Governance Governance Corporate governance statement 58 Board of Directors 60 Governance framework 62 Audit Committee report 72 Nominations Committee report 76 Risk & CSR Committee reports 79 Directors’ remuneration report 82 Remuneration at a glance 84 Directors’ remuneration policy 88 Annual Report on Remuneration 97 Directors’ report 110 Independent auditors’ report 114 57 Corporate governance statement An introduction from our Chairman “ I believe that as a Board we have a wide ranging combination of diversity, skills, experience and knowledge, required to steer the Company through the next years.” Dear Shareholder, We considered several ways of protecting the Company and all our stakeholders, and by way of example decided to postpone the I am pleased to present this year’s corporate governance decision to propose a dividend until later in the year. You can read statement. As in previous years, this report should be read in more about this in the CFO’s section on page 27. conjunction with the section on how we have complied with the UK Corporate Governance Code on pages 62 to 109. Our CEO and CFO immediately agreed a temporary salary reduction of around 33%, and in addition, the Global Leadership Response to COVID-19 Team and senior leaders volunteered temporary salary reductions In dealing with the fast developing COVID-19 pandemic of up to 25%. The Non-Executive Directors and I also volunteered emergency, the Board and I ensured we took swift actions to to temporarily reduce our fees by 25%. protect the health and wellbeing of our employees and their In order to limit the spread of COVID-19 through public gatherings, families, (further information can be found on page 11), to ensure we also took the difficult decision to not allow shareholders to that we continued to deliver critical work for our customers and attend this year’s AGM in person. However, we want to ensure in doing so maintaining the strength of QinetiQ for the long-term that shareholders are able to exercise their rights to vote and to and protecting our stakeholders. ask questions on the business of the meeting. The details of how One of our first actions as a Board, was to call an additional Risk this will be facilitated are described further on page 67. & CSR Committee meeting, of which further information can be found on page 79. We used this meeting to test and confirm a strategy of necessary actions to be taken going forward. Further information of the Code can be found on www.frc.org.uk QinetiQ Group plc 58 Annual Report & Accounts 2020 Governance Purpose, Values and Strategy The Nominations Committee continues to review the skills that we need whilst always considering diversity and the need for The 2018 UK Corporate Governance Code (the Code) became independent thinking and challenge. The Committee will also effective for us from 1 April 2019. The Board and its Committees continue to review the size of the Board and confirm that it is have spent considerable time reviewing the 2018 Code to ensure appropriate with a good mix of skills, experience and knowledge our compliance. This has proved invaluable during the year in and the ability to maintain appropriate oversight of the Executive, considering our purpose and values and progressing with the including providing constructive challenge and support. delivery of our strategy, and in testing and supporting the Board’s and our Executives’ decision making, a process which is further described in the Section 172 Statement on pages 50 to 53. Culture During my time at QinetiQ, my initial very positive impressions of Understanding our Stakeholders its culture and values have been further confirmed. By spending time with the business and its people I have seen that the culture The Board continues to take account of the impact of its and values of QinetiQ; integrity, collaboration and performance decisions on all our stakeholders, as set out in the 172 Statement are clearly embedded and genuinely lived. In QinetiQ, I have on pages 50 to 53 and the examples of our Stakeholder found a culture that is grounded, responsible and humble, where engagement on pages 48 to 49 and 66 to 67. The 2018 UK people have confidence in their capabilities and our strategy, Corporate Governance Code emphasises the need for boards to and with a strong desire to learn and develop. A priority for my develop effective relationships with all stakeholders, including Chairmanship is to see that the Board continues to help sustain understanding their views. In particular, boards are encouraged and evolve this positive culture by having the right capability to ensure they find ways to hear the voice of employees. My around the table and the right engagement with stakeholders fellow Directors and I have worked extensively on our approach outside the boardroom. to these important matters, to ensure that all voices – those of shareholders, employees, customers and communities – find their way to the Boardroom. More information about how the Remuneration Board and the Company considers stakeholders, can be found on At the 2020 AGM we are bringing a new and continued robust pages 66 and 67 and a deep-dive into the interaction between the Remuneration Policy to the vote of the shareholders. Susan Board and the Group’s workforce can be found on pages 64 to 66. Searle has been working tirelessly with the Remuneration Committee over the year to develop a fair, flexible, stretching and Management Changes aligned Remuneration Policy, of which further information can be found on pages 88 to 108. It is now 13 months since I joined QinetiQ, initially as a Non- Executive Director. It has been a pleasure to get to know my new colleagues on the Board and I believe that as a Board we Conclusion have a wide ranging combination of diversity, skills, experience I would especially like to thank the CEO, his Executive team and and knowledge, required to steer the Company through the next my fellow Directors for their work during the year. QinetiQ has an years. At the AGM in July we will be saying good bye to Paul exciting future ahead and I believe that the right team is in place to Murray. Paul has made valuable contributions during his tenure take the Company forward and transition into a global business. through his leadership of the Audit Committee. In May 2020 we welcomed Shonaid Jemmet-Page to the Board. Shonaid is an experienced Non-Executive Director in the energy and financial sectors and will be taking on the role as Audit Committee Chair Neil Johnson when Paul Murray steps down in July. Non-Executive Chairman In July 2019, Michael Harper stepped down as the Chair of the Remuneration Committee, and I would like to take this opportunity to thank him for his work and dedication to this role. Michael continues to serve as the Deputy Chairman and Senior Independent Director on the Board and its Committees. Susan Searle, who has been a valuable member of the Board as a Non-executive Director since 2014, took on the responsibility as the Chair of the Remuneration Committee when Michael stepped down. In addition to her experience from the QinetiQ Board, Susan also brings to this challenging role previous and current experience as the Remuneration Committee Chair of other listed companies. 59 Board of Directors The Chairman considers all of the Directors to contribute valuably, and to continue to be paramount to the Company’s long-term sustainable success. Neil Johnson Steve Wadey David Smith Chairman Chief Executive Officer Chief Financial Officer Skills, competence and experience: Neil’s former Skills, competence and experience: Steve’s proven Skills, competence and experience: David provides CEO experience and current roles as a plc Chairman track record of driving growth, and his in-depth significant expertise to the Group from his broad and and Non-Executive Director brings to the Board experience of defence and technology industries is of comprehensive executive experience in blue-chip relevant knowledge, challenge and leadership. essential importance and benefit to the Board. companies and work in the aerospace and defence, Starting his career at Sandhurst and the Army, Neil Steve is a Fellow of the Institution of Engineering and technology, and automotive sectors. spent much of his early career in the automotive and Technology, the Royal Aeronautical Society, and the David is an Associate of the Chartered Institute engineering industries. He was worldwide Sales and Royal Academy of Engineering. He was previously of Management Accountants and a member of Marketing Director at Jaguar before being seconded Co-Chair of the UK Defence Growth Partnership, a its Advisory Panel. He was previously the CFO of to the UK Ministry of Defence to command 4th member of the Prime Minister’s Business Advisory Rolls-Royce Holdings plc, having joined as CFO of its Battalion The Royal Green Jackets. He returned to Group, Co-Chair of the National Defence Industries Aerospace Division. Prior to that, David was CFO of the industry with British Aerospace, initially running Council Research and Development Group, and a Edwards Group and CEO of Jaguar Land Rover, having Land Rover and then all of its European automotive Non-Executive Director of the UK MOD Research and previously been its CFO. He has also held a variety of operations. Neil was later CEO of the RAC, and former Development Board. Steve has held various roles roles with the Ford Motor Company. Director General of the EEF and a Home Office with MBDA, including as Managing Director, MBDA Other appointments: Motability Operations Group plc. appointed Independent Member of the Metropolitan UK. Previously he held various roles with Matra BAe Police Authority.