Statement of Corporate Governance Arrangements 

The Wates Corporate Governance Principles for Large Private Companies serves as the framework to demonstrate how Directors have had regard for the matters set out in section 172(1)(a) to (f) of the Act when performing their duties, including how Directors have engaged with and considered the interests of stakeholders including the Company’s shareholder, employees, suppliers, customers; and other stakeholders such as the environment and local communities within which the Company operates. Reporting against the Wates Principles is included in the Corporate Governance Statement below.

Corporate Governance Statement

For the year ended 31 December 2023, under The Companies (Miscellaneous Reporting) Regulations 2018, the Company has applied the Wates Corporate Governance Principles for Large Private Companies which can be found at www.wates.co.uk/insights/wates-group/culture/the-wates-principles-report/. The Directors have set out below an explanation of how the Wates Principles have been applied during the 2023 year.

Principle 1 – Purpose and leadership

“An effective board develops and promotes the purpose of the Company, and ensures that its values, strategy and culture align with that purpose.”

As a subsidiary of Marsh & McLennan Companies Inc. Group, the Company shares the Group’s purpose to make a difference in moments that matter, for its clients and for the communities in which it operates. The Group’s values and strategy that underpin that purpose, are set by MMC, and applied by the Company to consider the local market in which it operates.

The Board has delegated responsibility to formulate the Company’s strategy to the Chief Executive Officer (“CEO”), who sets the Company’s strategic objectives within the risk tolerance agreed by the Board and develops the Company´s business plans, financial objectives and budgets, and operating strategies. Through regular updates from the Executive on delivery of the Company’ strategy, the Board can independently and constructively challenge the Executive on objectives and plans, as well as performance against strategic initiatives. During 2023, the Board considered a number of key strategic initiatives aimed at creating sustainable profitable growth, including investments in growth areas such as the launch of the Mercer Smart Pension Master Trust, the divestiture of the Company´s Pensions Administration business (considered a non-strategic part of the Company´s portfolio), as well as efforts aimed at deliberate collaboration with colleagues across the Group in the Marsh, Oliver Wyman and Guy Carpenter businesses.

The Board understands that instilling the right culture is critical to fulfilling the Company´s purpose, as it guides strategy and drives long-term value for the Company´s shareholder and wider stakeholders. The Board supports and promotes efforts by the Executive through, for example, the Company´s diversity and inclusion agenda, and social impact efforts, to build a culture where all colleagues belong and thrive. The Board views the Group´s Code of Conduct, The Greater Good (which applies to all employees and Directors of the Company) as the foundation of the culture of the Company, underpinning the values of the Company as a whole and the individual obligations of all colleagues. Culture is routinely monitored through employee surveys, absenteeism rates and exit interviews, with results reported to the Board periodically. Employees are encouraged to report concerns relating to business integrity and conduct through established whistleblowing processes, and anonymised concerns are reported to the Board periodically.

Principle 2 – Composition

“Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the Company.”

As at 31 December 2023, the Board of the Company comprised a Non-Executive Chair, two further independent Non-Executive Directors, the CEO, the Chief Financial Officer, and an additional Executive Director, the former Chief Financial Officer.

Board members have a diverse range of skills, expertise, and experience, including experience and expertise in the fields of actuarial science, corporate finance, treasury, banking, private equity, accountancy, pensions, management consulting and law. All Board members have extensive experience in executive and/or nonexecutive positions within financial services and other industries.

The separation between Chair and Chief Executive Officer roles ensures that there is a balance of responsibilities and effective decision-making by the Board. The Chair promotes and facilitates open and productive dialogue amongst Directors and the Executive and is supported by the Company Secretary in ensuring that all Directors have appropriate information and sufficient time to discuss important topics.

The Nominations Committee keeps under review the structure, size and composition of the Board to ensure that there is diversity of thought, experience and expertise necessary to govern the Company. It also oversees Board succession planning and appointments and considers other significant time commitments and/or conflicts disclosed by Directors. The Nominations Committee reviews the results of the annual Board performance evaluation process as this relates to Board and Committee effectiveness and composition and makes recommendations as appropriate. The Nominations Committee also oversees the delivery of induction programs to new members of the Board to ensure they are fully informed about the Company´s main areas of business activity, strategic priorities, risks and commercial issues affecting the Company. Induction programmes are tailored to each Directors´ specific experience and knowledge.

Principle 3 – Responsibilities

“The board and individual directors should have a clear understanding of their accountability and responsibilities. The board´s policies and procedures should support effective decision making and independent challenge.”

The Board´s terms of reference, which provide a framework for governance practices, clearly sets out the responsibility and remit of the Board and the matters it has delegated to the Executive. The Board reviews its terms of reference and governance policies annually, or as and when required, in order to ensure alignment with evolving corporate governance and business practices. In accordance with regulatory requirements applicable to the Company, all Directors have clearly documented statements of responsibility for the matters under their remit. These statements of responsibility are included in papers shared with the Audit Committee and provide a clear view of individual Director responsibilities.

The Board has established committees which comprise a majority of Non-Executive Directors, to assist in providing oversight, independent challenge and guidance to the Executive in the areas of Risk, Audit and Remuneration. The responsibilities of the committees, including decision-making authority and escalation processes, are outlined in each committee´s terms of reference which are annually reviewed by the respective committees and the Board.

The Board meets at least four times per year, with ad hoc meetings held as and when required. During 2023, the Board met a total of seven times. In accordance with its terms of reference, the Board also considered and approved items via written resolution outside of meeting where convening a meeting proved impractical or impossible.

The Board receives regular and timely information on all matters required to lead and direct the Company and to ensure that it is soundly and prudently managed. This includes regular reports on business and financial performance, key strategic risks and opportunities, operational matters, market conditions, human resources, legal, compliance, audit and regulatory matters. All papers provided to the Board are prepared by subject matter experts with the relevant experience and skills necessary to ensure the integrity of information presented.

Principle 4 - Opportunity and Risk

“The Board should promote the long term sustainable success of the Company by identifying opportunities to create and preserve value, and establish oversight for identification and mitigation of risks.”

Through regular updates by the CEO at each quarterly board meeting during 2023, the Board considered and discussed the Company´s key business initiatives and future plans for value creation and preservation. Outside of the formal meeting programme, the Non-Executive Directors met with members of the Executive to review and discuss business strategy and plans for each of the Company´s lines of business. The Board has responsibility for risk management and has delegated this oversight responsibility to the Risk Committee. The Risk Committee is supported by a sub-committee, the Operational Risk Committee (‘ORC’). The Risk Committee recommends the Company´s risk appetite and tolerance to the Board annually for approval and receives regular reports from the Chief Risk Officer on risk taking relative to performance. The Company’s key risks have been outlined in the Strategic Report on pages 7 to 9. 

Principle 5 - Remuneration

"A Board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the Company.”

The Company’s remuneration practices are subject to the Remuneration Policy, which is approved by the Board on an annual basis, upon the recommendation of the Remuneration Committee. The Board has delegated authority to the Remuneration Committee to keep under review the Company’s Remuneration Policy and compensation practices to ensure that they are consistent, promote effective risk management and align to the Company’s business strategy, values and long-term objectives.

During 2023, the Remuneration Committee reviewed the remuneration packages of all FCA Code Staff (which includes Executives) within the Company to ensure that performance was remunerated for financial performance and qualitative measures aimed at preserving the legal, regulatory and reputational health of the Company. The Remuneration Committee also reviewed and challenged the Executive on high-level remuneration and performance data for all colleagues during the Company´s annual compensation process to ensure remuneration proposals for the Company’s employees were balanced, proportionate and aligned with the Company´s diversity and inclusion aspirations. The Board continues to commit to improving the Company´s Gender Pay Gap. The Company´s latest Gender Pay Gap Report, which was reviewed by the Board prior to publication is available at http://ie07.zo23.com/en-gb/footer/gender-diversity-targets/ .

Principle 6 – Stakeholder Relationships and Engagement

“Directors should foster effective stakeholder relationships aligned to the Company's purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.”

The Board understands that good corporate governance and effective communication are essential on a day-to-day basis to deliver the Company’s purpose; and to protect the Company’s brand, reputation and relationships with all stakeholders, including the Company’s shareholder, clients, employees, suppliers, the environment and the local communities within which the Company conducts business. The Board ensures there are channels to receive appropriate feedback from discussions with all stakeholders and has clearly outlined in its terms of reference that its purpose is to generate value for its shareholder and to ensure the sound and prudent management of the firm, with due regard for the interests of the Company´s other stakeholders.

Shareholder

As a wholly owned subsidiary, the Board considers the views of its ultimate shareholder (Marsh McLennan Companies, Inc.), and the interests of the Group in all decisions and transactions undertaken by the Company. The Company´s Executive Directors provide the primary channel of communication between the Company, Marsh McLennan Companies, Inc and the Group.

Distributions to the Company´s shareholder are considered after a full assessment of the Company’s capital adequacy and ability to continue as a going concern into the foreseeable future. The Board also balances the ability to invest in future growth, with stable and sustainable returns for the shareholder. Further information on dividends is set out in the Notes to the Financial Statements on page 44.

Clients

The Company is committed to ensuring that all clients are treated fairly, that positive client outcomes are achieved, and that client interests are considered as part of decision making at every level within the Company, including decisions to launch any new product or service.

The Audit Committee reviews the effectiveness of key business processes and controls to ensure high levels of service and positive client outcomes, whilst the Risk Committee monitors key risk indicators in this regard, including completion levels of employee induction and training, error and omission and complaints data and trends, actions taken to areas of concern and time to resolution. High level reporting and items of significant concern are reported to the Board on a quarterly basis or more frequently if required.

During 2023, the Board closely monitored the Company´s progress against plans to ensure compliance in applicable areas of its business with the new Consumer Duty (the “Duty”) introduced by the FCA which sets out new rules and standards of consumer protection, requiring firms to put their customers´ needs first. A Board Champion was appointed to ensure that the Duty is raised regularly during relevant discussions, and that the Board challenges the Executive on the Company´s management of embedding the Duty and focusing on customer outcomes. The implementation program presented an opportunity for the Company to formalise its existing best practice in this regard and identify and address areas for improvement including updates to the Company´s Vulnerable Customer Policy and refining management information, and governance and reporting processes. Monitoring the Company´s compliance with the Duty has been integrated into the formal Board programme with a view to ensuring that the Company´s strategies, governance, leadership, processes, and people policies reflect the obligation to act to deliver good outcomes for customers.

Employees

The Board supports and promotes the Company’s policy of open and effective communication with all employees who, subject to practical and commercial considerations, should be consulted on and involved in decisions that affect their current and future job prospects and working environment. The Company conducts regular colleague engagement surveys with the results reviewed by the Executive and the Board to identify areas for improvement.

The Company has in place a forum of Mercer Employee Representatives (the “MER”) which comprises elected representatives from across all offices and lines of business and is chaired by a member elected from within the employee representatives. The MER meets at least monthly and is engaged to provide feedback to the UK Executive Leadership Team on policy amendments, proposals for changes to benefits and to support colleagues when changes to structure are proposed.

The Board monitors attrition rates and measures absenteeism levels in an effort to identify emerging people risks and trends and to ensure appropriate action is taken to address these. Emerging people risks and trends are highlighted to the Board by Management, together with proposed action plans.

The Board and UK Executive Leadership Team remain committed to delivering the Company´s diversity and inclusion strategic targets. The target to increase the Company´s senior female population to over 35% by 2023 was exceeded, and the Company is now aspiring to reach 50% by 2027.

The Board and UK Executive Leadership Team have similar ethnically and racially diverse (“E&RD”) mandates that aim to increase representation of all E&RD colleagues to 15% by 2027.

Suppliers

The Company´s business with suppliers is managed at a Group level through its Global Sourcing and Procurement department. The Group is committed to building strong relationships with suppliers and recognises that engaging with suppliers and subcontractors who provide a superior service on reasonable terms is critical to success. The Board is supportive of the principles included in the Greater Good setting out the Group´s commitment to engage with well qualified and financially responsible suppliers based on the quality of their products and services and the competitiveness of their prices and terms and conditions, and to avoid suppliers who have engaged in unlawful or unethical conduct, who do not meet the Group´s dataprotection standards or who could damage its reputation. Colleagues involved in the supplier selection process are also obliged to disclose any actual or potential conflict of interest or any personal relationship with a prospective supplier and the Group encourages suppliers from diverse backgrounds to compete for its business. Marsh Corporate Services Limited reports on the UK Group’s supplier payment practices on a biannual basis, and results are monitored by the Audit Committee.

The latest results can be found at http://check-payment-practices.service.gov.uk/report/80629

Other

The Company is authorised and regulated by the Financial Conduct Authority. The Board is committed to open and co-operative interactions with the FCA, as and when these arise.

Community 

In an ever-changing world with geopolitical instability, economic uncertainty and ongoing conflicts, the Board recognises the importance of supporting the communities in which the Company operates. In alignment with the Group´s ESG strategy, social impact activities are focused on disaster response, mentoring and building resilient communities, which the Board recognises helps contribute to the Company´s vibrant and inclusive culture, drives colleague engagement and elevates the Company´s brand reputation. By aligning its social impact programmes with the business priorities and experience, the Company and the wider Group can demonstrate its commitment to its communities in the UK while supporting the business.

In 2023, the Company continued to support the Group´s strategic charity partner in the UK, Ambitious about Autism, and participated in Global Volunteer month and in global disaster giving campaigns.

Environment

The Company, as part of the Group, recognises its obligations to be good stewards of the environment and continues to look at ways to minimise its carbon footprint and impact on the environment. The Company shares the Group´s ESG and climate-related ambitions and integrates the Group´s environmental initiatives into strategy, decision-making and business processes, considering the local market. Further information can be found in the Company’s Non-Financial and Sustainability Statement on pages 10 to 18 and in the Greenhouse Gas Emissions, Energy Consumption and Energy Efficiency Action report on pages 20 to 24.

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