Further embedding our Systems Thinking approach and increased digitalisation continues to underpin our succession pipeline for board and senior management.

Nomination committee

Quick facts

  • All members of the committee are independent, thus fulfilling the Code requirement that a "majority of members of the nomination committee should be independent non-executive directors".
  • The role of the committee is to make recommendations to the board on its composition, balance and membership and on refreshing the membership of the board committees.
  • The company secretary attends all meetings of the committee;
  • The customer services and people director, has responsibility for human resources, and regularly attends meetings and is responsible for engaging with executive search recruitment advisers.
  • The CEO is not a member of the committee, but from time to time is invited to attend. Neither the Chairman nor the CEO would participate in the recruitment of their own successor.

Quick links

Corporate responsibility committee members

Dr John McAdam (chair)

Stephen Carter

Mark Clare

Alison Goligher

Sir David Higgins

Brian May

Paulette Rowe

Sara Weller

Dear Shareholder

This year the focus for the nomination committee has been on the search for my successor, and so this will be my last report on behalf of the nomination committee. This process was led by Mark Clare in his role as senior independent director, and was in accordance with our previously agreed board succession plans. Further information can be found in the Nomination committee report.

Our succession plan aims to ensure that the board and senior management have the appropriate balance of skills and experience to support the group's strategic objectives. Our senior management succession plans take into account the views of all board members to ensure our plans encompass the benefit of all their skills and experience. During the year the board has reviewed the people and organisational capability plan ensuring that our internal talent is identified and developed to support the delivery of our next five-year asset management period. Further embedding our Systems Thinking approach and increased digitalisation continues to underpin our succession pipeline for board and senior management. In our succession planning we aim to ensure both our board directors and members of the executive team and other senior managers, who are potential successors to the board and/or the executive team or board, are well equipped with the right skills and experience to address the challenges of our business and, where necessary, address any developmental needs. They also need to be in tune with the culture of the company.

In support of these board discussions, the nomination committee has responsibility for considering the detailed recruitment process for executive and non-executive board appointments and members of the executive team. All the non-executive directors are members of the nomination committee and participate in meetings and in the recruitment process for new board colleagues. During a board recruitment process, the nomination committee would be supported by Louise Beardmore, customer services and people director, as part of her human resources responsibilities. During the year, the committee formally met twice. The meetings discussed and reviewed our board and executive level succession plans. Our plans address both contingency planning needs and requirements in the short to medium term, and incorporate a reasonable degree of certainty on timescales for key board positions.

Historically, independent non-executive directors at United Utilities have served a term of between seven and nine years, a pattern which has facilitated the refreshing of the board in recent years almost on an annual basis, along with ensuring a high degree of continuity. Notwithstanding this, the specifics of each of the non-executive directors' time of departure has been driven by their own personal circumstances. Serving beyond a nine-year term is identified in the Code as being one of the reasons which could affect a non-executive director's independence, although the 2016 Code, under which we are reporting, excludes a board chairman from this nine-year rule. The 2018 Code specifies that board chairmen are now subject to the nine-year rule.

Our updated board diversity policy (see the Nomination committee) is taken into account during every candidate selection process. Ultimately, we do strive to appoint the person we believe is best matched to the role in terms of what they have to offer the company and to make a positive contribution to the board conversation and board dynamics. Diversity of outlook and interest is essential to ensuring we have a variety of views to contribute to discussions and the decision-making process.

Dr John McAdam
Chair of the nomination committee

Main responsibilities of the committee

  • Lead the process for board appointments and make recommendations to the board about filling vacancies on the board, including the company secretary;
  • Consider the succession planning of directors and members of the executive team;
  • Make recommendations to the board on refreshing the membership of the board's principal committees;
  • Review directors' conflict authorisations;
  • Consider the request from executive directors for election to the boards of other companies and make a recommendation to the board; and
  • Consider requests from non-executive directors for the election to the boards of other companies; this role has been delegated to the Chairman (other than in respect of his own position).

What has been on the committee's agenda during the year

Board succession

The committee has further developed the board succession plans during the year, taking into account more granularity around timescales for key board positions, the likely evolution of the business and the changing shape and increasingly competitive nature of the industry expected from 2020 onwards. A succession planning matrix tool (incorporating the skills matrix, see the Nomination committee) for board directors is used to support the planning process for board appointments. The succession planning matrix highlights the Code governance requirements; existing directors' terms of appointment and a forecast/anticipated time frame when an individual might leave the business; the projected strategic needs of the business and resulting preferred experience of any potential new board member; existing potential internal successors to a role (where identified) and those who could act as an interim should the need arise. A candidate suitable for the role of CEO would need to demonstrate that their management approach would fit with the company's culture of behaving responsibly. The committee would seek to consult with the incumbent CEO, given his unique knowledge and perspective of the group, on his view of the needs of the business going forwards. Neither the Chairman nor the CEO would be involved in the appointment process of their successor.

Board appointment process

Typically, following board discussions, the nomination committee will be responsible for drafting a brief, setting out the attributes and experience of a preferred candidate supported by the customer services and people director as part of the human resources function of the role. The brief would be shared with a number of executive search agencies (all of which would be signatories to the voluntary code of conduct on gender diversity for executive search firms) who would be invited to present their understanding of the role and attributes required. One of these firms would be engaged to conduct the search. A longlist of candidates would then be reviewed by the nomination committee and those identified for a shortlist would be invited for interview, initially with the Chairman, the CEO and the customer services and people director. Thereafter, a number of candidates would be invited to meet other non-executive directors and the CFO. Following the interview process, the nomination committee would meet to review and discuss the candidates (with the support of the customer services and people director) taking into account the views of the CEO/CFO and assess the 'best fit' with the succession planning and skills matrix and then make a recommendation to the board. References would be sought and reviewed by the Chairman prior to an appointment being taken up. A preferred candidate would also meet with representatives of Ofwat.

Directors' tenure as at 31 March 2019

Age profile

Chairman

Executive director

Senior independent non-executive director

Independent non-executive director

 

Report by Mark Clare (senior independent non-executive director) on the appointment of Sir David Higgins as non-executive director and Chairman designate

The focus for the nomination committee this year has been to identify a suitable successor to John as Chairman. The brief was to find a candidate with the skills, experience and capability to take on the leadership of the board as the company prepares to implement its business plan for the next five year period and beyond, against a backdrop of an operating environment that continues to change.

The process to identify a new Chairman started with the appointment of a recruitment partner, the Lygon Group in November 2018 (other than providing executive search services on previous occasions, Lygon Group have no other connection with the company). The brief made it clear that we were very keen to ensure we considered and saw a diverse range of candidates. From an extensive and diverse longlist, seven candidates were seen in the first stage, two of whom were female.

Following a rigorous process involving all members of the board and including a meeting with our regulator, Ofwat we decided to appoint Sir David to succeed Dr John McAdam as Chairman. John will step down from the board on 31 December 2019. On his initial appointment as a non-executive director, Sir David will become a member of the nomination committee. He will also be appointed as a non-executive director of United Utilities Water Limited.

In recruiting Sir David, the board believes his substantial infrastructure experience, engineering background and understanding of regulated businesses make him an excellent appointment. We are delighted that he has accepted the position and the board looks forward to working under his leadership to deliver the company's 2020–25 business plan and beyond.

Sir David is currently chairman of Gatwick Airport Limited and a non-executive director of Commonwealth Bank of Australia, where he chairs the remuneration committee and is a member of the risk committee. Sir David will step down from the Commonwealth Bank of Australia in December 2019. Previously, he was chief executive of Network Rail Limited and The Olympic Delivery Authority. Sir David's full biography can be found in the Board of directors.

Having served on the Board for over 11 years, I would like to thank John for the pivotal role he has played in helping drive the considerable progress made by the business during that time, and for his wider contribution to the sector. His commitment and contribution to the company will be much missed and we wish him well for the future.

Membership of the principal board committees

No changes were made to the membership of the principal board committee during the year. On his appointment, Sir David Higgins became a member of the nomination committee.

Board diversity

The board diversity policy (see Nomination committee) is to "ensure the selection process for board appointments provides access to a range of candidates. Any appointments will be made on the basis of merit and objective criteria, and within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths, but with due regard for the benefits of diversity on the board, including gender diversity." The objective of the policy is for new directors to bring something different to the board table, be it in terms of experience, skills, perspective, interests or other attributes. As referred to above, our board diversity policy would be brought to the attention of any executive search firm used as part of the selection and appointment process for a board position. Feedback would be sought from the search firm in terms of their success in attracting potential candidates with diversity of attributes and from any interview process conducted by other board members and taken into consideration in identifying suitable candidates. During the year, we have updated our board diversity policy, reflecting the recommendation of the review of the ethnic diversity of UK boards led by Sir John Parker and published in October 2017. We recognise the benefits of diversity, and its contribution to the effectiveness of the board decision-making process, and to the benefits of diversity across our entire employee population with initiatives in place to support women in the workplace and the ethnic imbalance of our workforce (see Nomination committee).

Skills matrix of board directors

Finance/
accounting
UtilitiesRegulationGovernmentConstruction/
engineering
IndustrialCustomer- facingFTSE companies
Dr John McAdam
Steve Mogford
Russ Houlden
Steve Fraser
Mark Clare
Sara Weller
Brian May
Stephen Carter
Alison Goligher
Paulette Rowe
Sir David Higgins

 

Summary of board diversity policy

  • Ensure the selection process for board appointments provides access to a range of candidates. Any such appointments will be made on the basis of merit and objective criteria, and within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
  • Ensure that the policies adopted by the group will promote diversity in the broadest sense among senior managers who will in turn aspire to a board position.
  • In selecting candidates for board positions, only use the services of executive search firms who have signed up to the voluntary code of conduct for executive search firms as recommended by the Davies Report.
  • Adopt measurable objectives from time to time for achieving gender diversity at board level – which shall be to maintain at least 25 per cent, and aspire to 33 per cent female representation by 2020 and to have at least one director of non-white ethnicity by 2021.

A typical induction programme

  • Meet with members of the executive team discussing our business and regulation;
  • Meet with the company secretary to gain an understanding of the group's governance arrangements and associated processes;
  • Visit the integrated control centre based in Warrington, to meet staff, and gain an understanding of the digital monitoring and control of the group's water and wastewater network and assets;
  • Meet with the corporate affairs director and head of sustainability;
  • Meet with the customer services and people director to discuss the actions undertaken by the business to improve service to customers and the group's employee agenda;
  • Meet with the wastewater network director and the water and scientific services director to gain an understanding of the wholesale operating model; and
  • Visit the water and wastewater testing laboratories where regulatory and operational samples are analysed daily providing essential quality and compliance data.

A typical induction programme

  • Meet with members of the executive team discussing our business and regulation;
  • Meet with the company secretary to gain an understanding of the group's governance arrangements and associated processes;
  • Visit the integrated control centre based in Warrington, to meet staff, and gain an understanding of the digital monitoring and control of the group's water and wastewater network and assets;
  • Meet with the corporate affairs director and head of sustainability;
  • Meet with the customer services and people director to discuss the actions undertaken by the business to improve service to customers and the group's employee agenda;
  • Meet with the wastewater network director and the water and scientific services director to gain an understanding of the wholesale operating model; and
  • Visit the water and wastewater testing laboratories where regulatory and operational samples are analysed daily providing essential quality and compliance data.

Conflicts of interest and time commitment

The company's articles of association contain provisions which permit unconflicted directors to authorise conflict situations. Each director is required to notify the Chairman of any potential conflict or potential new appointment or directorship, and the board reviews the position of each director annually. No changes were recorded which would impact the independence of any of the directors.

The board does not specify the precise time commitment it requires from its non-executive directors in taking on the role as they are expected to fulfil it and manage their diaries accordingly. The board is content that none of its directors are overcommitted and unable to fulfil their responsibilities as a board director for United Utilities and are not overboarded. Each individual's circumstances are different, as is their ability to take on the responsibilities of a non-executive directorship role. Should a director be unable to attend meetings on a regular basis, not be preparing appropriately or not contributing appropriately to board discussions, the Chairman would be responsible for discussing the matter with them and agreeing a course of action.

Induction of new non-executive directors

An induction programme is devised for each new non-executive director. It would include one-to-one meetings with the Chairman and each of the existing non-executive directors. They will have one-to-one meetings with the CEO, CFO, COO and the company secretary along with other members of the executive team. They will also meet members of the operational teams and visit some of the key operational sites and capital projects to ensure they get a first-hand understanding of the water and wastewater business. New directors receive a briefing on the key duties of being a director of a regulated water company, including the role of the regulated company's holding company. They will also meet with the strategy and regulation director and are required to meet with representatives of Ofwat.

Wider succession pipeline and talent management

For a number of years, we have had a written succession plan for our executive directors and other members of the executive team, which now includes outline timescales. This plan identifies an interim internal successor to fill a role in the short term should the need arise, and the longer-term development needs of potential successors to be able to fulfil a role on a more permanent basis. As with all our board appointments, we would always aim to appoint the best person to fulfil a role. It would be common, when recruiting for a senior role, for an external search to be conducted alongside an internal candidate recruitment process.

Any changes that are required to the profile of the management team to reflect the changing needs of the business are considered by the board in the executive succession plan. Succession and development initiatives for senior executives include executive mentoring and coaching and participating in an executive business school programme. Leadership development centres have been delivered to identify and validate potential for future director and senior leader positions and develop a number of role-ready diverse candidates to provide the group with leadership capacity in an increasingly complex environment. Senior managers are encouraged to take on a non-executive directorship role as part of their personal development, but it is recognised that this is very much a personal commitment for each individual. We continue to work towards improving our gender balance across our employee population as part of our ongoing diversity and inclusion plan (see Nomination committee).

During the year, board directors have a number of opportunities to meet with members of the executive team, both formally when senior managers are required to present at board meetings on matters related to their responsibilities, and on more informal occasions. From time to time, board members also have the opportunity to attend events and meet with members of the apprentice and graduate population and other employees identified as potential talent within the business.

What we have done to improve diversity and inclusion in 2018/19

Gender

Our workforce profile has remained quite static at 65 per cent male and 35 per cent female. This is primarily due to the limited supply of females with the relevant skills available in the market and the legacy of a traditional male-orientated bias in science, technology, engineering and maths (STEM) careers.

At board level, 70 per cent are male and 30 per cent are female; the position is similar at the executive team level of 71 per cent male:29 per cent female. Encouragingly, there is a greater female representation in the direct reports to the executive team of 64 per cent male:34 per cent female. The overall number of female graduates is 41 per cent. We offer predominantly STEM based programmes and we are encouraged to see a more gender balanced pool of future talent. The apprentice population is 18 per cent female, an increase from nine per cent since 2014/15, and this compares favourably compared to the sector.

We are:

  • celebrating the success of those of our senior and emerging female leaders included in the Northern Women Power List;
  • continuing to look for targeted development for our future female leaders with cross company mentoring schemes and targeted personal development to support future progression;
  • actively encouraging employees to join the gender equality network within the business;
  • part of the 30 per cent Club campaign to achieve the target of 30 per cent female representation in senior leadership teams by 2020; and
  • members of the EU skills diversity network and have signed a diversity pledge alongside 32 other businesses in the sector, with the aim of improving diversity business-wide.

Disability

In the North West, 19 per cent of the working age population are disabled or live with a long-term health condition; less than one per cent of our employees have declared a disability or long-term health condition. Our ability network aims to support employees with, or those who support, people with a disability or long-term health condition. In 2017 we gained the government recognised Disability Confident status, and are aiming to achieve Disability Leader status over the next 18 months. We are committed to guarantee interviews and making reasonable adjustments for people who are registered with a disability, and will continue to promote this to attract candidates from the widest talent pool.

Our Time to Change campaign, normalising the stigma of mental health and providing support to employees through our network of trained mental health first aiders, is sponsored by Steve Fraser, COO. Similarly, Louise Beardmore, customer services and people director, sponsors and raises awareness of dyslexia across the business. We will participate and promote National Dyslexia week to encourage awareness and support employees with the condition.

Ethnicity

The Black Asian Minority Ethnic (BAME) representation of our workforce is two per cent; 15 per cent of our workforce choose not to disclose ethnicity. We hold Bronze status in the Business in the Community Race for Opportunity programme. Attracting a future pipeline of employees from multi-cultural backgrounds remains a priority. We are in the second year of partnership with Teach First as a way to gain access to talented young people from diverse cultural communities in our region, particularly in areas where English is a second language. We have strategic partnerships with universities and other education providers, with higher levels of BAME presence in their student population in order to improve the ethnicity of our workforce profile.

We are members of the National Apprenticeship Champions Diversity Network Forum, which works alongside other companies in the UK, to address the challenge of recruiting more apprentices from BAME backgrounds. We have joined the Energy and Utility Skills Diversity Forum to enable us to promote and contribute to the agenda in our sector.

Social mobility

During the year we signed up to the UK Government's social mobility pledge, committing to provide support to people from communities with low social mobility. Youth unemployment in the North West is higher than the national average at 11.2 per cent. We recognise that our region's young people come from a range of socio-economic backgrounds which can contribute, along with personal challenges, to the difficulties of finding work.

In collaboration with our partners, we have continued to lead our youth programme, started in 2014, supports young people from across our region who are not in education, employment or training (NEET) become work ready. This collaboration has supported over 80 young people, with 79 per cent of participants obtaining paid employment after the programme. The Prince's Trust measure the social value of the programme at £150,000 per person.

Flexible working

We comply with, and often exceed, our statutory obligations to provide flexible and part-time working patterns for our employees to reflect stages in their individual lifecycle. We provide the opportunity for money and credit management advice to the under 30s through to financial management and budgeting in retirement. We are committed to considering modifying working practices and policies to reflect what is important to employees at different points in the employment lifecycle.

LGBT+

Identity+, our lesbian, gay, bisexual and trans employee network, has over 500 members. Plans are in place to gain external recognition for the excellent colleague support provided by the network, which has an active presence in our communities often being involved, in annual pride events across our region. We hope to encourage those involved in our LGBT+ network to play an active role in their own communities to promote United Utilities as an employer of choice.

Gender pay

At present, we have a higher proportion of men at more senior levels within our organisation and more men in higher-skilled and higher-paid roles which contributes to the gender pay gap. We have an action plan in place which focuses on how we challenge tradition and attract more women into these currently male dominated roles; how we develop our female talent to increase the number of women in senior positions and strengthen succession pipelines; and leading from the top on a commitment to change. Our gender equality network (GENEq) aims to support, mentor, develop, inspire and promote both men and women in United Utilities to realise the benefits of gender equality. Our gender pay gap figures are shown below. Further details can be found in the full report; a copy can be found at unitedutilities.com/corporate/responsibility/employees/diversity/

 

93.3 per cent of males and 96.2 per cent of females received a bonus payment. Levels are less than 100 per cent as the eligibility criteria requires a minimum level of service to be completed during the bonus year and therefore some new starters may not be eligible.

(1) Source: Office for National Statistics October 2018.

(2) Source: company payroll data for the month of April 2018.

(3) Source: company payroll data, bonus paid in the 12 months period preceding 30 April 2018.