14 minute read
Board consideration of stakeholder interests and s.172(1)
by gpe_london
Impact on decisions
Some examples of how the Board has considered stakeholder interests and s.172(1) matters in its decision making in 2021/22 are set out below and in ‘What we did in 2021/22’ on pages 96 and 97. Further details on our stakeholder engagement, and our response, can also be found on pages 52 to 62.
In January 2022, the Board approved the acquisition of Gresse Street for £36.5 million.
In reviewing the proposal, the Board considered how the acquisition presented the opportunity to further its strategy to grow GPE’s Flex office portfolio, serving the longer-term interests of GPE and its stakeholders. This was supported by feedback from customers, agents, flexible space operators and market data, as well as from GPE’s successful roll-out of its Flex offer at eight buildings, indicating increasing customer demand for flexibility, experience and service provision.
The Board considered the financial impact of the acquisition, including the anticipated income and capital returns, returns for shareholders and the further upside potential for the Group.
It was discussed that, following the relocation of the Fashion Retail Academy, it was planned to undertake a substantial upgrade to the building to bring it in line with customer demands and to improve its sustainability and wellbeing credentials in accordance with GPE’s Net Zero Carbon commitment and stakeholder expectations. The Board also considered opportunities to support local community needs.
From an employee perspective, it was considered that the acquisition would drive further momentum in the business whilst a flexible space business plan would provide employees with additional development opportunities, including in the area of customer service provision.
It was concluded, having regard to stakeholder interests, that the acquisition was likely to generate long-term sustainable value for stakeholders. At the same time, it would provide further opportunity to innovate across our operations and work with our customers and communities to create sustainable space for London to thrive.
See more on page 29
Redevelopment of 2 Aldermanbury Square, EC2 (2AS)
In November 2021, the Board committed in principle to the redevelopment of 2AS, and the incurrence of additional expenditure for demolition and enabling works.
The Board discussed the strong business case, prospective performance metrics and development returns for the scheme and shareholders, along with wider stakeholder impacts.
The Board considered recent customer and agent feedback and market analysis, which had highlighted strong customer demand for best-in-class offices in terms of flexibility, amenity, technology, wellbeing and sustainability. The proposed development would represent the next generation of exemplary modern offices and deliver in each of these areas in a prime location.
The Board discussed GPE’s sustainability agenda and stakeholder expectations and the aim for the project to deliver GPE’s second net zero carbon building and its first NABERS UK rating for energy performance. The Board also considered GPE’s ongoing work with suppliers to achieve stretching embodied carbon targets, to reuse (and source more sustainable) construction materials, and the need to partner with customers to minimise their carbon impacts.
The Board had regard to the impacts on communities and the public realm and amenity improvements under the scheme that would have a positive impact on the local area and improve accessibility to the western entrance of the Liverpool Street Crossrail station. The impact for the Group’s employees was also considered, noting that the scheme would offer employees both development and innovation opportunities.
Having weighed up the balance of risks and potential returns, and after taking into account wider stakeholder interests, it was concluded that GPE should commit in principle to the development and proceed to the next stage of the project.
See more on page 24
How we behave, human rights, supplier stewardship and anti-corruption and anti-bribery matters
We aspire to the highest standards of conduct based on honesty and transparency in everything we do. Our Executive Committee has a high level of oversight over the Group’s dayto-day policies and procedures and carries out regular reviews of the appointment of contractors, consultants and suppliers.
We support the principles of the UN Declaration of Human Rights and core conventions of the International Labour Organization. Our expectations on human rights are set out across a number of our policies and procedures as we seek to avoid causing or contributing to adverse human rights impacts through our activities. In our business relationships, we look to demonstrate a commitment to fundamental human rights through our own behaviours and look to engage suppliers whose values and business principles are consistent with our own. Whilst we require all our suppliers to comply with standards and codes that may be specific to their industry, our Supplier Code of Conduct also sets out the additional standards that we require of our suppliers in this regard. GPE team members regularly meet with main contractors to share information on industry best practice, including in relation to human rights, health and safety and responsible sourcing.
In September 2021, we published our latest Modern Slavery Act Statement, which can be found at www.gpe.co.uk/ our-modern-slavery-statement, setting out the steps we have taken over the past year, and intend to take over the next 12 months, to ensure our suppliers and their supply chains adopt similar standards to our own to prevent slavery and human trafficking taking place within our supply chain.
Formal policies in place in relation to human rights, anti-bribery and corruption and fraud matters include our new overarching Anti-Fraud, Bribery & Corruption (‘Financial Crime’) Policy which was adopted in March 2022, together with our Ethics, Gifts and Hospitality, Whistleblowing, Use of GPE Suppliers, Conflicts of Interest and our Inside Information and Share Dealing Policies. All new employees receive training on these policies as part of their induction process. A formal compliance statement relating to these policies (which will include our new Financial Crime Policy from 2022/23) is required to be signed-off by employees annually with any matters of concern reported to the Audit Committee. There were no significant matters to report to the Audit Committee in relation to these policies in the year ended 31 March 2022. The Audit Committee also reviews our Ethics, Gifts and Hospitality and Whistleblowing Policies (and will review our Financial Crime Policy) and processes annually. Our policies can be found at www.gpe.co.uk/about-us/governance.
Whilst we consider our industry to be relatively low risk with regard to money laundering, we also have a formal Anti-Money Laundering Policy in place and specific training is provided to employees as appropriate.
Our conflict of interest procedures
The Company’s Articles of Association allow the Board to authorise potential conflicts of interest that may arise and to impose such limits or conditions as it thinks fit. The Company has established a procedure whereby any actual or potential conflicts of interest that may arise must be authorised by the Board, maintained on a register and periodically reviewed, with Directors required to update the Board with any changes to the nature of any conflicts disclosed.
A Director who has a conflict of interest is not counted in the quorum or entitled to vote when the Board considers the matter in which the Director has an interest and the Director may be excluded from the meeting where appropriate. The Board considers these procedures to be working effectively.
Our approach to Board induction and development
All new Directors receive a comprehensive induction programme over a number of months which is facilitated by the Chair and the General Counsel & Company Secretary and tailored to the Director’s individual roles and needs. The induction process is designed to develop the Director’s knowledge and understanding of the Group covering key areas including GPE’s purpose, values, culture and strategy, its corporate governance, risks and internal controls and the markets in which it operates. Our induction programme for new Directors is delivered through:
– meetings with the Chair, wider Board, General Counsel & Company Secretary and relevant Committee Chairs; – a structured programme of meetings with executives and senior managers to provide a deeper understanding of risks and opportunities and stakeholder interests; – meetings with advisers, including the internal and external auditors and brokers, to provide a valuable external perspective; – property tours to see assets first-hand and to learn more about GPE’s asset and development plans; – access to a library of reference materials covering key areas including strategy, finance and operations, governance, risk management and internal controls; and – training as appropriate on key policies, statutory duties and legal and governance requirements.
To enable the Board to discharge its duties, all Directors receive appropriate and timely information, including briefing papers distributed in advance of Board meetings and regular property tours conducted by the relevant GPE teams.
The Board strongly supports the ongoing development of its Directors. The Directors may, at the Company’s expense, take independent professional advice and are encouraged to continually update their professional skills and knowledge of the business and wider industry. Senior managers and external advisers presented to the Board during the year on a range of subjects, including macro-economic and political risks along with impacts arising from COVID-19 and the Russia-Ukraine conflict; industry themes and developments; the global and UK real estate investment market; the flexible space market and GPE’s flexible space offer; property technology; health and safety; climate change and sustainability; cyber risk; and accounting and governance developments.
Directors also individually attend seminars or conferences associated with their expertise or responsibility and are provided each quarter with a list of relevant upcoming seminars by various firms. Director training is reviewed by the Nomination Committee and development areas are discussed with individual Directors as part of the annual performance evaluation process.
What we did in 2021/22
2021
Strategy, governance, risk and opportunity management
May
– Discussion of 2021/22 key priorities, themes, strategic actions and team resourcing – Discussion of the progress of GPE’s Inclusion & Diversity
Strategy – Received an update on activities being undertaken in relation to the development pipeline – Consideration of GPE’s asset and investment strategy and review of a potential acquisition – Discussion of customer rent collection, arrears and delinquencies – Support given for GPE’s brand refresh to align with the vision to meet customer needs and build a sustainable legacy for London
– Approval of the progression of the 2 Aldermanbury Square (‘2AS’) development project to secure vacant possession and complete Stage 4 design works – Discussion of potential post-Brexit related risks, including supply chain and labour disruption and inflationary pressures – Update on Executive
Committee ‘Away Day’ including discussions on market dynamics, the risks and opportunities regarding sustainability and Flex and the future shape of the business – Approval of our Sustainable
Finance Framework for potential future debt issuances to (re)finance projects that have a positive environmental and/or social impact – Approval of appointments of Dan Nicholson and
Mark Anderson to the
Board, Vicky Jarman as the next Audit Committee
Chair and Carrie Heiss as
HR Director – Approval of Wendy Becker’s external appointment to Oxford Nanopore
Technologies – Approval of 160 Old Street disposal for £181.5m to
J.P. Morgan – Review of market trends, evolving working patterns and customer demand for prime, sustainable and flexible space and the impacts on
GPE’s business model and asset strategy – Discussion of climate change and decarbonisation risks, and actions to quantify and mitigate the impacts of new
EPC rating requirements – Review of the investment market and potential acquisition opportunities – Discussion of the risks of construction costs inflation and mitigating actions with suppliers – Received a health and safety update and approved new proactive KPIs – Approval of the pre-let at 50 Finsbury Square to Inmarsat
July August/ September
50 Finsbury Square
Understanding the views of stakeholders, the interests of employees and the fostering of business relationships
– Consideration of employee wellbeing and communications as the business emerged from the pandemic crisis.
Reviewed employee pulse survey results and next steps, including consultation on the development of the wellbeing programme and a new Hybrid
Working Policy – Update on customer feedback as GPE supported customers’ return to the office – Update on wider stakeholder relationships, including discussions with freeholders on leasing and development pipeline activities – Noted continuing activities to target Net Zero Carbon for near-term schemes in line with stakeholder expectations and considered GPE’s sustainability ratings in investor indices and opportunities for improvements – Recommendation of the payment of a final dividend to shareholders – Discussion of social value created by GPE during 2020/21 and development of a new
Social Impact Strategy – Consideration of feedback from planners regarding 2AS and, the design response, including public realm and affordable workspace provisions – Noted activities to deepen freeholder and JV partner relationships – Noted plans for continued customer engagement and to address feedback in the 2021 Customer
Satisfaction Survey, including through service charge process improvements.
Noted lessons learned and positive feedback from Flex customers at 16 Dufour’s
Place, following its launch in March 2021 – Consideration of feedback from investor meetings following the year-end results, including on development plans, the future of the office, the Flex opportunity, prospects for rent, the retail market, GPE’s buy/sell aspirations and sustainability – Discussion of processes for deployment of the
Decarbonisation Fund to reduce carbon emissions in the portfolio – Consideration of reports from institutional shareholder advisory bodies and their voting recommendations for the AGM – Discussion of actions to address feedback from GPE’s flexible office customers, including to strengthen operational design and capabilities and to further embed a Customer first culture – Discussion of market and local planning views on the political and social acceptability of new builds – Discussion of ongoing partnering with customers and suppliers on delivery of carbon commitments – Update on Investor Relations activities and common investor themes – Update on planning authority and local community engagement regarding development schemes, including at New
City Court, Minerva House and Piccadilly Estate – Approval of GPE’s 2021
Modern Slavery Statement
16 Dufour’s Place
The table below provides examples of our significant discussions, transactions and appointments over and above the scheduled matters outlined on page 105, together with examples of our oversight of engagement with stakeholders and consideration of s.172(1) matters since April 2021. You can read our s.172(1) statement on page 62.
2022
November
– Received a deep dive presentation on the development of GPE’s
Flex operations – Approval of extension of the Group’s Revolving
Credit Facility – Approval of the launch of the GPE rebrand alongside the interim results – Review and commitment in principle to the redevelopment of 2AS and expenditure for demolition and enabling works – Approval of Grant
Thornton as GPE’s new internal auditor from 2022/23 – Approval of Equiniti as GPE’s new registrar – Noted an IT security update and results and recommendations from a PwC-conducted technology maturity assessment of systems and processes
January/ February
– Discussion with the CEO of Pi Labs on property technology risks, potential disruptors and opportunities – Review of key themes and priorities to be addressed as part of the March 2022 strategy review – Approval of the acquisition of 7/15 Gresse Street & 12/13 Rathbone Place, W1
7/15 Gresse Street
– Discussion of organisational design, skills and capabilities and approval of senior management role changes to enhance the delivery of our Customer first approach – Review of potential asset sales – Approval of Numis as an additional joint corporate broker – Approval of the GPE People
Plan to enable and support the delivery of our purpose and strategy – Approval of the appointment of Emma Woods to the Board and discussion of ongoing
Board recruitment
March
– External presentations on (i) macro-economic conditions, including the impacts of the
Russia-Ukraine conflict; and (ii) global equity and
UK real estate markets – Review of our portfolio response to customer demands and approval of the target to grow our Flex office space to 600,000 sq ft by March 2027 – Update on our three-year
IT strategy, including cyber security governance – Review of health and safety governance, risks and controls – Approval of our new one-year
Innovation Strategy
2 Aldermanbury Square
– Consideration of a 60-Day
Review from GPE’s new
HR Director and proposed activities to simplify processes and strengthen diversity and inclusion – Review of results of October 2021 employee engagement survey. Supported actions to be taken in response, including to further support employee wellbeing and flexible working – Discussion of how GPE could achieve greater customer insight and enhance engagement, including through data and technology, to support its Customer first approach – Approval of the interim dividend – Approval of Social
Impact Strategy to create a lasting positive social impact in our communities and £10 million of social value by 2030 – Discussion of refinement of 2AS scheme to meet evolving customer needs, including in respect of sustainability – Update on discussions with freeholders in respect of development pipeline buildings – Discussion of the progress being made against GPE’s diversity and inclusion agenda and approval of related
People Plan objectives, including the establishment of an Inclusion Committee – Discussion of opportunities to enhance supplier engagement, particularly in the areas of sustainability and technology – Review of feedback from an institutional investor roadshow in November, which included strong support for Flex opportunities and development pipeline prospects – Support given for plans for a Capital Markets
Day in April to focus on
GPE’s response to evolving markets with a Customer first approach – Consideration of an update on evolving sustainability requirements, the development of GPE’s
Climate Resilience Strategy and a new Sustainable
Development Brief – External presentation on the emerging climate risk themes connected with the built environment and stakeholder impacts and expectations – Update on results of the recent customer satisfaction survey – Support given for our new three-year charity partnerships with XLP and
National Energy Action
