Institute of Directors

ANNUAL REPORT AND ACCOUNTS 2019

www.iod.com Objects of the Institute of Directors' Royal Charter | Annual Report and Accounts 2019

Objects of the Institute of Directors' Royal Charter

To promote for To promote the To represent To advance the public benefit study, research the interests of the interests high levels of and development members and of members of skill, knowledge, of the law of the business the Institute, professional and practice community to and to provide competence of Corporate government facilities, services and integrity Governance, and in the public and benefits for on the part of and to publish, arena, and to them. directors, and disseminate or encourage and equivalent office otherwise make foster a climate holders however available the favourable to described, of useful results entrepreneurial companies of such study activity and and other or research. wealth creation. organisations.

For further information on the IoD, please explore our website found at: www.iod.com

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Contents “ Throughout this pandemic, Objects of the Institute of Directors' 2 Royal Charter the IoD community has been a powerful, Interim Chair of the Institute’s Report 4 positive force.” Director General’s Report 6 John Watson Interim Chair of the IoD 2019 Overview 8 • Influence 8 • Development 12 • Connection 14 • People and Culture 16

Governance of the Institute of Directors 22

Statement of Board Responsibilities 31

Financial Review 32

Independent Auditor’s Report 34

The Accounts 36

IoD Chairs from Geographical Areas 55

IoD Premises 57

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Interim Chair of the Institute’s Report

The IoD’s century-old Royal Charter The difficulties the world is experiencing provides us with a mission to have only reinforced the importance of create better directors, encourage our core functions as an institute. One of entrepreneurialism, and stand up these is to foster connections between for good governance. As the world directors, and our events across the UK comes to terms with the impact and beyond have brought directors – of COVID-19, this mission is more from organisations large and small, important than ever. from the public, private, and third sectors – together. In 2019 these took It has been immensely heartening to on a new focus around key issues such see the response of our members and as global trade and inclusivity. John Watson the IoD team to this crisis. In challenging circumstances, they have stepped up to Our Professional Development Interim Chair of the IoD support not just the director community, offering grew for the fifth year running. but wider society too. For this, we cannot Hundreds of programmes were thank them enough. delivered to over 5,000 delegates, both in the UK and further afield. I would Thousands of our members have like to personally congratulate each adapted at pace. In many cases, and every one of our 111 new Chartered they have been directly assisting the Directors appointed over the year, a third medical response to the pandemic of whom were women. Those who have – from producing hand sanitiser to gone before you know first-hand the assisting front-line healthcare workers dedication and skill required to reach – providing a prime example of the our levels of accreditation and you positive role directors can and should should, quite rightly, feel proud. play in such circumstances. This came on top of the contribution being made We remain a leading voice on the issues by our public and third sector members that matter to directors, especially working in health and social care. this year, on good governance. Our Policy Voice community has The IoD’s own response has been no continued to grow, ensuring what less swift. An online hub, gathering key we say is based, as it should be, information, guidance, and peer support, directly on our members’ views. was launched in a matter of days. Across our branch network, our teams We have a long and proud history, rapidly got to grips with digital platforms but to enable the IoD to continue like never before, providing directors making a positive social impact, with a sense of community when we need a solid base and sustainable they needed it most. Our Professional long term plan. With this in mind, Development team quickly moved one of the Board’s key focusses courses online so that directors last year was to improve financial could equip themselves with the vital control, with management targeting knowledge and skills they needed to see the eradication the deficit of the their business through the challenge. previous year. We successfully made the case to Government for business support and That target was more than met: temporary changes to the UK’s corporate in 2019 the Institute achieved a governance and insolvency rules. surplus of £752,000. This is a clear demonstration that we can change Throughout this pandemic, the IoD when we work together. community has been a powerful, positive force.

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While I have no doubt that we have Empowering our branch network I am delighted that last year closed with further challenges ahead, compounded will continue to be a priority. With this, our appointment of Jonathan Geldart by the current consequences of the we will further strengthen our focus on as Director General, who has taken on global pandemic on our staff and the importance of good governance, the responsibility of maintaining these operations, I am confident we can for the benefit of organisations, but also objectives, albeit under circumstances continue to build on that work. We may for the whole economy, an aim central none of us would have expected. be an historic institution but we must to our Royal Charter. face up to the challenges of today Through the first half of 2020, and in doing so be forward looking, We should not be shy about highlighting Jonathan worked tirelessly towards always considering the long-term the significant benefits our accredited fulfilling the goals of the Institute. perspective. Again, we will do that courses, of which Chartered Directorship He is a long-time member and together, as one team with staff, is the pinnacle, offer directors. In its 20th steadfast supporter of the principles volunteers and members bringing year in 2019, we saw a record number that the IoD stands for: Integrity and our resources together. of Chartered Directors qualify. We are Enterprise. While the challenges ahead placing more emphasis on growing this are substantial, if we stick firm to these The Board’s long-term aspiration has community and sharing its value to principles, I am confident about been to empower our local networks. the IoD and the UK. I would like to see the IoD’s future as the pre-eminent We have started to make good simpler pathways to achieving our high organisation for directors. progress with significant work put standards and in doing so making our into developing a new, streamlined leading Chartered Director accreditation operating model that will enable the IoD more inclusive and attainable. to better service members wherever they are. Importantly, this brought So too must governance be at the together IoD staff and volunteers from forefront of our efforts to provide across our networks, providing an influence for members. Last year the example of the positive collaboration development of a key project, the IoD we want to continue to encourage. Centre for Corporate Governance, The work of our dedicated and brought together experts from talented volunteer members reflects academia and business to investigate well on the enviable generosity and live governance issues. This Centre, capabilities of our wider membership. launched earlier this year, stands as a We all owe you a debt of gratitude. powerful symbol of the central position of the Institute and our members in I would also like to express my gratitude the good governance debate. to our previous Chair, Charlotte Valeur and our Joint Interim Directors General, Equally, we must continually update Anna Daroy and Edwin Morgan, for their the Institute’s own governance, endeavours, particularly in progressing adapting to the new expectations these two key strands of work. of both our members and ourselves. We are publishing pay gap figures for As your Interim Chair, my focus will be gender and ethnicity, and from next on guiding us through the next few year intend to publish information on critical months to ensure that our new our environmental impact. Chair has every opportunity to lead us into a sustainable, long term future. 2019 was a year of financial stabilisation, affirming the importance our volunteer The reshape and recovery plan is network, and refocussing on our our best chance of preparing for the core purpose. economy to return to growth and in doing so, ensuring the Institute is closer and even more relevant to its members.

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Director General’s Report

First as a member, then as chair for This campaign complemented our Yorkshire and the North East, I have Information and Advisory Services, long been an enthusiastic advocate which continued to provide a valuable of the Institute of Directors. It was service for members, dealing with a privilege to be appointed Director thousands more requests during the year. General last October. The IoD doesn’t just help our members I believe firmly in the IoD’s mission to secure their existing business, but create better directors, and I have always also enables them to take the next valued the work it does as a champion step. In this regard, our Professional of its members and the wider director Development offering continues to go Jonathan Geldart community. 2019 was no different in from strength to strength, growing for this regard. the fifth year running. Thousands of Director General delegates attended our programmes The IoD’s flagship event series, the across the world, with thousands of Director of the Year Awards, was better examinations delivered, generating an than ever, showcasing some of the best overwhelmingly positive response from of Britain’s directors. With hundreds of delegates. The year also saw a record entrants from across the UK spanning number of applications for our gold the private, public, and third sectors, standard: Chartered Directorship. the awards campaign reached over a million people. Yet this is just one Our purpose example of the events which, over the While the IoD has always had its course of last year, helped directors Royal Charter as its ‘North Star’, like all connect with one another and discuss long-standing organisations there is a topics ranging from financial strategy need periodically to remind ourselves to inclusivity in the workplace. of our purpose and recapture the spirit of the group of directors who Just as prominent was our advocacy bonded together to form the IoD work, speaking out on behalf of our over a hundred years ago. members on the issues that matter to them. While Brexit, and particularly the To this end, throughout last year threat of no deal, loomed large in a year and into 2020, we have brought of political tumult, we helped to secure together staff and members who have influence for our members across a volunteered their time, working as one range of areas, including audit reform, team, to hone and strengthen our sense action on late payment, and new city of purpose and member proposition. deals to promote local growth. I would like to offer tremendous thanks to all those involved for their continued Our role is not just to inform efforts on this vital piece of work. policymakers of our members’ views, but also to ensure directors have the Building upon the Institute’s Royal information they need to adapt their Charter, and underpinned by quantitative organisations to upcoming change. research, this work indicated the need for the IoD to drill down to the essentials Last year’s Brexit readiness campaign of what our members want. was a prime example. Moving at speed, teams from across the IoD combined to provide guidance, webinars, events, and content via our online hub, visited by hundreds of thousands of business people.

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This is the opportunity to: Financial performance We have ensured directors can It is crucial that this ongoing programme continue to develop by launching of change is built upon firm foundations. a suite of accredited virtual training Connect Arriving in post near the end of last thanks to the tireless work of our To other directors to share year, my first job was to continue Professional Development team. experiences and common crucial work carried out in 2019 to And our influence has helped to secure challenges stabilise the Institute’s finances. significant support for businesses, and legal changes that give real The Board and Interim Directors breathing room for company directors. Develop General Edwin Morgan and Anna Daroy Knowledge and skills that will deserve significant credit for their I cannot emphasise enough how help improve any organisation efforts to reduce our cost base during impressed I have been by the efforts of 2019. The target they were set was to our staff and volunteers in the face of eradicate the Institute’s 2018 deficit this challenge. I would like to thank them Influence and reach a surplus. all for the work they have done during these incredibly challenging times. Add their voice and influence I am pleased to confirm that this the people that matter, at a has been achieved. All told, in 2019, The current situation has accelerated, local and national level the Institute generated a surplus not deflected us from, our work to of £752,000. ready the IoD for the next 100 years.

The IoD must reflect and cater for the Outlook significant responsibilities that come At this point, the injurious impact of with the role of the director, and to the coronavirus pandemic on business address the many ‘unknown unknowns’ hardly needs restating. that come with the position. We should champion good governance and skilled As an organisation with significant directorship at every turn, emphasising revenue streams from hospitality, the role our accredited courses, events, co-working spaces, and face-to- particularly the Chartered Director face professional development, the IoD Qualification, can play in supporting has not been immune to the effects of these values. In future, there is no the virus. In retrospect, it underlines the reason we should not expect qualified importance of the work done in 2019 to directors to sit in every boardroom return the Institute to a surplus. Due to in the UK. the ongoing effects of the pandemic, this work will need to continue. To deliver on our objectives, we must get closer to our membership, and we While Covid-19 has put strain on the must do so at a branch level. Our branches economy, it has also spurred significant should be empowered to provide innovation, both in our members’ the services that will truly benefit their organisations and the Institute itself. members, underpinned by a ‘Member First’ philosophy. This new model Our teams across the regions and will help to deliver a service for our nations have rapidly upskilled in membership that better reflects their organising virtual events, enabling needs today and tomorrow. thousands of directors to connect at a time when they needed the IoD community more than ever.

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Influence

The IoD’s Royal Charter calls on The IoD contributed to this debate At the end of the year, the newly the Institute “to promote the study, in a balanced way, highlighting the elected Government unveiled a research and development of the contribution of a wide range of number of proposals that indicated law and practice of corporate organisational stakeholders to business the future direction of the UK’s governance”, and “to represent success whilst also acknowledging that approach to corporate governance. the interests of members and shareholders continue to play a crucial In line with our recommendations, of the business community to role in effective corporate governance. the Government indicated that it government and in all public fora would adopt proposals for a stronger and to encourage and foster a Responding to the Financial Reporting audit regulator and a new airline climate favourable to entrepreneurial Council’s consultation on the updated insolvency regime. The Government activity and wealth creation”. Stewardship Code for institutional also indicated that it would strengthen investors, the IoD broadly welcomed its powers to intervene in mergers and Following these instructions, the IoD updates to the Code whilst expressing acquisitions on grounds of national seeks to influence politicians and some scepticism about the Code’s security. We broadly welcomed these opinion formers on behalf of members, ability to significantly reshape measures whilst also warning against to maintain and raise governance the nature of board-shareholder the negative impact of politically- standards in the UK, and to argue engagement at listed companies. driven interventions in legitimate for a business environment which In March, we worked closely with corporate transactions. In that context, encourages sustainable growth. the Chartered Institute of Internal we emphasized the need to retain, But change does not only come Auditors to produce a report as much as possible, an open and through government policy, and examining the importance of internal non-protectionist approach to business we also seek to use our influence to audit in ensuring good governance. ownership and investment in the post- promote improvement in standards Brexit economy. of directorship and governance that 2019 also saw the collapse of the 178- doesn’t need legislation. year old travel operator Thomas Cook. As mentioned in the Interim Chair’s In the IoD’s response to Parliament’s report, in 2019 we laid the groundwork Corporate governance Business Committee’s inquiry on for the IoD’s Centre for Corporate 2019 was a watershed moment in the matter, we posed a number of Governance, with an advisory panel international corporate governance questions concerning the disappointing comprising significant investors, as business leaders around the world role of auditors, shareholders and the academics and business figures. reconsidered corporate purpose. board in failing to prevent the collapse. Launched at an event with Darren Jones MP, Chair of the House of In the United Kingdom, the British Ahead of the General Election, Commons Business, Energy and Academy published an influential set we issued a policy paper in which Industrial Strategy Committee in of principles for purposeful business, we called for 10 policy initiatives July 2020, the first subject the which called on boards of directors which were designed to reinforce Centre is investigating is stakeholder to define an overarching business the UK’s pre-eminent position in governance, sustainability in purpose which articulated the the global corporate governance governance and the impact of emerging contribution of their enterprises space. Proposals included calling on technologies on governance. We believe to society. In the United States, Government to establish a new form of this initiative will further cement the the US Business Roundtable issued company for the outsourcing industry, IoD’s position as the home of the a high-profile statement signed by “the Public Service Corporation”, latest thinking in good governance. many leading CEOs which argued which would balance the interests that boards should adopt more of of shareholders, the workforce and a stakeholder orientation in the other stakeholders to a greater extent governance of major companies. than at present. We also called on Government to introduce the necessary legislation to enact Sir John Kingman’s recommendations concerning external audit regulation.

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Influence at all levels The IoD speaks for its members not just to UK central government, but crucially also to the Devolved Administrations Policy & Media and at local government and LEP level. The Institute’s teams in Scotland, Wales and Northern Ireland, as well as in the Highlights English regions have frequent contact with relevant political leadership, providing valuable data, case studies and insight into consultation processes. 1,000+ Regular and frequent meetings took place between IoD staff and 3,000+ broadcast Ambassadors with cabinet ministers, interviews and civil service and government staff hits in all forms mentions to discuss key issues of import to of news media businesses, and these were of particular in 2019 use where issues, such as Brexit, in 2019 may affect the whole UK, but have greatly varied local impacts.

In addition to Policy Voice surveys, a community which grew by 16% in 2019, many regions ran specific surveys for members in 2019 to gain local insights to supplement the considerable feedback received on a consistent basis.

100+ +16% meetings with ministers Policy Voice and civil servants community grows speaking directly to government

All figures correct as of August 2020

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Business environment Alongside our role in promoting As a member-led institute, our priorities governance, our Royal Charter is in this regard are driven by the needs equally clear that the IoD has an and concerns of the IoD community. obligation to make the case for Below are some of the areas in which government policy to be designed the IoD made an impact on behalf of so that it helps people to establish its members. and to grow organisations of all types.

What members told us How we responded What we achieved

By April 2019, less than half Alongside providing guidance Over £2bn funding of members had been able to directly to members, for Brexit readiness is draw up Brexit contingency we consistently called for announced in August plans financial support

Survey evidence and member Throughout 2019, we mount In December, the case studies show demand a campaign to secure a Government commits for digital tech investment 'Productivity Allowance' to widening existing tax incentives for SMEs, in the media and credits to achieve this meeting officials exact aim

Late payments repeatedly Engaging directly with officials Measures in line with emerge as a top concern in at BEIS, we put forward IoD proposals are monthly Policy Voice surveys recommendations to force introduced in June the issue onto board agendas at large firms

Extensive consultation with IoD policy leads make the DIT launches new tool members highlights the case directly in meetings with to enable firms to importance of 'nuts-and- DIT ministers and officials report trade barriers bolts' trade promotion

Work with members and IoD Regional Growth Government continues teams across the UK paper advocates more focus on regional growth highlights desire for more decentralised funding and agenda, announcing new local-led policy-making decision-making 'City Deals'

IoD NI members raise fears IoD appointed to PM’s expert IoD policy input helps over post-Brexit border advisory panel on the Irish secure a Brexit deal that issues border avoids land border

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Front of 116 Pall Mall

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Development

Helping every director to progress on Future Directors Digital Academy their journey of honing their skills and The next generation will play an ever- In addition to paid-for courses, all IoD knowledge is at the heart of the IoD’s increasing role in driving better board members have access to our Digital mission. This can take many forms, performance, sustainable business Academy, on which we published a from our professional development practices, a healthier economy and fair broad range of learning content during courses, to information and advice, and equitable society. We launched our 2019, including interviews and podcasts and physical or digital events. Future Directors programme to support with inspirational leaders across the succession planning and nurture the public, third and private sectors. Courses and qualifications talent pipeline. It focuses on the skills Content is mapped to our Director 2019 was our fifth consecutive and mindset required for directorship; Competency Framework and users can year of growth in our courses and and what is required in order to make benchmark their knowledge, skills and qualifications business – with our the shift from manager to director. mindset against the 74 standards in footprint expanding across the UK the framework to support their CPD. and overseas in partnership with Continuing Professional our regions, nations and international Development Information and advisory services partners. Our mission remains the Learning doesn’t just stop when you A popular and highly-regarded service same – to champion the highest get to the boardroom. Arguably it is among IoD members is provided standards of good governance and even more vital in a position of such by our IAS team, providing a range strategic leadership through the responsibility and influence that of tools to help directors improve provision of accessible and high-quality you continue to develop and grow. themselves and their organisations, development opportunities for directors. To support our members and prospective ranging from bespoke research, members to commit to lifelong advisory sessions with experts The number of Chartered Directors learning, we launched a brand new on everything from marketing to qualifying grew slightly in 2019, with CPD programme the ‘Professional fundraising, and factsheets, to access 111 appointed in the year. In addition, Director Series’ in Autumn 2019. to legal and tax helplines. 2019 was a we saw an increase in examination In just four months, 146 directors and successful year, with 4,488 information take up for the Diploma in Company senior leaders attended 11 sessions, requests completed, 903 advisory Direction with strong pass rates all underpinned by our renowned sessions delivered and 1,350 calls demonstrating the appetite for Director Competency Framework. placed to the IoD legal helpline. our qualifications pathway.

Client case study TheBoardroom Africa

TheBoardroom Africa (TBRA) promotes In 2019 we had over 40 delegates attending exceptional female talent to boards across co-branded Certificate in Company Africa. They break down barriers to Direction programmes, which were help organizations realise the benefits delivered in South Africa and Mauritius. of increased diversity on boards by In November, we hosted a joint event accelerating the placement of female at 116 Pall Mall to showcase the female board directors and now boast a leadership talent pool across the membership of over 1,000 directors. sector as well as the value of the IoD’s The IoD and TheBoardroom Africa have qualifications. The event was hosted by been partnering to enable board-ready Baroness Verma, Chair of the UN Women women to complete the IoD Chartered UK and attended by some of the largest Director qualification since 2018, through private equity groups and developmental the “Open Doors Programme”. finance institutions across Europe.

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Development Highlights 5,000 delegates attended our programmes from 436 across the globe development programmes delivered 111 Chartered Directors appointed in 2019 90% of delegates would recommend IoD Professional Development 1,699 to a colleague Chartered Directors appointed in total and 2019 saw the highest 3,311 ever number of exams delivered applications ever received 56% of our delegates ⅓ were IoD members of programmes delivered internationally in 22 different 33% countries of the Chartered Directors appointed in 2019 were female All figures correct as of August 2020

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Connection

Bringing directors together so that they can share experiences, learn from and support each other has always been a core function of the IoD, and 2019 was no different.

The IoD worked tirelessly throughout the UK to connect our members with each other, and to recognise and celebrate the incredible talent evident in boardrooms throughout the land.

Our well-established Director of the Year Awards were held once more in all regions and nations, with the number of nominations and the quality of candidates continuing to rise year on year. The 2019 UK finals, held in London in November, showcased a diverse group of winners from all regions and nations and demonstrated the continuing raising of the bar in qualification, experience and creativity of our shortlist. The Prime Minister recorded a video for the awards, congratulating the finalists and thanking Winners of the 2019 Director of the Year Awards, with event host Sir Trevor McDonald them for their “part in helping to make this a bright and successful Britain”.

Conference and meeting activity was of a very high standard yet IoD Innovation again with an enviable list of speakers Open House on the Road at prestigious conferences from Gleneagles in Scotland, to Belfast After converting our traditional annual to London, and all points in between. convention into a more bite-size and Members and non-members used these interactive format in 2018 with the creation events to engage and debate key of Open House, we continued to innovate issues facing their businesses, and to in 2019, creating Open House on the Road, listen to cutting-edge presentations to let members across the UK participate. from opinion-leaders on key topics With 20 events across the UK, divided of the day. into the themes of Global, Connected and Inclusive Business, 1,500 members took part At a more local level, our Chairs and in half-day sessions to learn about emerging Ambassadors have held hundreds business trends, gain practical knowledge of branch meetings with speakers, and engage with their peers. A report activities, and behind-the-scenes was produced for each of the themes, access providing great insight to containing policy insights, member views, members and encouraging the sharing advice and support, taking the content to of good practice. These have been held a wider audience. on a regular basis and continue to prove very popular with branch members.

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A new way of connecting This is based on the insight of our “ Our teams across the with members members that directors not only If providing connection through carry substantial legal and financial regions and nations events, conferences and awards responsibilities, but that it can also have rapidly upskilled was a continuation of what the IoD be lonely and overwhelming at times. has always offered, what was different Directors need specific knowledge, in organising virtual about 2019 was the way in which our but they also need the fellowship of events.” network of director volunteers were their peers, and the chance to be engaged to use their vast stores of part of a collective voice. collective experience and knowledge to shape the future of the IoD. The work that began last year has taken material form in 2020 with Putting members at the heart of the ongoing reshaping of the IoD’s decision-making has long been an structure, putting our branches ambition of the IoD’s, but 2019 was at the forefront and devolving the year that it really began in earnest. responsibility to communicate This work will be crucial to arrest with members, provide learning and reverse the long-term trend in and connection opportunities and membership, which fell to 26,442 local influence. We are closer than in 2019. we have ever been to becoming a truly member-led institute. Beginning with a small group of regional chairs, working closely with management, the IoD embarked on a process on returning to the fundamentals of the Royal Charter and crafting an updated value proposition, essential work if the IoD is to endure and be able to continue to pursue its mission.

Building on a belief that better directors build a better world, and that the IoD has an essential role to play in helping all directors to be better, volunteers, staff and board have come together on the three pillars of Connect, Develop and Influence is the essence of the value we can offer to directors.

Director of the Year Award Finals | Image credit: Peter Nutkins photography

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People and Culture

The IoD’s team worked incredibly Employee engagement Workforce statistics hard in 2019 to achieve the financial and recognition surplus. A number of voluntary During 2019, we developed and redundancies had been made at the implemented a number of initiatives end of 2018, making the performance to enhance staff engagement. of staff even more notable. The number of unique employees Working with our staff we identified (full time equivalent) was 1471 In 2019, a number of actions were and implemented our new performance taken aimed at developing our people management process, Continuous and supporting individual opportunity Conversations, aimed at ensuring Gender composition of our employees, for growth and development. two-way communication between across our organisation1: staff and the business

The Employee Voice group was 85 Values active throughout 2019 as a key Female conduit for staff. employees To give staff a central role (58%) in establishing the values We continued our staff survey cycle, they believed the IoD and with 4 surveys held throughout the its people should live up to, year alongside our peer-to-peer in 2019 we ran an extensive recognition system, allowing colleagues 62 consultation with staff. to celebrate the great work they see Male The resulting ‘Pillars of from other staff. In 2019 we continued employees Success’ are designed and with the ‘Above & Beyond Award’, (42%) owned by staff, and are our quarterly recognition of employees the reference point for – nominated by colleagues – for their everything from recruitment exceptional efforts and achievements 33% to performance management, awarded at our quarterly All Staff Management 2 reward, recognition and Meetings. 6 individuals and 2 teams Team 4 67% development. of staff received an award.

The Pillars of Success are: We also implemented an employee Heads 3 25% of benefits portal that has enabled us Department 9 75% • Accountability to bring together our benefits in one • Adaptability easy to use online portal. • Collaboration Female: | Male: During 2019 we enabled a number of • Leadership staff to become Mental Health First NOTE • Respect Aiders (MHFA). Each of our MHFAs gained a professional qualification and 1. As at August 2020 • Transparency we have started to roll out a number of initiatives across the business to help people identify their own mental health needs and also to provide a safe and confidential space for staff to discuss their issues.

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Policy team presenting at local member event | Image credit: Peter Nutkins photography

Learning and development “ Designed and owned Ethnic origin1 Through our online platform we were able to offer to staff over 500 by staff, our ‘Pillars development courses covering a wide of Success’ are the range of subjects and skills. 100% of our staff undertook online training reference point for in 2019, whether for job-related what we do and how development or personal skills growth. Individual coaching, mentoring, we do it” team building, skills development and professional training continue to be developed. White British (86) | 58.0% A number of our people are currently White Other (23) | 14.8% engaged in development opportunities White Irish (7) | 4.3% leading to professional qualifications Asian Other (6) | 3.7% including CIPD, ACCA, MBA and, of course, our own Certificate and Black African (6) | 3.7% Diploma leading to Chartered IoD Black Caribbean (5) | 3.7% status. We continue to support Indian (5) | 3.1% our staff in gaining professional Chinese (4) | 2.5% qualifications in their chosen field. White Asian (3) | 1.9% Bangladesh (2) | 1.9%

NOTE

1. As at August 2020

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Gender pay gap analysis Collected gender pay gap data for 5th April 2018 and 5th April 2019 As an employer with fewer than 250 employees, the IoD does not fall within 5th April 5th April the scope of legislation on gender 2018 2019 pay reporting, but publishes the information below in the interests Mean Gender Pay Gap (hourly pay relevant employees) 28% 11.6% of transparency. Median Gender Pay Gap (hourly pay relevant employees) 24% 20.3% The data below is based on the ‘snapshot’ dates of 5th April in 2018 Proportion of males receiving a bonus payment 14.3% 21.7% and 2019, but it is worth noting Proportion of females receiving a bonus payment 2.6% 3% the IoD’s workforce has changed substantially since, and this does not Mean bonus gender pay gap 61% 87% represent the current position. Median bonus gender pay gap 63% 21% The mean gender pay gap fell between 2018 and 2019 from 28% to 12%, with the median pay gap falling slightly from 24% to 20%. Proportion of males and females in each pay quartile (lower quartile, lower middle In relatively small organisations, quartile, upper middle quartile and upper quartile) the averages can be shifted significantly by a small number of roles, and one Quartile Gender Numbers Percentage relevant factor between the two dates was the departure of the (male) 2018 2019 2018 2019 Director General. At the point the 2019 Lower F 39 30 75% 73% snapshot was taken, the IoD had two interim Directors General, one male M 13 11 25% 27% and one female. Lower Total 52 41 25% There is a larger difference when it comes to bonuses, with 22% of male Lower Middle F 32 25 61.5% 62.5% employees receiving a bonus in 2019, M 20 15 38.5% 37.5% against 3% of female employees. There are more female than male Lower Middle Total 52 40 25% employees overall, and we have a higher percentage of male employees Upper Middle F 23 20 44% 48.8% in our sales teams which operate with M 29 21 56% 51.2% variable pay. As mentioned in the Development section above, sales of Upper Middle Total 52 41 25% our PD courses and qualifications grew in 2019. Outside of the commission- Upper F 21 18 41% 45% based departments, we operate an M 30 22 59% 55% IoD bonus scheme based on the achievement of surplus targets set Upper Total 51 40 25% by the Board. Despite achieving a financial surplus, the large majority of Grand Total 207 162 100% IoD employees did not receive a bonus in 2019 as this did not trigger a pay-out under the specific rules of the scheme.

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Ethnicity pay gap analysis Collected ethnicity pay gap data for 5th April 2018 and 5th April 2019 As with the gender pay figures, the numbers below relate to the snapshot 5th April th date of 5 April 2019 and should not be 2019 taken as reflective of the current position. Mean Ethnicity Pay Gap (hourly pay relevant employees) 17.5% According to the latest census (2011), 86% of residents of England and Wales Median Gender Pay Gap (hourly pay relevant employees) 3.8% were white. The IoD’s proportion of employees from other ethnic groups Proportion of white British/Irish employees receiving a 7.8% is higher than the overall proportion. bonus payment This may in part be reflective of the Proportion of other ethnic group employees receiving a 22.6% fact that the IoD’s main location for bonus payment staff is in London.

Mean bonus ethnicity pay gap 44.4% The IoD has a mean pay gap of 17.5% between white employees and Median bonus ethnicity pay gap 47.2% employees of other ethnicities, and a median pay gap of 3.8%. The figures, and the difference between the two averages, are reflective of the higher Proportion of White British/Irish and Other ethnic groups in each pay quartile proportion of white employees in (lower quartile, lower middle quartile, upper middle quartile and upper quartile) the upper quartile of employees. 2019 Quartile Ethnicity % As this is the first year of reporting on this basis, we do not have previous Lower White British / Irish 53.7% figures against which to compare Other 46.3% them. Finding comparators is also difficult. Few large companies report, Lower Middle White British / Irish 71.4% two of those who do are Barclays, Other 28.6% who reported a median gap of 7.6% and mean gap of 1.5% in 2019, and ITV, Upper Middle White British / Irish 53.7% who reported a median gap of 5.8% and a mean gap of 6.5%. Other 46.3%

Focus for coming year Upper White British / Irish 70.7% We recognise that there is still much Other 29.3% to do to ensure we are doing all we can to support and promote inclusion and diversity across our organisation and membership. We continue to • The development of a simple, • Ensuring all of our policies and work closely with all stakeholders to fair and transparent pay system procedures encourage inclusive ways improve representation at all levels in which pay is determined with of working and our managers and and address any gaps. reference to a job evaluation system leaders are equipped and empowered based on non-discriminatory factors to own and drive inclusion. In 2020 and beyond, we will continue and independent market testing. our activity and are committed to • Developing our staff to ensure making progress through a number • Continuing to improve our talent everyone receives regular diversity of interventions and actions including: acquisition and development and inclusion training. processes to ensure we are • Working groups tasked with attracting, developing and recruiting looking at specific actions we will from a wider pool and attracting take to promote more diversity , diverse talent. All our recruiting particularly BAME representation, managers will receive inclusive- in our membership, events, staff and recruitment training. across our network of volunteers.

www.iod.com 19 Our Governance Structure | Annual Report and Accounts 2019

Our Governance Structure

The Board Approves strategy and leads the IoD to achieve long-term success

Non-Executive Chair Non–Executive Directors Director General and Executive Directors • Leads the Board and ensures it • Work with and challenge operates effectively executive directors • Day-to-day management of the • Maintains a culture of openness • Provide independent, external business and implementation and debate perspective of strategy • Ensures effective dialogue • Contribute a broad range of between the Board and members experience and expertise

Committees of the Board and Council

Nomination committee • Leads process for Board and Council appointments • Ensures the completion of an annual review of the performance of governance bodies with focus on the structure, size and composition of the Board and Council • Ensuring that the Board and Council has a reasonable geographical distribution of members and a balance of diversity, sector and background

Committee of the Board

Audit and Risk Remuneration Membership Committee Accreditation and Committee Committee Standards Committee • Advises on membership, • Oversees financial • Advises on the member services • Approves standards/ reporting, internal compensation and provided by the IoD competencies required control, risk terms of employment and membership by directors and boards management systems for senior members conduct matters and the methods for and audit processes of staff and executive assessing directors directors • Responsible for independent assurance of Chartered Director programme • Ensures all current activity reflected in the academic regulations

Executive Committee

Is responsible for the ongoing management of the • Responsible for the development and Institute. It considers day-to-day operational matters implementation of the strategy for running the business and reviews performance • The development and delivery of business plans of the Institute and in line with the strategic plan. and budgets The Executive Committee generally meets on a • Approval of procedures and policies monthly basis and is chaired by the Director General. • The monitoring of operating and financial performance The Director General then reports to the Board. • Health and safety management

20 www.iod.com Annual Report and Accounts 2019 | Our Governance Structure

Summary The Council Guardian of the Our governance structure is an We are immensely proud of the constitution to make integral part of the way the Institute diversity and depth of experience sure that the Chartered of Directors delivers its Royal Charter contained in our Board and Council, obligations and its strategy, supporting which are responsible for the Institute’s Objects are being effective decision-making and enabling strategic direction and sustainability. delivered the right people to have access to the right information at the right time. Council • Appoints and removes the IoD non-executives The Council 1 The Board1 and determines their independence • Critiques and provides opinion to the Board on the overall progress of the IoD • Holds the Board to account • Monitors the Board’s engagement with membership and stakeholders Female | 38% Female | 29% • Appoints and removes the senior independent Male | 62% Male | 71% council member NOTE

1. As at August 2020

www.iod.com 21 Governance of the Institute of Directors | Annual Report and Accounts 2019

Governance of the Institute

The Institute of Directors As a chartered organisation, initial • The Council also appoints Board was established in control of the Institute is vested in members, via the recommendations the members and the Institute is of the Nomination Committee 1903 and became a fundamentally controlled by the (the joint committee of the Board body corporate under Privy Council and in turn the Queen and Council). Council members in Council. The Institute does not have appointments are approved Royal Charter in 1906. owners and it is not subject to the by members at the Annual The IoD’s constitution normal laws and regulations relating to General Meeting. the operation of registered companies. comprises the charter, The Institute, however, is accountable • The Board is responsible for the by-laws and regulations. to the public as well as its members overall leadership of the Institute and must therefore meet the public and for holding the executive to The Institute’s principal interest test in pursuit of its objects. account. The Board approves office is at 116 Pall Mall, the strategy and is responsible The IoD is committed to a high standard for setting the Institute’s values, London, SW1Y 5ED. of governance and adopts best practice standards, aims and objectives and The Board is responsible recommendations as a guide to its own for delivering them in line with the governance. Our governance structure Charter Objects. The Board has a for all of the affairs of shapes the way that information number of sub-committees which the Institute and the flows throughout the Institute and we support its decision making across constantly strive to improve our own the Institute. The sub-committees Council is the forum in governance procedures and processes. of the Board are: the Audit and which the Board is held The relationship between the Board, Risk Committee, Remuneration Council and committees as defined Committee, Membership Committee directly accountable to in the Institute’s constitution are: and the Accreditation and Standards the charter. Committee. There is also an • The Queen in Council and Privy established geographic network, Council granted the Institute its which reports to Board via the Royal Charter and by-laws. Regional Chairs.

• The membership approve any changes to the Royal Charter prior to submission to the Queen in Council and Privy Council who approve any changes to the charter and by-laws.

• The Council is the guardian of the constitution and considers any changes to the constitution before they are considered by membership.

22 www.iod.com Annual Report and Accounts 2019 | Governance of the Institute of Directors

IoD Council

The Chair of Council (and Senior Council’s ability to focus on and deliver Independent Council “SICM”) is its constitutional purpose has been Jean Church, MBE who was elected enhanced during the past year through in October 2019 following the the restructuring of agendas and departure of Dame Joan Stringer improving the relevance of paperwork earlier in the year. and contextual information, plus a means of reporting back thus closing Role of Council loops on previous discussions. The Institute’s Council acts in an oversight and advisory capacity as The conduct of meetings has been guardian of the Institute, representing further improved so as to engender the interests of its members and a much more open and transparent Ceinwen Jean Church MBE holding its Board to account for the dialogue between the Board and delivery of the objects of the Institute Council, or their representatives either Chair of Council and SICM contained in its Royal Charter. at, or between, meetings where issues are raised and addressed constructively. Council provides critique and opinion In this regard, a better interaction to the Board on the overall progress with the Board around strategic of the Institute, including monitoring priorities, with particular emphasis engagement with stakeholders. on the membership proposition and Council members engage and engagement, has been essential. communicate with the Institute’s Council is not simply a receiver of members and ensure that their information but also has the ability to views and interests are properly comment, inform and, if appropriate, represented and considered by the influence on behalf of the membership, Institute as appropriate. strategic choices. Council has a reserved section on the Agenda for “items to In exercising its powers the Council is be recommended for consideration bound by the Institute’s Royal Charter, by the Board”, these items then being By-Laws and Member Rules and presented back to the Board. Regulations. At least one Council meeting is held on Council meetings the same day as the Board during the Three to four Council meetings are year, and opportunities are provided scheduled throughout the year and for Board and Council to interact Council members are required to socially outside of the meeting room. ensure that they allocate sufficient time To further facilitate the Council’s ability to discharge their duties effectively. to inform, advise and communicate Council has met more frequently during with the Board an annual ‘Strategy Day’ the past few months due to challenges between the two bodies is scheduled, imposed on the business with the the first of which took place in Covid-19 outbreak. Council meetings June 2019. take place on different dates to Board meetings. Therefore, Board members, The Council agenda is set by the including the Institute Chair, are invited SICM, in conjunction with the Institute to provide updates or discuss specific Secretary. Each scheduled meeting matters at Council meetings. includes a Chair of the Institute Report, Director General Report, Financial Council has adopted a number of Report and various updates on the mechanisms in order to enable them activities considered by the Board to discharge their responsibility in together with governance matters. holding the Board to account.

www.iod.com 23 Governance of the Institute of Directors | Annual Report and Accounts 2019

During 2019 particular areas considered Council has also received detailed Elected Council Members by the Council, and discussed with updates on the progress of the Board’s Board members, either directly or Strategy to stabilise and to transform Members following receipt of reports from the fortunes of the Institute through a > Ellen Miller Senior Management and Committee revised membership proposition and > Sarah Soar Chairs, included: decentralising operations. > David Trenchard

• Financial performance of the Institute As a Council it is intended that Member Departures ongoing work to review the timely > Dame Joan Stringer (June 2019) • Strategy update exchange of communication between the Board and the Council together • Member Value Proposition with planning strategic discussion days International Appointed and Value Proposition will further strengthen the relationship Representative with, and oversight of, the Board. • Change Programme > Rick Denton (Decentralisation/Communities Model) Composition of the Council 1 Under 25 Directly Appointed • International strategy Representative

• Professional Development > Vacant

Care is taken to ensure that information is circulated in good time before Regional Council Members Council meetings, and that papers are presented clearly and with the Chair of Council and SICM appropriate level of detail to enable > Ceinwen Jean Church MBE the Council to discharge its duties. Members The more recent months have been > Brian Hall Elected Council Members | 50% particularly challenging for the > Roger Marsh OBE Regional Council Members | 50% Institute due to the Covid-19 outbreak. > Aidan O’Carroll There has been a lot of change > David Sales particularly introduced through the NOTE > Emma Sheldon MBE work on the revised membership 1. As at August 2020 > Garry Smith proposition and decentralisation. > Nick Sturge Having seen a positive turnaround > Paul Terrington of the financial position at the end of the financial year we are New Members currently considering the effect > Mike Blackburn (July 2019) on the Institute’s revenue due to > David Langworth (July 2019) the current crises. Council receives > Mehrdad Mansourpour (July 2019) frequent updates on the financial > Marie McHugh (July 2019) position and strategic direction of > Sharon O’Connor (July 2019) the Institute and, whilst remaining > Kim Adele Platts (July 2019) seriously concerned about the financial > Alex Pratt (July 2019) health of the Institute, has welcomed > Annneliese Reinhold (July 2019) the reassurances from the Board > Graham Robb (July 2019) that progress is being made in these areas, in particular the monitoring and Member Departures control of the costs of the Institute. > Garry Smith (April 2020)

24 www.iod.com Annual Report and Accounts 2019 | Governance of the Institute of Directors

IoD Board

The Board’s responsibility for leading Division of responsibilities Board Non-Executives the Institute and overseeing the There is a clear written division of governance of the organisation responsibilities between the Interim Interim Chair continues to be supported by a Chair (who is responsible for the > John Watson robust structure which allows for leadership and effectiveness of the constructive debate and challenge Board) and the Director General Senior Independent Director by its members. This approach (who is responsible for managing the > Alexander Simpson enables the Directors to make Institute’s business). The Board has effective decisions, at the right time delegated authority for the day-to-day Members and based on the right information. management of the business to the > Deborah Davis Director General, with specific areas > Dr Suzy Walton Leadership of the business being managed by the As at 31st of August 2020 the Board other members of the Management New Members comprises the Interim Chair, five Team. The Management Team members > Femi Bamisaiye (February 2019) other independent Non-Executive are involved in, or aware of, all major > Amaechi Nsofor (February 2019) Directors and one Executive Director. activities and are therefore extremely The Institute’s rigorous and transparent well placed to ensure that any decisions Member Departures procedures for appointing new Directors align with the Institute’s agreed strategy. > Kirsty Lloyd-Jukes (March 2020) are led by the Nomination Committee. > Charlotte Valeur (August 2020) The composition of the Board is Board meetings fundamental to its success in providing The Board agenda is set by the Interim strong and effective leadership. Chair, in conjunction with the Director Board Executive Directors Non-Executive Directors are appointed General and Institute Secretary. for specified terms, usually of three Each scheduled meeting includes New Members years with an option to stand for a a Director General Report delivered > Jonathan Geldart (November 2019) reappointment for a second term of by the Director General and a Finance three years. The Nomination Committee Report as well as regular updates Member Departures is responsible for reviewing the on the activities of various standing > Stephen Martin (January 2019) composition of the Board and assessing Committees. Discussions also take > Louise Gulliver (May 2019) whether the balance of skills, experience, place on strategic proposals, legal > Edwin Morgan (October 2019) knowledge and diversity is appropriate and governance matters. > Anna Daroy (November 2019) to enable them to operate effectively. > Jim Jordan (July 2020) Conflicts of interest Role of the Board The Directors are required to avoid The Board has reserved key decisions a situation in which he or she has, and matters for its own approval, or can have, a direct or indirect including its core responsibilities of conflict with the interests of the setting the Institute’s strategic direction, Institute. The Institute has established overseeing the delivery of the agreed a procedure whereby the Directors strategy, managing risk and establishing are required to notify the Interim the culture, values and standards of Chair and the Institute Secretary of the Institute as a whole. Matters below all new outside interests and actual the financial limit set by the Board are or perceived conflicts of interest delegated to the Management Team. that may affect them in their roles The Board culture is one of openness as Directors of the IoD. and constructive debate; the Interim Chair has a continued dialogue with individual Directors outside formal Board meetings to allow for open, two- way discussion about the effectiveness of the Board, its Committees and its members. The Interim Chair is therefore able to remain mindful of the views of the individual Directors.

www.iod.com 25 Governance of the Institute of Directors | Annual Report and Accounts 2019

Nomination Committee

Role and responsibilities Board and Council membership Diversity The Committee ensures integrity in The Committee regularly reviews the The Committee, the Board and all IoD office holder appointments structure, size and composition of the Council continue to pay full regard by setting the overall appointment Board and Council in order to ensure to the benefits of diversity, including principles and processes, carrying it is made up of the right people with gender diversity, both when searching out Board, Director General and the requisite skills and experience, for candidates for Board and Council Council appointment processes and including diversity of thought and appointments and when the Institute by ensuring ongoing succession approach, who can provide strong and is searching for candidates for other planning. The Committee is a joint effective leadership to the business appointments. The Institute currently Committee of the Board and Council. and support delivery of the Institutes’ has eight female Council members. strategy and Charter Objects. This represents 36% female Council The Committee’s principal membership as at August 2020 responsibilities remain: Succession planning (2018: 37%). The Committee is responsible for • To approve the appointment reviewing the succession plans for the principles for all IoD office holders Board and Council. The succession and the processes by which the plans for the Executive Directors are principles will be delivered prepared on immediate, medium and long term basis while those for • To ensure that the appointment Non-Executive Directors and Council of all Board and Council members Members reflect the need to regularly delivers a balance of skills, refresh the Board and Council. Such knowledge, experience, plans take account of the tenure of diversity and a geographical individual members. The Director spread of members General, with the support of the Director People and Culture, is responsible • To annually review the effectiveness for developing succession plans for of governance across the Institute executives and senior management. and to make recommendations in regard to the structure, size and composition of the Board and Council (effectiveness reviews are carried out by Board and Council separately)

26 www.iod.com Annual Report and Accounts 2019 | Governance of the Institute of Directors

Appointment process for Focus for coming year Chair Board Directors Having overseen changes to > Ceinwen Jean Church MBE In the past year, the Committee membership of the Board over the undertook a process to identify, last 12 months, the Committee is now Members select and make recommendations focusing its attention for the coming > Brian Hall to the Board and Council in relation months on undertaking a structured > Sarah Soar to the appointment of a new review of the succession plans for > Nick Sturge Director General of the Institute. Council and conducting a recruitment > Dr Suzy Walton process for a new Chair of the Institute > John Watson This process is set out below: as well as two Non-Executive Directors. Member Departures > Dame Joan Stringer (June 2019) > Kirsty Lloyd-Jukes (March 2020) > Charlotte Valeur (August 2020) Search process 1 Under the direction of the Committee, Odgers Berndtson, external search consultancy, was engaged to facilitate the search process.

Review 2 Details of preferred candidates were presented to, and considered by the Committee. Shortlisted candidates were invited to interview by the Committee and Board and Council members as appropriate.

Recruitment 3 The Committee considered the feedback from interviews and made recommendations to the Board and Council as to the appointment of Jonathan Geldart as Director General of the Institute. The appointment was formally announced following approval by the Council.

www.iod.com 27 Governance of the Institute of Directors | Annual Report and Accounts 2019

Sub-committees of the Board

Audit and Risk Committee (ARC) Role and Responsibilities The Audit and Risk Committee (ARC) continues to play a key role in overseeing the integrity of the Institute’s financial statements Financial Reporting – Monitoring the integrity of the Institute’s financial including the Annual Report and statements and considering significant financial reporting issues, Accounts as well as ensuring that a judgements and estimates. sound system of internal control and External Audit - Oversight and remuneration of the external auditor, risk management is in place. assessing effectiveness and making recommendations to the Board on the appointment of the external auditor. John Watson is the Chair of ARC, the Committee continues to be composed Internal Audit and Controls – Monitoring and reviewing the adequacy mainly of independent Non-Executive and effectiveness of the internal financial controls and risk management Directors and Council members and approving the statements to be included in the annual report with sufficient financial experience, concerning internal control and risk management commercial acumen and sector knowledge to fulfil their responsibilities. Risk Management - Reviewing the system of internal control and risk management Members of the senior management team, including the Chief Financial Officer, Institute Secretary, and representatives of the external auditors External Audit Following the review the Committee continued to attend Committee The Committee is responsible for recommended the outsourcing of the meetings. In addition the Director overseeing the relationship with the finance function. A tender process was General and other key employees are external auditor and for considering their initiated in Q2 selecting Equiom Group invited to attend part, or all, of specific terms of engagement, remuneration, as a preferred partner. The outsourcing Committee meetings. The Committee effectiveness, independence and was completed in August 2020, meets privately with external auditors continued objectivity. The Committee with the CFO exiting the organisation and continues to be satisfied that annually reviews the audit requirements on completion. neither is being unduly influenced of the Institute, for the business and in by management. The Committee the context of the external environment, The Committee is overseeing the Chair additionally holds regular placing great importance on ensuring progress on the work of the Management meetings with the Director General, a high quality, effective External Team on the recommendations for Chief Financial Officer and other Audit process. the strengthening of the control members of management to obtain environment and improvement of a good understanding of key issues Risk management and the reporting for branches. affecting the Institute and is thereby Internal Control able to identify those matters which In 2019 The Committee continued The Committee has made require meaningful discussion at its focus on Risk Management and recommendations on cash flow Committee meetings. Internal Control. In February 2020 forecasting which has been further the external review of internal audit strengthened during the COVID and controls was concluded and the lock down and the development of recommendations were presented to stress testing scenarios with included the Committee. The review ensured assumptions of timings of temporary that an independent and objective and permanent cost savings. The cash assurance advice was provided, flow forecasts, including a detailed 90 designed to recommend where needed day look forward and monthly forecast improvements of the effectiveness have been circulated for review on of the governance, risk management a weekly basis by the Board since and internal controls framework in approximately March 2020. mitigating the key risks of the Institute.

28 www.iod.com Annual Report and Accounts 2019 | Governance of the Institute of Directors

The Board has delegated responsibility Audit and Risk Focus for the coming year for overseeing the effectiveness of the In 2020, the Committee will continue Institute’s risk management and internal Chair to focus on the design of remuneration control systems to the Committee. > John Watson policies, structures and schemes which During the past year the risk register incorporate suitable links between has been reviewed and a new method Members remuneration and strategy and risk framework was delivered in > Aidan O’Carroll order to ensure a more comprehensive > Amaechi Nsofor approach to risk is taken across the > Ellen Miller Remuneration Committee organisation in a consistent manner > David Trenchard of risk identification and assessment. > Dr Suzy Walton Chair A specific method suitable for small > Deborah Davis and medium sized businesses and Member Departures specifically relevant to Not-for-Profit > Andrew Rinker (July 2019) Members organisations was considered as the > Femi Bamisaiye most appropriate for the IoD. > Dr Suzy Walton Remuneration Committee There are risks created from the Member Departures automated interfacing of the (2016) The Remuneration Committee has > Kirsty Lloyd-Jukes (March 2020) installation of the CRM systems to delegated responsibility for designing > Charlotte Valeur (August 2020) financial ledgers. These risks include and determining remuneration completeness, accuracy and existence for the Director General, Executive of financial postings. To compensate, Directors and the next level of the ARC has requested extra substantive senior management. testing be undertaken during the external audit process and a long term plan During the past year the Committee developed to eliminate this specific risk. continued to be chaired by Deborah Davis. The Committee has commenced The Institute’s whistleblowing a full review of the Institute’s arrangements, which enable all staff, remuneration and incentives policy. including temporary and agency staff, The review includes matters such as to report any suspected wrongdoing, any pay principles applied across the remained unchanged during the organisation, base pay, benefits, and all year. These arrangements, which are incentives and aspects of financial and monitored by the HR Director and non-financial reward. The outcome of General Counsel, include an independent the review is due to be considered by and confidential whistleblowing service the Committee in November this year. provided by a third party. The Remuneration Committee reviews During the rest of the year in 2020, employee remuneration and related the Committee will continue to focus policies. The purpose of this review on the processes by which the Board is to ensure the reward, incentives and identifies, assesses, monitors, manages conditions available to the Institute’s and mitigates risk particularly in light employees are taken into account of the current financial position of the when deciding the pay of executive Institute due to the Covid-19 outbreak directors and senior management. and uncertainty arising from the UK’s This enables the Remuneration decision to leave the EU as well as Committee to feedback to the Board a continued membership decline. on employee reward, incentives and The Committee will also continue to conditions, and support the latter’s monitor key risk areas for the business, monitoring of whether the Institute’s particularly, but not limited to General policies and practices support Data Privacy Regulation compliance, culture and strategy. cyber security and Health and Safety.

www.iod.com 29 Governance of the Institute of Directors | Annual Report and Accounts 2019

Accreditation and Standards Accreditation and Standards Membership Committee Committee (ASC) Chair Recent changes in the leadership The Accreditation and Standards > Dr Suzy Walton of IoD membership, and a more Committee is chaired by Dr Suzy integrated approach to professional Walton (non-executive director) Members development and membership, and members of the committee are > Giorgio Bendoni has presented a good opportunity appointed by the board. The ASC > Suzy Brain England OBE to review the structure of the sets the educational competencies > James Gambrell Membership Committee, to ensure and standards for directors and > Carmel McKinney it continues to deliver value to boards, oversees the standards for > Robert Smith members and the IoD executive alike. external accreditation providers and > John Warden The Committee is due to reconvene maintains and protects the integrity with a refreshed membership in of the professional standards for due course. candidates for the principal professional assessments conducted by and under the auspices of the Institute. The ASC Institute Secretary met two times during 2019. The Institute Secretary ensures the highest standards of governance and The ASC oversees the work of the compliance with legal requirements and Assessment Committee, ultimately best practice. This includes providing responsible for the overall quality support and advice to all Board, Council assurance of the examinations and and Committee members and acting assessments and supporting processes. as the conduit for all communication and engagement with them. The Committee’s main responsibilities remain: The role contributes to achieving the aims of the IoD by advising on and • To approve the competency ensuring compliance with the laws and framework, accredited learning good governance practices relating to outcomes and assessment criteria. the workings of the organisation, and with the IoD’s Constitution. • To approve code of conduct and CPD requirements for professional competency of Chartered Directors. Institute Secretary

• To ensure the safeguarding of the > Kristina Lewis IoD’s powers to award by adherence to the accreditation principles and our Policies and Procedures and to escalate any issue to Board for resolution where integrity is not being maintained.

30 www.iod.com Annual Report and Accounts 2019 | Statement of Board Responsibilities

Statement of Board Responsibilities

As a body corporate In preparing the financial statements, Each Board member confirms that: established by Royal the Board is required to: • so far as they are aware, there is no Charter, the Institute • select suitable accounting policies relevant audit information of which is obliged to comply and apply them consistently the Institute’s auditor is unaware with its constitution • make informed judgments and • they have taken all necessary steps (comprising charter, estimates that are reasonable to ensure that they are aware of and prudent any relevant audit information by-laws and regulations). and to establish that the Institute’s The constitution requires • state whether applicable United auditor is aware of the information Kingdom accounting standards that the Board lays have been followed, subject to The Board is responsible for the before the members, any material departures disclosed maintenance and integrity of the and explained in the financial financial information included on in a general meeting, statements the Institute’s website. Practice in financial statements for the United Kingdom governing the • prepare the financial statements on preparation and dissemination of the year which give a true the going concern basis unless it is financial statements may differ from and fair view of the state inappropriate to presume that the practice in other jurisdictions. institute will continue in operation of affairs of the Institute. The financial statements The Board is responsible for keeping adequate accounting records that must include the surplus disclose with reasonable accuracy at or deficit of the Institute any time the financial position of the Institute. The Board is also responsible for that period. The Board for safeguarding the assets of the is also required to approve Institute and taking reasonable steps to ensure the prevention and the financial statements detection of fraud and any other only if they are satisfied irregularities. that they give a true and fair view of the state of affairs of the Institute and of the surplus or deficit for that period.

www.iod.com 31 Financial Review | Annual Report and Accounts 2019

Financial Review

Overall Results Income Expenditure

This year delivered a very pleasing Membership Income Total expenditure of £26,561k was result given the prior year’s Membership income has continued £4,127k lower than the prior year, performance, producing a surplus of to fall, with a reduction of £714k to and is analysed across Membership, £752k, a turnaround on prior year of £9,536k in 2019 (down 7%); The 2018 Revenue Earning Activities, Member nearly £5m. Revenue for the year was reduction was 9%. The reduction Services, Operating and Overhead up nearly 3% (£786k), however, during in income in 2019 was due to a fall Costs and Representation and the period the Institute received £747k in overall membership numbers by Directorate, as shown in Analysis of grant income from the Department about 8.7%, though we continued to of Operating Surplus by Activities. for Business, Energy & Industrial witness growth during the same period Strategy (‘BEIS’) Business Readiness within our IoD Advance membership Employment Costs Fund to deliver various activities to proposition. Our core membership Employment costs are by far the both members and non-members for offering continued to decline through biggest costs incurred by the IoD. the purpose of giving them advice 2019, with overall numbers down In 2019, employment costs decreased around navigating Brexit; so like for about 9% (2018: decrease 12%). by £2,693k (23%) to £9,238k. like revenue was flat. Total costs have fallen by nearly 13% (£4.1m), and it is Membership contribution decreased by Direct and Indirect Costs the reduction in costs that delivered £339k to £8,001k in 2019 (down 4%), There was a decrease in direct and the surplus in the period. as shown in the Analysis of Operating indirect costs in the year as they fell Surplus by Activities disclosure note £1,310k (9%) to £13,167k. The main At 31st December 2019 the Institute's to the financial statements (note 2). increase was approximately £689k accumulated funds stood at £4,973k in the delivery of the Brexit readiness compared with £4,221k a year earlier, Revenue Earning Activities work funded through the BEIS grant an increase of £752k which reflects Income from revenue earning activities income. Costs fell across Membership the surplus for the year. increased by £1,705k (12%) to £16,243k by £375k (20%), Professional (Director) with sales increases of over £100k Development services, where we have At the end of 2019, the balance of in Hospitality, Professional (Director) also seen an uplift in income alongside cash and cash equivalents, including Development, Director Events, and sales a reduction in costs by £695k (15%), those held as investments, increased decreases of over £100k in Director £481k (53%) in Director Events that by £496k to £7,948k. Further details Publications and Business Centre. was primarily related to the cost of cash movements during the year Professional (Director) Development associated with running the Open can be found in the Consolidated remained as the area with the highest House event in 2018, £385k (11.1%) Statement of Cash Flows. sales at £8,873k which was 9% up on in Regional Services, £258k (75%) in the prior year (2018: 12%). In the last Member Benefits following the removal two years revenue from Professional of our airport lounges agreements, (Director) Development training has £852k (20%) in IT, iod.com, Marketing increased by 23%. and New Initiatives relating to savings in our marketing spend following a large increase in the prior year, and £966k (22%) in Central Administration relating to decreased employment and recruitment costs incurred during the year.

32 www.iod.com Annual Report and Accounts 2019 | Financial Review

Within indirect costs, during 2019 For all trade creditors, it is the After reviewing the information there was £900k of spend across Institute’s policy to agree terms of available, the Board considers that transformation programmes. payment with suppliers, at the start the Institute has adequate resources The programmes worked on have of business, and to ensure that they to continue in operational existence resulted in a reduction in headcount are paid in accordance with the and, in particular, that there are no of 22%, with salary savings in the agreed contractual and other legal material uncertainties casting doubt period of £2.3m. In addition, a more obligations. The trade creditors over the Institute's ability to continue seamless and faster online joining balance at 31st December 2019 operating for at least a twelve month and renewal process for members has represented an average payment period following the approval of this been created, alongside a continuing period of approximately 35 days report and accounts. (Further details shift towards a new membership (2018: 30), based on the ratio of are provided within the accounting proposition, underpinned by a the Institute’s trade creditors to the policies which accompany the financial ‘Member First’ philosophy. amounts invoiced during the year. statements). For this reason, the going concern basis continues to be adopted The work that was undertaken through Donations in preparing the financial statements. the transformation programmes, has There were charitable donations made helped to reduce both employment during the year of £3,600 (2018: £500). and direct and indirect costs, helping the organisation to deliver the 2019 also saw no political donations turnaround and a surplus of £752k. (2018: £nil).

Property Expenditure Going Concern Ongoing property expenditure was In considering whether or not the £110k higher in 2019, at £2,812k, primarily Institute should prepare the financial due to an increase in business rates. statements on a going concern basis, the Board has examined all available Capital Expenditure information, including the effects of Capital expenditure of £523k was the 2020 outbreak of Covid-19 on incurred during the year which the Institute’s operations. The Board was £62k higher than in 2018. has reviewed the latest financial information available, as well as Creditor Payment Policy the trading and cash flow forecasts The Institute was one of the founding (that have been stress tested); members of the Prompt Payment including the assumptions that Code and is a supporter and signatory underpin these. In addition, the Board of the scheme: has also considered the longer term www.promptpaymentcode.org.uk plans of the Institute.

www.iod.com 33 Independent Auditor’s Report | Annual Report and Accounts 2019

Independent Auditor’s Report

Opinion Basis for opinion • the Board has not disclosed in the We have audited the non-statutory We conducted our audit in accordance financial statements any identified consolidated financial statements with International Standards on Auditing material uncertainties that may cast (“the financial statements”) of the (UK) (ISAs (UK)) and applicable significant doubt about the Institute’s Institute of Directors (“the Institute”) law. Our responsibilities under those ability to continue to adopt the going for the year ended 31st December 2019, standards are further described in the concern basis of accounting for a which comprise the consolidated Auditor’s responsibilities for the audit period of at least twelve months statement of income and retained of the financial statements section of from the date when the financial earnings, the consolidated balance our report. We are independent of the statements are authorised for issue. sheet, consolidated statement of Institute in accordance with the ethical cash flows, and the related notes to requirements that are relevant to our Other information the financial statements, including a audit of the financial statements in the The Board is responsible for the other summary of significant accounting United Kingdom, including the Financial information. The other information policies. The financial reporting Reporting Council’s Ethical Standard, comprises the information included framework that has been applied in and we have fulfilled our other ethical in the annual report and financial their preparation is applicable law and responsibilities in accordance with statements, other than the financial United Kingdom Accounting Standards, these requirements. We believe that statements and our auditor’s report including Financial Reporting Standard the audit evidence we have obtained thereon. Our opinion on the financial 102 ‘The Financial Reporting Standard is sufficient and appropriate to provide statements does not cover the other applicable in the UK and Republic of a basis for our opinion information and, except to the extent Ireland’ (United Kingdom Generally otherwise explicitly stated in our Accepted Accounting Practice). Emphasis of matter – effects of report, we do not express any form Covid-19 of assurance conclusion thereon. In our opinion, the financial statements: We draw attention to the accounting policies referenced on pages 41 to 43. In connection with our audit of the • give a true and fair view of the In particular, we draw attention to the financial statements, our responsibility state of the Institute’s affairs as matters included under the heading is to read the other information and, at 31st December 2019 and of its "Assessment of Going Concern" and in doing so, consider whether the income and expenditure for the the Board's conclusion that there is no other information is materially year then ended; and material uncertainty related to going inconsistent with the financial concern notwithstanding the impact statements or our knowledge • have been properly prepared in of the ongoing social and economic obtained in the audit or otherwise accordance with United Kingdom disruption relating to the pandemic appears to be materially misstated. Generally Accepted Accounting on the Institutes's operations. Practice. If we identify such material Conclusions relating to going concern inconsistencies or apparent material We have nothing to report in respect misstatements, we are required of the following matters in relation to determine whether there is a to which the ISAs (UK) require us to material misstatement in the financial report to you where: statements or a material misstatement of the other information. If, based • the Board’s use of the going on the work we have performed, concern basis of accounting in we conclude that there is a material the preparation of the financial misstatement of this other information, statements is not appropriate; or we are required to report that fact.

We have nothing to report in this regard.

34 www.iod.com Annual Report and Accounts 2019 | Independent Auditor’s Report

Opinion on other matters Responsibilities of the Board A further description of our In our opinion, based on the work As explained more fully in the responsibilities for the audit of the undertaken in the course of the audit Statement of Board’s Responsibilities financial statements is located on the the information given in the annual within the annual report, the Board Financial Reporting Council’s website at report for the financial year for which is responsible for the preparation of www.frc.org.uk/auditorsresponsibilities. the financial statements are prepared is the financial statements and for being This description forms part of our consistent with the financial statements. satisfied that they give a true and fair Auditor’s report. view, and for such internal control as Matters on which we are required the Board determine is necessary to Use of our report to report by exception enable the preparation of financial These financial statements were In the light of the knowledge and statements that are free from material prepared solely for the purposes of understanding of the Institute and its misstatement, whether due to fraud management of the Institute’s affairs, environment obtained in the course of or error. and have not been prepared under the audit, we have not identified material section 394 of the Companies Act misstatements in the annual report. In preparing the financial statements, 2006 and are not statutory financial the Board are responsible for assessing statements. Our audit work has been We have nothing to report in respect the Institute’s ability to continue undertaken so that we might state to of the following matters which we as a going concern, disclosing, as the Institute’s members those matters are required to report to you if, applicable, matters related to going we are required to state to them in in our opinion: concern and using the going concern an auditor’s report and for no other basis of accounting unless the Board purpose. To the fullest extent permitted • adequate accounting records have either intend to liquidate the Institute by law, we do not accept or assume not been kept, or returns adequate or to cease operations, or have no responsibility to anyone other than the for our audit have not been received realistic alternative but to do so. Institute and the Institute’s members as a from branches not visited by us; or body, for our audit work, for this report, Auditor’s responsibilities for the or for the opinions we have formed. • the financial statements are not audit of the financial statements in agreement with the accounting Our objectives are to obtain reasonable records and returns; or assurance about whether the financial statements as a whole are free from • certain disclosures of directors’ material misstatement, whether due to remuneration are not made; or fraud or error, and to issue an Auditor’s report that includes our opinion. • we have not received all the Reasonable assurance is a high level Buzzacott LLP information and explanations of assurance, but is not a guarantee Chartered Accountants we require for our audit. that an audit conducted in accordance 130 Wood Street with ISAs (UK) will always detect a London material misstatement when it exists. EC2V 6DL Misstatements can arise from fraud or error and are considered material 16th September 2020 if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

www.iod.com 35 Consolidated Statement of Income and Retained Earnings – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes 2019 2018

2. INCOME £’000 £’000

Membership income 9,536 10,250

Revenue earning activities 16,243 14,538

Other trading income 1,402 1,593

Interest receivable 76 90

27,257 26,471

2. EXPENDITURE

3. Employment costs 9,238 11,931

Direct and indirect costs 13,167 14,477

Property expenditure 2,812 2,702

Loss on disposal of fixed assets - 2

Depreciation and amortisation 1,344 1,576

26,561 30,688

2. Surplus / (deficit) before taxation 696 (4,217)

5. Taxation - -

4. Surplus / (deficit) after taxation 696 (4,217)

OTHER COMPREHENSIVE INCOME

15. Closed defined benefit pension scheme adjustment 56 234

Total comprehensive profit / (loss) 752 (3,983)

RECONCILIATION OF ACCUMULATED FUNDS

Accumulated funds at 1st January 4,221 8,204

Accumulated funds at 31st December 4,973 4,221

All operations in the year and in the comparative year were continuing.

36 www.iod.com Annual Report and Accounts 2019 | Consolidated Balance Sheet – at 31st December 2019

Notes 2019 2018

FIXED ASSETS £’000 £’000

6. Tangible fixed assets 3,063 3,751

7. Intangible fixed assets 490 624

3,553 4,375

CURRENT ASSETS

8. Debtors 3,341 2,740

9. Cash at bank and in hand 7,948 7,452

11,289 10,192

CURRENT LIABILITIES

10. Creditors – amounts falling due within one year (4,590) (4,336)

11. Deferred membership income (3,983) (4,506)

Total current liabilities (8,573) (8,842)

Net currents assets 2,716 1,350

Total assets less current liabilities 6,269 5,725

www.iod.com 37 Consolidated Balance Sheet – at 31st December 2019 | Annual Report and Accounts 2019

Notes 2019 2018

NON CURRENT LIABILITIES £’000 £’000

11. Creditors – amounts falling due after more than one year (1,296) (1,504)

Net assets 4,973 4,221

15. Pension liability - -

Net assets including pension liability 4,973 4,221

Represented by:

Accumulated funds at 31st December 4,973 4,221

The financial statements on pages 36 to 54 were approved by the Board on 16th September 2020 and were signed on its behalf by:

John Watson Jonathan Geldart Interim Chair of the Institute Director General

16th September 2020 16th September 2020

38 www.iod.com Annual Report and Accounts 2019 | Consolidated Statement of Cash Flows – at 31st December 2019

Notes 2019 2018

£’000 £’000

Net cash used in operating activities (note A) 942 (2,289)

Cash flows used in investing activities

Interest received 76 90 Purchase of tangible and intangible fixed assets (522) (461)

Net cash used in investing activities (446) (371)

Change in cash and cash equivalents in the year 496 (2,660)

Cash and cash equivalents at 1st January 7,452 10,112

Cash and cash equivalents at 31st December (note B) 7,948 7,452

A Reconciliation of net deficit for the year to net cash flows from operating activities Surplus / (deficit) for the year 696 (4,217)

Adjustments for: Taxation charge - - Tax paid - - Depreciation on tangible and intangible fixed assets 1,344 1,576 Gain on disposal of fixed assets - 2 Interest receivable and similar income (76) (90) Decrease / (increase) in debtors (601) 680 Increase in trade creditors 146 65 Decrease / (increase) in other creditors, accruals and provisions (292) 139 Decrease in multiple years’ advance membership over one year (208) (196) Decrease in deferred membership income (523) (394) Increase / (decrease) in other deferred income 400 (88) Difference between pension charge and cash contributions 56 234

Net cash provided by (used in) operating activities 942 (2,289)

B Analysis of cash and cash equivalents

Cash at bank and in hand 7,948 7,452

www.iod.com 39 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Note 1 Accounting Policies

The Institute of Directors (the “Institute”) Basis of Accounting and Consolidation • The depreciation / amortisation is not subject to the Companies These financial statements have charge for the year which is based Act 2006. However, these financial been prepared for the year to on the estimate of the useful statements have been prepared in December 2019, with comparative economic lives attributed to accordance with applicable Accounting information provided in respect of the relevant assets; and Standards in the United Kingdom and the year to 31st December 2018. incorporate the disclosures required • The provisions made in respect by the Companies Act 2006 in respect The financial statements comprise of bad or doubtful debts; of directors’ emoluments for a private the consolidated accounts of the limited company. Institute and the net revenue and assets of its branches. Its wholly owned Assessment of Going Concern The principal accounting policies subsidiaries, The Director Publications During the period from 31st December adopted, judgements and key sources Limited, IoD Management Limited, 2019 to the date that the financial of estimation uncertainty in the iod.com Limited, and Tomorrow’s statements were approved, the preparation of the accounts are laid Directors Limited, are all dormant. coronavirus (Covid-19) outbreak out below. Financial statements for the Institute of has spread worldwide and caused Directors alone have not been presented. extensive disruptions to businesses as well as economic activities globally The financial statements have been including the UK. We have considered prepared under the historical cost the effects of the 2020 outbreak of convention with items recognised Covid-19 on the Institute’s operations. at cost or transaction value unless otherwise stated in the relevant As part of the Board’s consideration accounting policies below or the of the appropriateness of adopting notes to these accounts. the going concern basis in preparing the financial statements, a range of The financial statements have severe scenarios have been reviewed. been prepared in accordance with The assumptions modelled are based the Financial Reporting Standard on the estimated potential impact of applicable in the UK and Republic Covid-19 restrictions and regulations, of Ireland (FRS 102). along with our proposed responses over the course of the next 28 months The financial statements are presented (to 31st December 2022). These include in sterling and are rounded to the a range of estimated impacts primarily nearest thousand pounds. based on length of time various levels of restrictions are in place and the severity of the consequent impact of Critical Accounting Estimates those restrictions on our operations. and Areas of Judgement Preparation of the accounts requires For each of our business areas we the Board and management to make have sensitised revenue, profit and significant judgements and estimates. cash flow impact of reduced trading The items in the financial statements activity, using membership levels where these judgements and as the key driver. The scenarios are estimates have been made include: most sensitive to the assumptions made for Professional Development • The assessment of the Institute courses and Hospitality events that as a going concern in light of the are delivered face to face, given the impact of Covid-19; restrictions in place with regards to the maximum number of people who can attend an event or course.

40 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Note 1 Accounting Policies (continued)

As Professional Development courses Under all of the scenarios modelled, Revenue Earning Activities have now also been converted to after taking mitigating actions as Revenue earning activities income virtual online delivery during Covid-19, required, our forecasts did not indicate consists of member services that there is less sensitivity within this area. any possible or probable exhaustion are recognised when the service is We have not assumed any uplift in of cash reserves. However, to get provided and risks and benefits have any area of the business, under any to this position there is a need to been transferred. level of restrictions, for the purpose remove a significant amount of the of scenario modelling. current cost base, given the reduced trading as a direct result of Covid-19. Tangible Fixed Assets A key judgement applied is the likely A reduction in the cost base will allow Tangible fixed assets are recorded time period of restrictions on trading the Institute to rebuild its reserves. at historic cost, together with any activity in face to face delivery of incidental costs of acquisition. courses and events, movement On the basis of these reviews, Depreciation is calculated on a straight of people and social distancing. the Board has concluded that whilst line basis over the expected useful The severe scenarios include an there may be reductions in income economic lives of the assets concerned. assumption that restrictions will and reshaping of some activity, The principal annual rates used for this remain in place for much of 2020, notwithstanding this the Board does purpose are: with them only starting to loosen in not believe that there are material the last couple of months of 2020. uncertainties related to events or conditions that may cast significant Leasehold 10% or the The key assumption when modelling doubt on the ability of the Institute improvements period of the range of scenarios, is for to continue as a going concern. the lease if membership levels to be consistent The Board is of the opinion that the lower throughout the period modelled Institute will have sufficient resources at 20,000. Under each scenario, to meet its liabilities as they fall due. Computers, 20% mitigating actions are within furniture & fittings management control, can be initiated as they relate to spend, and do not Membership Income impact the ability to deliver to our Annual membership subscriptions are members. These actions include recognised as income on an accruals Intangible Assets some that have already been started, basis applicable to the membership The cost of acquired computer including the outsourcing of our period, and part of the subscription software licenses is capitalised. finance function, stopping the applicable to the following year is These costs are amortised over their publication of Director magazine, carried forward as deferred income. expected useful lives – up to five years. reducing our headcount, and moving In the case of multiple year membership Costs incurred on development to a model of delivering services subscriptions, an annual allocation is projects relating to the design closer to our members. included within income for the year, or improvement of systems are the unutilised income being carried recognised as intangible assets In all scenarios modelled our cash forward to future years. when the recognition criteria set reserves are in line with the ranges set out in FRS 102 is met. Capitalised out in our Reserves Policy, and satisfy Election fees are accounted for development costs are amortised the Institute’s needs to be able to meet on a receipts basis. from the date available for use of its liabilities as they fall due. the system over their expected useful lives – not exceeding five years. December 2020 is the most sensitive Research expenditure is recognised point as the modelling has assumed as an expense as incurred. that restrictions on face to face delivery of courses and events remains in place until 2021.

www.iod.com 41 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Note 1 Accounting Policies

Cash at Bank and In Hand Expenditure Pension Scheme Cash at bank and in hand represents Liabilities are recognised as expenditure The Institute operates both a non- such accounts and instruments that as soon as there is a legal or constructive contributory defined contribution are available on demand or have a obligation committing the institute to pension scheme for benefits accruing maturity of less than three months make a payment to a third party, it is from 1 January 1997 and a closed from the date of acquisition. probable that a transfer of economic defined benefit pension scheme. benefits will be required in settlement and the amount of the obligation can Pension costs for the defined Debtors be measured reliably. All expenditure contribution scheme are charged Debtors are recognised at their is accounted for on an accruals basis to the Consolidated Statement of settlement amount, less any provision and excludes recoverable VAT. Income and Retained Earnings when for non-recoverability. Prepayments they are payable to the scheme. are valued at the amount prepaid. They have been discounted to the Property Maintenance For the closed defined benefit pension present value of the future cash receipt Under the terms of the various scheme, finance income is credited to where such discounting is material. leases held by the Institute there is the Consolidated Statement of Income. an obligation to keep the relevant As the scheme is in surplus, the surplus properties in a proper state of repair is not carried on the balance sheet in Foreign Currencies together with the rentals are charged accordance with the requirements of Assets and liabilities in foreign as incurred. In addition, and where FRS 102. Accordingly, a corresponding currencies are translated into sterling necessary, the Institute will set aside adjustment equivalent to the finance at the rates of exchange ruling at a provision for expenditure required income is recognised within other the balance sheet date. Transactions to bring this Grade 1 listed property comprehensive income. in foreign currencies are translated back to a proper state of repair at into sterling at the rate of exchange the end of the lease. For 116 Pall Mall, ruling at the date of the transaction. which is held under a lease expiring Exchange differences are taken to in 2043, the public areas of the building the statement of income and retained are maintained to a standard which is earnings in arriving at the net surplus consistent with their revenue earning for the year. potential. There are no provisions as at the balance sheet date.

Creditors and Provisions Creditors and provisions are recognised Leased Assets when there is an obligation at the Rentals applicable to operating leases balance sheet date as a result of a past where substantially all of the benefits event, it is probable that a transfer and risks of ownership remain with the of economic benefit will be required lessor are charged to the Consolidated in settlement, and the amount of the Statement of Income and Retained settlement can be estimated reliably. Earnings on a straight-line basis over Creditors and provisions are recognised the term of the lease. at the amount the charity anticipates it will pay to settle the debt. They have been discounted to the present value of the future cash payment where such discounting is material.

42 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes 2019 2019 2019 2018 Income Expenditure Net Net

2. ANALYSIS OF OPERATING SURPLUS / (DEFICIT) £’000 £’000 £’000 £’000 BY ACTIVITIES

Membership income 9,536 (1,535) 8,001 8,340

Revenue earning activities Hospitality 3,330 (2,237) 1,093 929 Director publications 233 (1,081) (848) (741) Professional (director) development 8,873 (3,979) 4,894 3,462 Office solutions 285 (105) 180 186 Business centre 1,573 (486) 1,087 1,094 Director events 501 (422) 79 (565) Commercial (product marketing) 701 (74) 627 503 BEIS grant income 747 (689) 58 -

16,243 (9,073) 7,170 4,868

Member services Regional services 1,377 (3,086) (1,709) (1,898) Information and advisory services 3 (762) (759) (834) Member benefits - (87) (87) (345)

1,380 (3,935) (2,555) (3,077)

Policy and directorate 7 (1,122) (1,115) (1,617)

Operating and overhead costs Property costs (excluding regions) - (2,812) (2,812) (2,702) Loss on disposal of fixed assets - - - (2) Depreciation - (1,344) (1,344) (1,559) IT, iod.com, marketing and new initiatives - (3,320) (3,320) (4,172) Central Administration 15 (3,420) (3,405) (4,386)

15 (10,896) (10,881) (12,821)

Interest receivable 76 - 76 90

Surplus / (deficit) on ordinary activities before taxation 27,257 (26,561) 696 (4,217)

www.iod.com 43 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes 2019 2018

3. EMPLOYMENT COSTS £’000 £’000

a) The average number of employees during the year was: 160 205

b) Salaries 6,501 8,440 Social security 689 918 Pension costs – see note 15 530 686 Contracted and temporary staff 449 367 Subsistence and insurance 164 198 Redundancy, termination & ex gratia payments 476 585 Recruitment and training 129 304 Motor vehicle and travel 281 343 Death benefit 0 61 Other 19 29

9,238 11,931

c) The fees paid to the Chair totalled £20,000 during the year (2018: £6,667).

d) Emoluments paid to the 4 Director Generals (2018: 1), who were the highest paid £’000 £’000 Directors, amounted to: - Salary 159 437 - Payment in lieu of employer pension contribution 1 10 - Contracted and temporary staff 252 - - Bonus - 32 - Benefits 1 17 - Pension contributions 6 -

419 496

- Redundancy, termination and ex-gratia payment 288 -

707 496

During the period, between permanent Director Generals being in place, the Institute had two Interim Director Generals; one focused on Operations and the other on External Affairs.

Included in contracted and temporary staff above is £251,519 (2018: £nil) relating to the Interim Director General, Operations, who was compensated on a contract basis, so not paid as salary through the payroll.

44 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes 2019 2018

3. EMPLOYMENT COSTS (CONTINUED) £’000 £’000

e) Executive directors’ emoluments

Emoluments paid to the 6 executive directors (2018: 3), amounted to:

- Salary 334 623 - Payment in lieu of employer pension contribution 24 31 - Contracted and temporary staff 220 - - Bonus - 32 - Benefits 2 18 - Pension contributions 3 -

583 704

- Redundancy, termination and ex-gratia payment 397 -

980 704

Contributions are payable under money purchase pension schemes to 4 directors (2018: 2 directors)

Included in contracted and temporary staff above is £220,079 (2018: £nil) relating to the Interim Director General, Operations, who was compensated on a contract basis, so not paid as salary through the payroll.

f) Emoluments paid to key management £’000 £’000

10 key management including the Director General and other executive directors (2018: 7 key management)

- Salaries 573 1,028 - Contracted and temporary staff 314 - - Bonus - 43 - Benefits 9 32 - Pension contributions 49 70

945 1,173

- Redundancy, termination and ex-gratia payment 397 -

1,342 1,173

Included in contracted and temporary staff above is £314,399 (2018: £nil) relating to the Interim Director General, Operations, who was compensated on a contract basis, so not paid as salary through the payroll.

Also paid in the year were two ex-gratia payment totalling £397,489 (2018: £nil).

Directors' emoluments disclosures have been prepared in compliance with Companies Act requirements for a limited company.

www.iod.com 45 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes 2019 2018

4. SURPLUS / (DEFICIT) AFTER TAXATION £’000 £’000

This is stated after charging:

Fees in respect of services provided by the auditor: Statutory audit 35 35

Tax advisory services - 19

35 54

5. TAXATION £’000 £’000

Current tax:

UK corporation tax - -

Tax reconciliation:

Surplus / (deficit) on ordinary activities before taxation 696 (4,217)

Multiplied by the standard rate of UK corporation tax of 19% (2018: 19%) 132 (752)

Tax effect of: Non-taxable income (1,957) (1,948) Expenses not-deductible for tax purposes 2,160 2,521 Movement in deferred tax not recognised 335 179

- -

Corporation tax is payable only on the Institute's externally derived sources of income. The Institute's membership activities are outside the charge to corporation tax.

No provision for deferred taxation is required (2018 – £nil).

Factors that may affect future tax charges: Legislation has also been enacted to reduce the corporation tax to 17% from 1st April 2020.

46 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes Leasehold Furniture Computer Office Total Improvements & Fittings Hardware Equipment

6. TANGIBLE FIXED ASSETS £’000 £’000 £’000 £’000 £’000

Cost: At 1st January 2019 4,509 2,646 489 - 7,644 Additions 140 128 2 7 277 Disposals (493) (820) (261) - (1,574)

At 31st December 2019 4,156 1,954 230 7 6,347

Depreciation: At 1st January 2019 (2,237) (1,335) (321) - (3,893) Charge for the year (444) (445) (76) - (965) Disposals 514 819 241 - 1,574

At 31st December 2019 (2,167) (961) (156) - (3,284)

Net book value 2019 1,989 993 74 7 3,063

Net book value 2018 2,272 1,311 168 0 3,751

Computer Software etc.

7. INTANGIBLE FIXED ASSETS £’000

Cost: At 1st January 2019 1,468 Additions 246 Disposals (35)

At 31st December 2019 1,679

Amortisation: At 1st January 2019 (844) Charge for the year (380) Disposals 35

At 31st December 2019 (1,189)

Net book value 2019 490

Net book value 2018 624

www.iod.com 47 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes 2019 2018

8. DEBTORS £’000 £’000

Trade debtors 2,568 2,181 Other debtors and prepayments 558 491 VAT receivable 215 68

3,341 2,740

All debtors are due within one year.

9. CASH AT BANK AND IN HAND £’000 £’000

Cash at bank and in hand 7,948 7,452

Cash at bank and in hand includes £216,083 (2017: £213,223) held in overseas branches.

10. CREDITORS – AMOUNTS FALLING DUE WITHIN ONE YEAR £’000 £’000

Trade creditors 1,936 1,790 Deferred non membership income 1,764 1,364 Other creditors and accruals 890 1,182

4,590 4,336

11. DEFERRED MEMBERSHIP INCOME £’000 £’000

Memberships expiring within one year 3,983 4,506 Memberships expiring after more than one year 1,296 1,504

5,279 6,010

Membership subscriptions received in advance include cash received for annual memberships for which benefits are owed to members until the expiry date of their membership. It also includes cash received for lifetime subscriptions which are released to income over a period of eighteen years.

48 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes 2019 2019 2019 Property Other Total

12. LEASE COMMITMENTS £’000 £’000 £’000

At 31st December, the Institute has total future minimum lease payments under non-cancellable operating leases as follows:

Within one year 458 11 469 After one, but within five years 1,657 0 1,657 After five years 5,948 0 5,948

8,063 11 8,074

2018 2018 2018 Property Other Total

£’000 £’000 £’000

Within one year 455 11 466 After one, but within five years 1,657 0 1,657 After five years 6,350 0 6,350

8,462 11 8,473

13. CAPITAL COMMITMENTS

Capital commitments contracted but not provided for in the financial statements amount to £nil (2018: £96,000).

14. RELATED PARTY TRANSACTIONS

The remuneration payable to the Institute’s Chair and Directors are disclosed in note 3 to these accounts.

There were no other transactions with related parties during the year (2018: no other transactions).

www.iod.com 49 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes

15. PENSION COSTS

The Institute of Directors operates both a non-contributory defined contribution pension scheme for benefits accruing from 1st January 1997 and a closed defined benefit pension scheme. The assets of both schemes are held separately from those of the Institute in independently administered funds. Further details of the cost of each scheme are provided below.

Defined contribution scheme

Contributions are charged to the Consolidated Statement of Income in accordance with the rules of the scheme.

The charge associated with this scheme was £530,000 (2018: £686,000), representing the employer contributions payable during the year.

Defined benefit scheme

With effect from 1st January 1997, this scheme became closed to new entrants and ceased to provide any further benefit accrual to the then active members who became entitled to deferred pensions, subject to statutory revaluation as from that date.

The last full funding valuation was carried out as at 1st January 2018. A qualified independent actuary carried out calculations as at 31st December 2018 to obtain the amounts reported under FRS 102.

At 31st At 31st At 31st December December December 2019 2018 2017

a) Balance sheet and notes

The major assumptions for FRS 102 purposes were:

Rate of increase in salaries n/a n/a n/a Rate of increase to pensions in payment (Post 88 GMP) 1.9% 2.1% 2.1% Rate of increase to pensions above GMP in deferment 2.2% 2.5% 2.5% Discount rate 1.9% 2.5% 2.3% RPI inflation assumption 3.2% 3.5% 3.5% CPI inflation assumption 2.2% 2.5% 2.5%

No contributions were paid to the scheme during the year (2018: Nil). The amounts charged and credited to the consolidated statement of income and retained earnings are detailed in sections b and c below; the total charge for 2019 was £56,000 (2017: £234,000).

No lump sum contributions are due in the coming year in respect of the scheme (2019: Nil).

50 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes Discount Value Discount Value Discount Value rate at 31st at 31st rate at 31st at 31st rate at 31st at 31st December December December December December December 2019 2019 2018 2018 2017 2017

15. PENSION COSTS (CONTINUED)

Defined benefit scheme (continued)

a) Balance sheet and notes £’000 £’000 £’000 (continued)

Under FRS 102 the long term expected rate of return is replaced by the discount rate. The assets in the scheme and the expected rates of return were:

Equities 1.9% 3,262 2.5% 2,819 2.3% 3,264 Bonds 1.9% 4,773 2.5% 4,451 2.3% 4,738 Cash 1.9% 34 2.5% 16 2.3% 54

Total market value of assets 1.9% 8,069 2.3% 7,286 2.3% 8,056 Present value of scheme liabilities 6,858 6,578 6,762

Surplus in the scheme 1,211 708 1,294 Deemed irrecoverable (1,211) (708) (1,294) Balance sheet valuation 0 0 0

At 31st At 31st December December 2019 2018

Reconciliation of present value of scheme liabilities: £’000 £’000

Opening defined benefit obligation (6,578) (6,762) Past service cost 0 (170) Administration costs (73) (92) Interest cost (160) (152) Remeasurement: actuarial (loss) / gain (417) 189 Benefits paid and expenses 370 409 Closing defined benefit obligation (6,858) (6,578)

www.iod.com 51 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes At 31st At 31st December December 2019 2018

15. PENSION COSTS (CONTINUED)

Defined benefit scheme (continued)

Reconciliation of fair value of scheme assets: £’000 £’000

Opening fair value of scheme assets 7,286 8,056 Interest income 177 180 Investment gain / (loss) 976 (541) Benefits paid and expenses (370) (409) Closing fair value of scheme assets 8,069 7,286

Current Previous Previous Previous Previous Year 2019 Year 1 2018 Year 2 2017 Year 3 2016 Year 4 2015

£’000 £’000 £’000 £’000 £’000

Defined benefit obligation (6,858) (6,578) (6,762) (6,866) (5,965) Scheme assets 8,069 7,286 8,056 7,831 7,051 Surplus 1,211 708 1,294 965 1,086 Experience adjustments on scheme liabilities 4 (41) (25) (10) (30) Experience adjustments on scheme assets 976 (541) 455 1,126 (127) (2014: restated under FRS 102)

At 31st At 31st December December 2019 2018

b) Analysis of amount charged to the consolidated revenue account £’000 £’000

Administration costs 73 92 Past service cost - 170

Total operating charge 73 262

At 31st At 31st December December 2019 2018

c) Analysis of amount credited to other finance income £’000 £’000

Interest income 177 180 Less: Interest on pension scheme liabilities (160) (152)

Net return 17 28

52 www.iod.com Annual Report and Accounts 2019 | Notes to the Financial Statements – for the year ended 31st December 2019

Notes At 31st At 31st December December 2019 2018

15. PENSION COSTS (CONTINUED)

Defined Benefit Scheme (continued)

d) Total amounts taken to other comprehensive income £’000 £’000

Remeasurement – gain / (loss) 976 (541) Return on scheme assets excluding interest income Remeasurement – gain / (loss) 4 (41) Experience gain / (loss) arising on scheme liabilities Remeasurement – (loss) / gain (441) 203 Changes in financial assumptions underlying the scheme liabilities – gain / (loss) Remeasurement – gain 20 27 Changes in demographic assumptions underlying the scheme liabilities – gain / (loss)

(Increase) / decrease in irrecoverable surplus (503) 586

Actuarial gain recognised in other comprehensive income 56 234

As the pension surplus is irrecoverable, the increase of £503,000 has been treated as a pension scheme adjustment in other comprehensive income in 2019.

At 31st At 31st December December 2019 2018

e) Movements in surplus during the year £’000 £’000

Surplus in scheme at beginning of the year 708 1,294

Movements in the year:

Other finance income (56) (234) Actuarial gain / (loss) 559 (352) Surplus in scheme at the end of the year 1,211 708

www.iod.com 53 Notes to the Financial Statements – for the year ended 31st December 2019 | Annual Report and Accounts 2019

Notes

15. PENSION COSTS (CONTINUED)

Defined Benefit Scheme (continued)

Sensitivity to changes in assumptions:

The assumptions as to discount rate and price inflation have a significant effect on the value placed on the defined benefit obligations. As at 31 December 2019, a 1% pa change to these assumptions would have had the following effects on the closing defined benefit obligation:

1% pa 1% pa increase decrease

Discount rate (£829k) £1,043k Price inflation £217k (£228k)

f) Demographic Assumptions used are as follows:

31st December 2019 (Changes from 31st December 2018)

Mortality (pre and post retirement) S3PxA, CMI_2018 (2018: S2PxA, CMI_2017 (1.5%)) Proportion married 90% for men and 70% for women Age difference Husbands 3 years older than wives Age at retirement Normal pension age Cash Commutation 90% of maximum cash allowance

54 www.iod.com Annual Report and Accounts 2019 | Governance

IoD Chairs from Geographical Areas

Regions and Nations County branches

East Midlands Aberdeen Hampshire and the Isle of Wight Gary Headland DL Mark McCue Vacant

East of England Berkshire Hereford and Worcester Biplab Rakshi Raj Singh Joanne Hodgetts

London Black Country Hertfordshire David Stringer-Lamarre Ian Priest Richard McBarnet

Northern Ireland Buckinghamshire Highlands & Islands Gordon Milligan Vacant Donald Forsyth

North West Cambridgeshire Isle of Man Mike Blackburn OBE Carolyn Rand Jennifer Houghton

Scotland Central London Jersey Aidan O'Carroll Interim Chair: Reena Dayal Lisa Springate

South Cheshire Kent Faisal Khan Vacant Interim Chair: Jules Quested Williams

South West City of London Lancashire Muir Macdonald CDir Alastair King Vacant

Wales Coventry & Warwickshire Leicestershire & South East Midlands Richard Selby David Trevis-Smith Sarah Canning

West Midlands Cumbria Lincolnshire Brian Hall Barry Leahey Michelle Allison

Yorkshire and the North East East Yorkshire Liverpool Delroy Beverley Pat Coyle David Wafer

Edinburgh Manchester Julie Ashworth Vacant

Essex Norfolk Alison Shadrack Michael Harrowven

Fife North East North Ian Collins Ammar Mirza CBE

Glasgow North East South Craig Jamieson Karl Pemberton CDir

Guernsey North Yorkshire John Clacy Interim Chair: Caroline Pullich

www.iod.com 55 Governance | Annual Report and Accounts 2019

Overseas branches Affiliated bodies

Nottinghamshire & Derbyshire Belgium IoD, Hong Kong Natalie Gasson Mark Cunningham CEO: Carlye Tsui

Oxfordshire Bermuda IoD, Republic of Ireland Vacant Rochelle Simons CEO: Maura Quinn

South Yorkshire Cyprus Prof Keith Jackson CDir Evdokimos Xenophontos

Suffolk France Interim Chair: John Cockburn-Evans Robert Thompson

Surrey Malta Richard Maybury Edwin Ward

Sussex Monaco Interim Chair: Alison Russell William Easum

Tayside Sonia Cottom

West Yorkshire Dr Richard Smith CDir

56 www.iod.com Annual Report and Accounts 2019 | IoD Premises

IoD Premises

London Pall Mall 116 Pall Mall, London, SW1Y 5ED T. 0207 839 1233 Bookings and enquiries: 0207 839 1233

East Leicester Leicester Castle Business School, 7 Castle View, Leicester, LE1 5WH Midlands Bookings and enquiries: 0116 250 6070 Nottingham Crowne Plaza Hotel Nottingham, Wollaton Street, Nottingham, NG1 5RH Enquiries: 0115 848 6190

North Manchester XYZ Building, Spinningfields, 2 Hardman Blvd, Manchester, M3 3AQ West Enquiries: 0161 806 0890

South Bristol The Innovation Centre at Bristol & Bath Science Park, Emersons Green, Bristol, BS16 7FR West Bookings: 0117 370 7700 Admin: 0117 328 5235 Bristol The Engine Shed, Station Approach, Temple Meads, Bristol, BS1 6QH Bookings: 0117 903 1100

Yorkshire Leeds Old Broadcasting House, Woodhouse Lane, Leeds, LS2 9EN Wakefield University Business Centre, 6-8 Bond Terrace, Wakefield, WF1 2HW Halifax University Business Centre, Piece Mill, 27 Horton Street, Halifax, HX1 1QE Bookings: 0113 243 0152

North Durham Mill Lane, Durham, DH1 3LB East Bookings: 0113 243 0152

Northern Belfast Riddel Hall, 185 Stranmillis Road, Belfast, BT9 5EE Ireland Bookings: 0289 068 3224

Scotland Edinburgh 10 Charlotte Square, Edinburgh, EH2 4DR Bookings: 0131 556 4270

Glasgow 200 St Vincent Street, Glasgow, G2 5RQ Bookings: 0141 222 3934 Admin: 0131 557 5488

Wales Bangor Bangor Business School, College Road, Bangor, LL57 2DG Bookings: 0292 038 9900 Admin: 0292 038 9990

Cardiff Institute of Directors, Aberconway Building, Colum Drive, Cardiff, CF10 3EU Bookings: 0292 038 9900 Admin: 0292 038 9990

Belgium Brussels De Warande, Zinnerstraat 1, 1000 Brussels, Belgium Chair: Mark Cunningham (0032 2256 7530)

Isle of Man The Claremont, 18-22 Loch Promenade, Douglas, Isle of Man, IM1 2LX Bookings: 01624 698 800

www.iod.com 57 Institute of Directors For further information on this report or for a copy in large text format, please contact:

The Institute Secretary’s Office [email protected]

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