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Chairman’s introduction Corporate Governance The Executive Team is required to provide the information to the Board that the Board needs to enable it to exercise its judgement. It must also evidence appropriate process. There is a very fine distinction between the approval of processes and their definition. Only exceptionally would the Board intervene to initiate or define. The Board sets the tone for the Company. The way in which it conducts itself, its attitude to ethical matters, its definition of success, and the assessment of appropriate risk, all define the atmosphere within which the Executive Team and all colleagues work. The Board has ultimate responsibility for ensuring an appropriate culture in the Company to act as a backdrop to the way in which the Creating long-term sustainable success Company behaves towards all stakeholders. Dear shareholder Good corporate governance is not about adhering to codes of practice (although adherence may constitute a part of The Board of the Company is responsible for ensuring the the evidence of good governance) but rather about the long-term success of the Company, generating value for exercise of a mindset to do what is right. One of the shareholders and contributing to the communities in which challenges facing any Board is the way in which the it operates and wider society. Non-executive and the Executive Directors interact. The Board is committed to ensuring that it provides It is clear that they each have the same legal responsibility effective leadership and promotes uncompromising but it is generally unrealistic to expect Executive Directors ethical standards. One of the ways in which the Board to speak individually with the same freedom as the Non- achieves this is by requiring that good governance executive Directors. Equally, Executive Directors who just principles and practices are adhered to throughout the “toe the executive line” in contradiction to their own views Group. The Board has determined that the following is may not be effectively contributing to good governance. a helpful summary of its role. A well-functioning Board needs to find the right Good governance is about helping to run the Company balance between hearing the collective executive well. It involves being satisfied that an effective internal view, being aware of the natural internal tensions in an framework of systems and controls is in place which Executive Team and allowing independent input from clearly defines authority and accountability and promotes the Non-executive Directors. success whilst permitting the management of risk to One of the consequences of both increasing the appropriate levels. watchdog role of the Board and finding this balance It also involves the exercise of judgement as to the between individuality and team behaviour is more definitions of success for the Company, the levels of risk boards have fewer and fewer executive directors. In our we are willing to take to achieve that success, and the levels circumstances, the Board construction continues to work of delegation to the Executive Team. The exercise of this effectively and an appropriate balance is struck. judgement is the responsibility of the Board and involves Notwithstanding the tensions created by many external consideration of processes and assumptions as well as expectations, which may be wholly or in part unrealistic, outcomes. It also involves the creation of a sensitive a successful Board should, ideally, be composed of a diverse interface for the views of shareholders and other group of respected, experienced and competent people who stakeholders to be given appropriate consideration coalesce around a common purpose of promoting the long- when reaching these judgements. term, sustainable success of the Company, provide a unified One way in which the Board has sought to ensure the voices vision of the definitions of success and appropriate risk, of stakeholders are heard is through our Board Associate endeavour to support management (i.e. those who honestly role, introduced in 2017. This role continues to be a criticise at times but encourage all the time) and who create successful way of ensuring that the Board appropriately confidence in all stakeholders in the integrity of the business. considers the interests of colleagues in its deliberations I am pleased that this statement of the role of the Board has and, in doing so, makes better decisions. The Board proved robust in the face of the challenges of the pandemic Associate also generates greater understanding of the in 2020, illustrating enduring principles of governance. role of the Board amongst colleagues. In June this year we appointed a new Board Associate, Pamela Novoa Ralli, as a successor to Albert Sampietro, to serve for a 12-month term. We have also created an Associates’ Council to enhance further communication with our colleagues. Sir Donald Brydon Chairman 78 Annual Report and Accounts 2020 | The Sage Group plc. Colleagues are key stakeholders at Sage. In FY20 the The UK Corporate Board has continued with its chosen approach to workforce Governance Code engagement, through the Board Associate programme. This arrangement has been chosen by the Board as an The principles set out in the UK Corporate Governance alternative to the workforce engagement methods referred Code 2018 (the “Code”) emphasise the value of good to in the Code, as is permitted by the Code. corporate governance for long-term sustainable success. We are pleased to report that Sage applied the principles The Board Associate programme was first adopted by the and complied with all of the provisions of the Code Board in 2017 and continues to deliver success in enabling throughout FY20, with the exception of Provision 38, efficient and effective engagement with our colleagues. aligning executive director pension contributions with The Board Associate attends all scheduled Board meetings, those of the wider workforce. As explained on page 124 receives copies of Board papers, has direct access to in the Directors’ Remuneration Report, we propose to Board members and receives mentoring from a designated review the pension policy for our CEO as part of the next Non-executive Director. The Board considers that the Board Remuneration Policy review cycle in 2021, which will Associate role is effective in delivering meaningful dialogue be presented for shareholders’ approval at the 2022 and therefore represents an appropriate method of Annual General Meeting. Pension provision for any engaging with colleagues, including providing a two-way future Executive Director will be aligned with the majority communication channel to create greater understanding of Sage’s workforce, and this policy was applied on the of the role of the Board amongst the workforce. This appointment of our CFO in December 2018. enables the Board to hear more of colleagues’ views, thereby ensuring that the Board appropriately considers the Our stakeholders are very important to us and we remain interests of the workforce when making decisions. During committed to maintaining regular and open communication the appointment process, care is taken to ensure that the with them. In compliance with the Code, this Annual Report Board Associate is representative of areas core to Sage’s describes how their interests and the matters set out in strategy and each of the three Board Associates appointed section 172(1) of the Companies Act 2006 (“Section 172(1)”) to date have come from different functional areas and have been considered in Board discussions and decision- different geographies. Sage’s drive to maintain colleague making. The global restrictions in place due to Covid-19 engagement was further enhanced in FY20 by the formation have paused face to face engagement activities but of the Associates’ Council, comprising past and present we have introduced virtual methods of communication Board Associates and selected candidates from the Board to ensure we continue to maintain the same level of Associate appointment process. The Board will meet the engagement. Details of how the Board has complied with Associates’ Council on a twice yearly basis to hear a wider Section 172(1) and how we engage with our stakeholders range of colleagues’ views and sentiments. Further details on can be found in our Section 172(1) Statement on page 29 the Board Associate’s role can be found on pages 94 and 100. and throughout this report. Further information on how we have applied the principles set out in the Code can be found as follows: Board leadership and Composition, succession Audit, risk and company purpose and evaluation internal control Pages Pages Pages Purpose and culture 32, 62 and 101 Board composition and succession 110 and 111 Significant reporting Shareholder engagement 95 Diversity and Inclusion 87, 111 and 112 and accounting matters 115 Colleague engagement 95 and 96 Annual re-election of Directors 93 Fair, balanced and understandable 117 Other stakeholder engagement 97 to 99 Induction, Director training and Viability statement and going concern 117 Conflicts of interest 86 development programme 87 and 92 Risk management and internal controls 117 Board effectiveness and evaluation 88 and 89 Internal audit 118 Division of responsibilities External auditor 118 Pages Remuneration Principal and emerging risks 66, 115 and 117 The role of the Board 84 Pages The role of the Committees 85 Remuneration principles 121 Board composition 86 Remuneration Policy 128 to 132 The Code is publicly available Committee composition 92 Pension

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