle

What we do and why

  1. Establish a strategy and business model which promote long-term value for Shareholders

The immediate strategy and business operations of the Group are set out in the Strategic Report detailed within the latest Annual Report

The Group’s strategy and business model and amendments thereto, are developed by the Chief Executive Officer (“CEO”) with his senior management team and approved by the Board. The management team, led by the CEO, is responsible for implementing the strategy and managing the business at an operational level.  

The Group’s overall strategic objective is to grow organically and through strategic acquisitions to further augment the range of services it offers and gain market share in markets in which it has proven experience. 

The Group has a balanced portfolio of regulated and unregulated operations, all of which are managed on a risk-based and prudential approach. The principal activities include: deposit taking; lending to consumer and commercial markets in the IOM and the UK; the provision of dedicated financial advice, especially in the areas of pensions and general insurance; and foreign currency and payment services. 

The Group has adopted a portfolio approach to its strategic assets and is not dependent on one particular platform technology. The Directors believe that this approach helps to mitigate any concentration risk. 

The Group operates in some heavily regulated sectors, and this is reflected in the emphasis on compliance and the provision of excellent customer service. 

In executing the Group’s strategy and operational plans, management will typically confront a range of day-to-day challenges associated with risks and uncertainties and will seek to deploy the identified mitigation steps to manage these risks as they manifest themselves.  

  1. Seek to understand and meet Shareholder needs and expectations

The Group, via the CEO, seeks to maintain a regular dialogue with both existing and potential new Shareholders to communicate the Group’s strategy and to understand the needs and expectations of Shareholders. 

Beyond the Annual General Meeting, the CEO and, where appropriate, other members of the senior management team will meet with investors and analysts to provide them with updates on the Group’s business and to obtain feedback regarding the market’s expectations of the Group. 

The Group’s investor relations activities encompass dialogue with both institutional and private investors. From time to time, MFG attends private investor events, providing an opportunity for those investors to meet with representatives from the Group in a more informal setting. 

  1. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include not only the Group’s employees, partners, suppliers, regulatory authorities, but also customers, be they depositors, borrowers or those seeking financial advice. The Group’s operations and working methodologies take account of the requirement to balance the needs of all stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole. 

  • Customers – are at the heart of the business, and the Group operates with a shared vision and set of values. These values instil a sense of how all staff form a part of the customer journey. Feedback is encouraged at all points of contact; it is proactively enacted upon as it aids the identification of process and system enhancements; 
  • Shareholders – where appropriate Shareholder feedback is discussed at the Board, with any actions agreed being tracked to completion by the Company Secretary. Shareholders have an opportunity to raise questions to the Board, in person, at the Annual General Meeting. In addition, the CEO meets with and addresses Shareholder concerns where appropriate; 
  • Employees – the Group collates employee feedback on an annual basis, engages employees via workshops, with all outputs analysed and visibly addressed by the Executives of the operational subsidiaries that form the Group; with the aim being to build an engaged, committed and enthusiastic workforce; 
  • Partners and suppliers – the Executive and Management regularly meet with our partners and suppliers to ensure the needs of all parties are understood to achieve continued excellent working relations; and 
  • Environment - The Group recognises the QCA Code recommendations on the integration of ESG and alignment with a reporting framework across organisations. This is a fast-moving agenda with the consolidation of voluntary frameworks and growth of international statutory reporting frameworks, and the Group continues to monitor this evolution and what it means with interest. Notwithstanding, integration of ESG across the Group is on-going as material ESG issues are identified. The Bank is now into its fourth year of responding to ESG integration and provides the model that other Group subsidiaries are following.
  1. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness by a series of committees, overseen by the ARCC, and reviewed by Internal Audit. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the ARCC, which meets at least six times per year, the effectiveness of these internal controls is formally reviewed four times per year. 

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results, and comparison to budget, are reported to the Board monthly. 

The Group maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Group. The insured values and type of cover are comprehensively reviewed on at least an annual basis. 

The senior executives meet weekly to consider new risks and opportunities for presentation to the Group, making recommendations to ARCC and / or the Board as appropriate. 

The Directors consider they are provided with all necessary information to assess the Company’s position, performance, business model and strategy. 


MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK

QCA Code Principle

What we do and why

  1. Maintain the board as a well-functioning, balanced team led by the chair

The Board currently comprises four Non-executive Directors and four Executive Directors. 

Each of the Directors are subject to election by Shareholders at the first Annual General Meeting after their appointment to the Board and will continue to seek re-election at least once every three years. 

Directors’ biographies are set out here

The Board is responsible to the Shareholders for the proper management of the Group and meets at least four times a year to set the overall direction and strategy of the Group, to review operational and financial performance, and to advise on management appointments. All key operational and investment decisions are subject to Board approval. 

The Board considers itself to be sufficiently independent. The QCA Code suggests that a board should have at least two independent non-executive directors. The Board considers three Non-executive Directors, namely Alan Clarke (Chairman of the ARCC), Gregory Jones and John Spellman, are independent under the QCA Code’s guidance for determining such independence. 

Non-executive Directors receive their fees in the form of a basic cash emolument. The CEO and Finance Director are the only Directors who hold Restricted Stock Units (“RSUs”) or options over the Group’s shares.

The RSUs or option grant concerned are not deemed to be significant, either for the individual Executive Director or in aggregate. The current remuneration structure for the Board’s Non-executive Directors is deemed to be proportionate. 

  1. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The Board considers that all the Non-executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities, and bring considerable experience in regulatory, financial and operational development within the financial service sector in both the IOM and the UK. 

The Directors’ biographies are set out here

The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group. 

The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational environment and to the Directors’ responsibilities as members of the Board. During the year, Directors receive updates from the Company Secretary and various external advisers on a number of corporate governance matters. 

Directors’ service contracts or appointment letters make provision for a Director to seek personal advice in furtherance of his or her duties and responsibilities, normally via the Company Secretary. 

  1. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The Board has an internal process for evaluation of its own performance, that of its committees and individual Directors, including the Chairman. This process is conducted annually and last took place in October 2023, with no substantive issues arising.  

The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning. 

  1. Promote a corporate culture that is based on ethical values and behaviours

The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations. These values are enshrined in the written policies and working practices adopted by all employees in the Group. An open culture is encouraged within the Group, with regular communications to staff regarding progress and staff feedback sought. The senior management team seeks to address any concerns that may arise, escalating these to Board level as necessary. 

The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility in this area. This is enshrined in the Group’s health and safety policy. 

  1. Maintain governance structures and processes that are fit for purpose and support good decision- making by the board

The role of the Board

The Board is collectively responsible for the long-term success of the organisation. Its principal function is to determine the strategy and policies of the Group within an effective control framework which enables risk to be assessed and managed. The Governance Framework is reviewed to ensure it remains fit for purpose on an annual basis and is approved by the Board. 

The Board ensures that the necessary financial and human resources are in place for the Group to meet its objectives and that business and management performances are reviewed. Furthermore, the Board ensures that the Group operates within its constitution, relevant legislation and regulation and that proper accounting records and effective systems of business control are established, maintained, documented, and audited.  

There are at least four formal Board meetings each year. All Board members have the benefit, at the Group’s expense, of liability insurance in respect of their responsibilities as Directors and have access to independent legal or other professional advice if required. The Board has a formal schedule of matters which are reserved for its consideration, and it has established three committees to consider specific issues in greater detail, being the ARCC, the Remuneration Committee and the Nomination Committee. The Terms of Reference for each of these Committees are published here.

There is a clear separation of the roles of CEO and Executive Chairman. 

Chairman

The Chairman is responsible for leading the Board, ensuring its effectiveness in all aspects of its role, promoting a culture of openness of debate, and communicating with the Group’s members on behalf of the Board. The Chairman sets the direction of the Board by facilitating the effective contribution of Non-executive Directors and ensuring constructive relations between Executive and Non-executive Directors. The Chairman also ensures that Directors receive accurate, timely and clear information. This fosters a positive corporate governance culture throughout the Group.

CEO

The CEO is responsible for managing the Group’s business and operations within the parameters set by the Board.

Non-executive Directors

The Non-executive Directors are responsible for bringing independent judgement to the discussions held by the Board, using their breadth of experience, and understanding of the business. Their key responsibilities are to constructively challenge and contribute to strategic proposals, and to monitor performance, resources, and standards of conduct, compliance, and control, whilst providing support to executive management in developing the Group.

Prior to appointment, Non-executive Directors are required to demonstrate that they are able to allocate sufficient time to undertake their duties.

The Board has established an ARCC, a Remuneration Committee and a Nomination Committee with formally delegated duties and responsibilities.  

Group Audit, Risk and Compliance Committee (“ARCC”)

The ARCC meets at least six times each year and comprises of three Independent Non-executive Directors, currently Alan Clarke (Chairman), Gregory Jones and John Spellman. Representatives from Compliance and Risk, the Internal and External Auditor and executive management attend by invitation. Its role is to be responsible for reviewing the integrity of the financial statements and the balance of information disclosed in the accompanying Directors’ Report, to review the effectiveness of internal controls and risk management systems, to monitor and review the effectiveness of the Internal Audit function and to consider and recommend to the Board (for approval by the members) the appointment or re-appointment of the External Auditor. The ARCC reviews and monitors the External Auditor’s objectivity, competence, effectiveness, and independence, ensuring that if it or its associates are invited to undertake non-audit work it will not compromise auditor objectivity and independence. 

Group Remuneration Committee (“REMCO”)

The REMCO meets at least twice a year and currently comprises of two Independent Non-executive Directors, currently Alan Clarke (Chairman), and Gregory Jones, with the Executive Directors, Head of Human Resources and external advisers attending by invitation where appropriate. It is responsible, amongst other matters, for determining the remuneration of the Executive Directors, the Company Secretary, and other members of management. Committee members do not take part in discussions concerning their own remuneration. The Chairman and CEO determine Non-executive Director fees. 

Group Nomination Committee (“NOMCO”)

The NOMCO is comprised of the whole Board. It is chaired by the Chairman of the Board and is responsible for making recommendations to the Board on matters relating to the composition of the Board, including Executive and Non-executive Director succession planning, the appointment of new Directors and re-election of existing Directors. 

Appointments to the Board

The principal purpose of the Nomination Committee is to undertake the assessment of the balance of skills, experience, independence and knowledge on the Board and subsidiary boards against the requirements of the business, with a view to determining whether any shortages exist. Having completed the assessment, the Committee makes recommendations to the Board accordingly. Appointments to the Board are made on merit, with due regard to the benefits of diversity. Within this context, the paramount objective is the selection of the best candidate, irrespective of background, and it is the view of the Board that establishing quotas or targets for the diversity of the Board is not appropriate. 

All Group Director appointments must be approved by the Company’s Nominated Adviser, as required under the AIM Rules, before they are appointed to the Group Board.   

Re-election

The Group’s Rules require that all Directors are submitted for election at the AGM following their first appointment to the Board and one third of the Directors are subject to retirement by rotation on an annual basis to refresh the Board, irrespective of performance. 

The Corporate Governance Manual also contains a schedule of matters specifically reserved for Board decision or approval and sets out the Company’s share dealing code and its public interest disclosure (“whistle-blowing”) policy and procedures. 

Board and committee attendance

The number of formal scheduled Board and Committee meetings held and attended by Directors during the year was as follows:

 

Board

ARCC

REMCO

NOMCO

Jim Mellon

5/8

-

-

3/3

Denham Eke

8/8

-

-

3/3

Douglas Grant

8/8

-

-

3/3

James Smeed

7/8

-

-

3/3

Gregory Bailey

5/8

-

-

1/3

Alan Clarke

6/8

8/8

11/11

2/3

Gregory Jones 

6/8

5/8

11/11

2/3

John Spellman 

8/8

8/8

-

3/3


BUILD TRUST

 QCA Code Principle

What we do and why

 

  1. Communicate how the company is governed and is performing by maintaining a dialogue with Shareholders and other relevant stakeholders

The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group’s activities are clear, fair, and accurate. The Group’s website is regularly updated, and users can register to be alerted when announcements or details of presentations and events are posted onto the website. 

Notices of General Meetings of the Company can be found here:

The results of voting on all resolutions in future general meetings will be posted to the Group’s website, including any actions to be taken because of resolutions for which votes against have been received from at least 20 per cent of independent Shareholders.