Chair’s introduction Our Governance Danuta Gray Chair of the Board Dear shareholders and other stakeholders, There is a duty, enshrined in the Companies Act 2006, for your Directors to act in the way each of us considers, On behalf of the Board, I am pleased to present the in good faith, would be most likely to promote the success Corporate Governance report for the year ended of the Company for the benefit of its members as a whole, 31 December 2020. having regard to various matters identified in the I have been very impressed by the way the Group has legislation. In this Annual Report & Accounts, we have responded to the challenge presented by Covid-19. detailed the stakeholders and issues which the Directors I am extremely proud of our people who have played considered when discharging this duty throughout the such an important part in continuing to deliver much year. Our formal statement in relation to Section 172(1) of needed services throughout the crisis. I am pleased to the Companies Act 2006 appears on page 10. report that our governance operated well in a different I would like to thank you for your support and look forward working environment. to hearing your views as we prepare for our forthcoming As Chair, it is my role to provide leadership of the Board AGM on Thursday, 13 May 2021. to ensure that it operates effectively. In the light of the impact of Covid-19 and the unprecedented level of Purpose, culture and values uncertainty for the business, the Board held a number of unscheduled meetings to consider significant operational The Board recognises the importance of its role in setting matters, as well as to monitor the Group’s solvency the tone of the Group’s culture, aligning it with our through a period of market volatility. purpose, values and strategy, and embedding it throughout the Group. The Board aims to foster an open Your Board is committed to underpinning all of the and collaborative culture based on our vision and purpose, Group’s activities with the highest standards of corporate supporting decisions that are best for our shareholders, governance. This section of our Annual Report & Accounts whilst having regard to the interests of our other explains how your Board seeks to ensure that we have stakeholders. Our vision, purpose, values and Code of effective corporate governance in place to help support Business Conduct are central to the Group’s culture. the creation of long-term sustainable value for all our We encourage our people to be curious, to be aligned on shareholders and other stakeholders. outcomes, to build trust, encourage simplicity, empower The Board endorses the UK Corporate Governance Code their teams and continually test, learn and adapt. 2018 (the “Code”), which applied to our 2020 financial year, Communication with our shareholders and other and the related FRC Guidance on Board Effectiveness. stakeholders is extremely important to us. During 2020, We seek to ensure that our governance framework directors attended virtual meetings with major investors remains aligned with best practice, consistent with the to ensure their views were considered and our objectives Code. Throughout the year ended 31 December 2020, the were understood. For the safety of our shareholders and Company complied with the Principles and Provisions set colleagues, we held a closed AGM in 2020 and encouraged out in the Code. shareholders to submit questions in advance of the Sustainability is at the heart of how we think about our meeting. In 2021, acknowledging that restrictions on business. We have always been conscious of our broader public gatherings may remain in place, we plan to enable role in society, giving something back to our local shareholders to participate in our AGM electronically. communities and fostering social mobility. Further Shareholders are encouraged to contact us by email information on our sustainable business model can be at [email protected]. found in the Strategic report. 76 Direct Line Group Annual Report and Accounts 2020 For more on communication with major investors, see As part of the annual evaluation process, all Non-Executive Governance page 88. Directors were assessed as being independent and able to provide a valuable and effective contribution to the Board. Suggestions for further improving effectiveness that were “The Board recognises the importance of its raised during the review process have been taken into role in setting the tone of the Group’s culture consideration by the Board. Further details can be found and embedding it throughout the Group.” on page 94. Remuneration Succession planning and Board changes The Board has delegated responsibility to the Remuneration There have been changes to our Board since last year’s Committee for the remuneration arrangements for AGM. I succeeded Mike Biggs as Chair in August 2020 the Chair, Executive Directors and Senior Management. and Adrian Joseph OBE joined as an independent The Remuneration Committee also reviews workforce Non-Executive Director in January 2021. remuneration and related policies and the alignment Jane Hanson has served as a Non-Executive Director for of incentives and rewards with the Group’s culture. over nine years and will step down from the Board at the The Group’s Remuneration Policy was approved at the conclusion of the 2021 AGM. 2020 AGM and the current Policy will remain in place for The Board recognises the benefit of recruiting leaders a further two years. who live the Group’s culture and values and represent Further details on the work of the Remuneration a diversity of gender, ethnicity, cognitive strengths Committee can be found in the Directors’ remuneration and socio-economic, educational and professional report which begins on page 113. backgrounds. For a wider understanding of the skills and experience of our Board, see pages 78 to 80 and pages 106 to 108. Annual General Meeting Direct Line Insurance Group plc’s 2021 AGM will be held on The Nomination and Governance Committee continues Thursday 13 May 2021 at 11.00 am. Full details including the to review succession plans both for the Board and at resolutions to be proposed to our shareholders can be executive level each year. found in the Notice of AGM which will be made available In early 2021, three levels of the emergency succession on our corporate website. plan were invoked to provide cover for Tim Harris’s leave The outcome of the resolutions put to the AGM, including of absence while he cared for a member of his family poll results detailing votes for, against and withheld, will receiving medical treatment: Neil Manser stepped up as be published on the London Stock Exchange’s and the Acting Chief Financial Officer; Jasvinder Gakhal as Acting Company’s websites once the AGM has concluded. Chief Strategy Officer and Rebecca Clapham as Interim Managing Director of Direct Line for Business. Yours sincerely, Further information on our diversity policy, our approach to succession planning and Board appointments can be found in the Nomination and Governance Committee report on pages 106 to 108. Danuta Gray Chair of the Board Effectiveness and evaluation As Chair, one of my principal objectives is to ensure that the Board includes a body of Non-Executive Directors with Our Code of Business Conduct the skills and experience to be able to support and challenge our Senior Management in developing and Your Board maintains strong relationships and executing an ambitious strategy for the benefit of our regular interaction with our shareholders and shareholders and other stakeholders. In accordance with other stakeholders. Their continued support the Code, we conduct evaluations of the effectiveness of for our strategic aims is important. Visit the Board and its Committees annually, including an www.directlinegroup.co.uk for more information. externally facilitated review every third year. The 2019 UK Corporate Governance Code 2018 review was facilitated by Robert Goffee, Professor of Board leadership and company purpose Organisational Behaviour at the London Business School, Read more on pages 84 to 88 who had no other connection with the Company or any individual Director. Division of responsibilities Read more on pages 89 to 90 In 2020, having recently been appointed as Chair, I chose to conduct the effectiveness review myself. Building on Composition, succession & evaluation themes identified by Professor Goffee, this year’s review Read more on pages 91 to 94 focused on the value capable of being added by Audit, risk & internal control Non-Executive Directors from their experience, the Read more on pages 95 to 96 emphasis on strategic issues on the Board’s agenda, the Board’s ability to challenge executive performance based Remuneration on the quality of information provided, and the external Read more on pages 113 to 139 sources of insight available. www.directlinegroup.co.uk 77 Board of Directors Danuta Gray Penny James Tim Harris Chair of the Board Chief Executive Officer Chief Financial Officer Appointed: February 2017 Appointed: November 2017 Appointed: October 2019 Biography Biography Biography Danuta is Chair of the Nomination and Penny was CFO of Direct Line Group until The Board benefits from Tim’s many years Governance Committee and was her appointment as CEO in May 2019. of experience as a finance director in the appointed as Chair of the Board in August The Board benefits from Penny’s deep insurance industry, his detailed knowledge 2020. The Board benefits from her previous understanding of our sector as well as her of capital markets and his track record of experience as Chair, Chief Executive and leadership skills, financial and risk expertise, successfully leading finance transformation NED (including two positions as Chair of strategic thinking and cultural alignment. programmes. Remuneration Committees), significant As CEO, Penny is leading both the delivery Tim was Deputy Chief Executive and Group experience in sales, marketing, customer of the Group’s short-term strategic Finance Director of the Royal London services and technology and in leading imperatives, including technological Group until July 2019.