Newcastle United - Corporate Governance

Corporate Governance is how well the board are looking after the business. There are a number of rules on how this should be carried out. In 2004 the annual report showed eight areas of concern these are shown here. The 2005 report has some points of interest too, these are shown below. When the full 2006 report is released any comments made will be reported here

The board of NUFC views its role as being to "provide entrepreneurial leadership of the Group within a framework of prudent and effective controls, which enable risk to be assessed and managed. It set's the Group's strategic aims, ensures that the necessary financial and human resources are in place for the Group to meet its objectives, and reviews management performance."

The areas the NUFC board are out of line with the approved code of practice are

1. the role of the Chairman and Chief Executive are held by one person.
2. the club do not have the recommended minimum number of of two independent directors
3. the remuneration and audit committees

These match up with some of the items listed a year ago. The board acknowledges these issue may cause some concern, but "remain confident that they .... provide and adequate an effective system of leadership and control".

They also acknowledge that there is no formal annual evaluation of the performance of the board, or of the individual directors. Wonderfully they consider 'that it is easier to recognise effective performance than to measure it".

In the year ended July 31st 2005 there were 8 (eight) full board meetings that all the directors attended. Apart from Douglas Hall who managed to get to 6 of them. Salaries for the directors are shown here.

The areas where the club are not in line are

1. There is only one person on the board of directors who can be viewed as independent. The  board is made up of Freddy Shepherd, his brother Bruce, Douglas Hall and his sister Alison. The single independent voice is Timothy Revill an accountant based in Gibraltar.
2. Freddy Shepherd is both Chairman and Executive Director, which means he is responsible for who is on the board, and for the day to day decision making. The Best Practice is that these two roles are not held by the same person. This is to ensure that someone is checking on the standard of work being done by the person running the business. The way it is with Freddy Shepherd is that no one can question how well he is doing.
3. The club does not have someone who can suggest appointments to the board, a "Nominations Committee".  This means that Shepherd can appoint who ever he wants into any position without any checking that they are the right person for the job.
4. The Remuneration committee who decide how much to pay board members is made up of only two people Bruce Shepherd and Tim Revill. As Bruce Shepherd is Freddy's brother he is not viewed as being independent. Tim Revill an accountant based in Gibraltar is viewed as independent.
5. The money paid to Freddy Shepherd and Douglas Hall is not dependent on how well the club performs, nor on any individual targets that should be set for them in. The Code says pay should be performance related.
6. Freddy Shepherd and Douglas Hall are on two years notice. So if NUFC wished to sack them they would have to pay two years salary to them. Freddy Shepherd was paid £500,000 in 2004, Douglas Hall £450,000 per year, so it would cost £1m and £900,000 respectively to sack each of them. The standard is for directors to have contracts of no more than 12 months.
7. The club have an Audit Committee which reviews how well the business looks after its accounts and financial policy. As with the Remuneration Committee this committee is made up of Bruce Shepherd and Tim Revill. Only Mr Revill an accountant based in Gibraltar is viewed as independent.