How we comply

Statements of compliance

UK Corporate Governance Code compliance

The Board considers that WPP complied in all material respects throughout 2014 with the provisions of the UK Corporate Governance Code.

Internal control

WPP operates a system of internal control, which is maintained and reviewed in accordance with the UK Corporate Governance Code and the guidance in the Turnbull Report and the FRC guidance on risk management.

How we comply

For ease of reference we have structured this section around the main principles of the UK Corporate Governance Code.

Leadership

The role of the Board

The Board is collectively responsible for promoting the success of the Company by directing and supervising the Company’s policy and strategy and is responsible to share owners for the Group’s financial and operational performance and risk management. Responsibility for the development and implementation of Group policy and strategy and for day-to-day management issues is delegated by the Board to the Group chief executive and Group finance director. The list of matters reserved to the Board can be downloaded from the website wpp.com/wpp/investor.

During 2014, the Board met six times formally and held 20 committee meetings throughout the year.

The role of the chairman

The Board is chaired by Philip Lader, who chairs the Nomination and Governance Committee and at the invitation of the chairmen of the Audit and Compensation Committees attended all meetings of those committees. The chairman provides the leadership of the Board and is the main point of contact between the Board and the management team. The chairman represents the Board in discussions with share owners and investor bodies, ensures that systems are in place to provide directors with timely and accurate information, represents the Company in external gatherings, and is also responsible for the Board governance principles. He has led the Board recruitment and appointment process, determination and periodic revision of confidential leadership plans for potential emergencies, and the ongoing emphasis on management development and CEO succession planning. Philip Lader plans to retire from the Board during 2015 and will be succeeded by Roberto Quarta subject to his election by share owners at the Annual General Meeting (AGM) and on his retirement from the Board of IMI plc.

The role of the senior independent director

The senior independent director is Jeffrey Rosen who is available to share owners and acts as a sounding board for the chairman and as an intermediary for the other directors with the chairman when necessary. The senior independent director’s role includes responsibility for the chairman’s appraisal and succession. Jeffrey Rosen has been the senior independent director since April 2010 and will be retiring at the 2015 AGM. His replacement will be announced later in the year.

Non-executive directors

The non-executive directors have a diverse range of skills, experience and backgrounds. As detailed in their biographies, the non-executive directors work across the globe in media and advertising, investment banking and investment management, pharmaceuticals, mining, logistics and bioenergy, airlines, FMCG, international management consulting, private equity and angel investing, business education, manufacturing, consumer products and retail management, internet start-ups, government and non-profit organisations. They provide constructive challenge and assistance to the Group chief executive in developing the Group’s strategy. All directors have access to the services of the Company Secretary and may take independent professional advice at the Company’s expense in conducting their duties. The Company provides insurance cover for its directors and officers.

Effectiveness

The composition of the Board

The Board is now composed of 17 directors, with at least three non-executive directors, including the Board chairman, planning to retire at the AGM in 2015. Two current members are executive directors and 15, including the chairman, are non-executive directors. Following these changes, the Board will comprise 14 directors, of which 12 are non-executive directors and two are executive directors. The independence of each non-executive director is assessed annually by the Board. The Board has confirmed that all of the non-executives standing for re-election at the 2015 AGM continue to demonstrate the characteristics of independence.

Succession: Board and committee membership

As a consequence of the review of Board composition commenced in 2012 the composition of the Board and the committees has been refreshed.

• The Compensation Committee chairman, Jeffrey Rosen, stepped down as chairman of the committee at the 2014 AGM and was succeeded by Sir John Hood.
• Colin Day will be succeeded by Jacques Aigrain as chairman of the Audit Committee on his retirement at the 2015 AGM. Jacques Aigrain has been a member of the Audit Committee since joining the Board in May 2013.
• Roberto Quarta will succeed Philip Lader as chairman of the Nomination and Governance Committee, at the same time as he takes over as chairman of the Group.
• Mark Read stepped down from the Board on 1 February 2015 to focus on his executive responsibilities as CEO for both Wunderman and WPP Digital.

Time commitment

Letters of appointment for non-executive directors do not set out a fixed time commitment for Board attendance and duties but give an indication of the likely time required. It is anticipated that the time required by directors will fluctuate depending on the demands of the business and other events.

Development

On joining WPP, non-executive directors are given an induction which includes one-to-one meetings with management and the external auditors, briefings on the duties of directors of a Jersey company, the Model Code, WPP Code of Conduct and the UK Corporate Governance Code. The induction also covers the Board committees that a director will join. All directors are fully briefed on important developments in the various business activities which the Group carries out worldwide and regularly receive extensive information concerning the Group’s operations, finances, risk factors and its people, enabling them to fulfil their duties and obligations as directors. The directors are also frequently advised on regulatory and best practice requirements which affect the Group’s businesses on a global basis. One Board meeting a year is held in a location other than London or NewYork. In 2014, the Board met in Rio de Janeiro, where it received briefings from all the heads of the Group’s Latin America operations. In 2015, in Beijing, the Board will review the Group’s Asia Pacific operations.

Evaluation

WPP undertakes an annual review of the Board, its committees and individual directors. In 2014, the annual evaluation was carried out internally. Each director completed a confidential questionnaire and identified opportunities for improvement. Separate conversations were then held between each director and either the chairman or the senior independent director, who also led the non-executive directors’ assessment of the chairman’s performance. From these findings, we concluded that the Board and its committees had been effective and are prepared for a variety of potential macroeconomic, industry, client and talent challenges, but must continue to seek additional ways that their effectiveness might be enhanced.

Re-election

The directors submit themselves for annual re-election at each AGM, if they wish to continue serving and are considered by the Board to be eligible. Directors may be appointed by share owners by ordinary resolution or by the Board on the recommendation of the Nomination and Governance Committee and must then stand for re-election at the next AGM, where they may be re-elected by ordinary resolution of the share owners.

With only specific exceptions to ensure Board continuity, non-executive directors shall not stand for re-election after they have served for the period of their independence, as determined by then-applicable UK and US standards; that currently being a period of nine years.

Diversity

WPP recognises the importance of diversity, including gender, at all levels of the Group as well as the Board.

WPP is committed to increasing diversity across its subsidiaries and supports the development and promotion of all talented individuals. As at 31 December 2014, women comprised 24% of the WPP Board and 29% of non-executive directors, 31% of Board members and executive leaders in the subsidiaries, 46% of senior managers and 54% of total employees. Following the retirement of Mark Read on 1 February 2015 and Philip Lader, Colin Day and Jeffrey Rosen at the 2015 AGM, women will comprise 29% of the WPP Board and 33% of non-executive directors, in line with our aspiration to increase and maintain the female representation on the Board to 30% of non-executive directors.

Directors’ conflicts of interest

The Company’s Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a director has an interest that conflicts, or may possibly conflict, with the interests of the Company (Situational Conflicts). The Board has a formal system in place for directors to declare Situational Conflicts to be considered for authorisation by those directors who have no interest in the matter being considered. In deciding whether to authorise a Situational Conflict, the non-conflicted directors must act honestly and in good faith with a view to the best interests of the Company and they may impose limits or conditions when giving the authorisation, or subsequently, if they think this is appropriate.

Any Situational Conflicts considered, and any authorisations given, are recorded in the relevant minutes. The prescribed procedures have been followed in deciding whether, and on what terms, to authorise Situational Conflicts and the Board believes that the systems it has in place for reporting and considering Situational Conflicts continue to operate effectively.

Accountability

Internal control

The Board (which receives advice from the Audit Committee) has overall responsibility for the system of internal control and risk management in the Group and has reviewed the effectiveness of the system during the year and up to the date of this report. In the context of the scope and complexity of this system, the Board can only give reasonable, not absolute, assurance against material misstatement or loss. The system of controls is designed to manage, but may not eliminate, the risks of failure to achieve WPP’s objectives. For certain joint ventures and associates, WPP operates controls over the inclusion of their financial data but places reliance upon the systems of internal control operating within our partners’ infrastructure and the obligations upon partners’ boards relating to the effectiveness of their own systems.

The principal elements of internal control are described below.

Control environment

The quality and competence of our people, their integrity, ethics and behaviour are all vital to the maintenance of the Group’s system of internal control.

The Code of Business Conduct (which is regularly reviewed by the Audit Committee and the Board and was updated in 2012), sets out the principal obligations of all employees. Directors and senior executives throughout the Group are required to sign this Code each year and all employees are required to complete training on the Code. The WPP Policy Book which has been updated with control bulletins in 2014 includes the Code of Business Conduct and human resource practices, as well as guidance on practices in many operational areas. Breaches or alleged breaches of this Code are investigated by the director of internal audit, head of compliance and the Group chief counsel. In 2013, WPP issued the Data Code of Conduct and updated the Supplier Code of Conduct.

The Group has an independently-operated helpline, Right to Speak, to enable our people to report issues that they feel unable to raise locally. Through 52 calls to this helpline, a number of issues have been raised during 2014, all of which have been followed through and investigated where appropriate and reported to the Audit Committee.

Risk assessment

Risk monitoring of all of the Group’s operations throughout the world is given the highest priority by the Group chief executive, the Group finance director, the chairman of the Audit Committee and the Board, as it is essential to the creation and protection of share owner value and the development of the careers of our people. The Board realises that WPP is a communication services company and its ongoing prosperity depends on being able to continue to provide a quality service to its existing and potential clients in a creative, efficient and economic way.

Identification, management and monitoring of sustainability risks (including social, environmental and ethical risks) is fully integrated into the Group’s risk management processes.

At each Board meeting, the Group chief executive presents a Brand Check review of each of the business’ operations, including an assessment of the risk in each business, providing feedback on the business risks and details of any change in the risk profile since the last Board meeting.

The Brand Check covers such issues as:

• the possibility of winning or losing major business (e.g. as a result of a change of senior management at a major client);
• the addition or loss of a key executive of the Group;
• introduction of new legislation in an important market;
• sustainability, including risks relating to marketing ethics, privacy and employment;
• political instability in an important market; and
• changes in accounting or corporate governance practice.

Each operating group undertakes monthly and quarterly procedures and day-to-day management activities to review their operations and business risks. These are formally communicated to the Group chief executive, other executive directors and senior executives in monthly reports and quarterly review meetings and, in turn, to the Board.

Paul Richardson provides a formal annual assessment of sustainability risks and performance to the Nomination and Governance Committee.

The Board is firmly of the opinion that the monitoring of risk is strongly embedded in the culture of the Company and of the operating companies, in a manner which the Board considers reflects the recommendations of the FRC Guidance on Risk Management and the UK Corporate Governance Code.

Control activities and monitoring

Policies and procedures for all operating companies are set out and communicated in the WPP Policy Book, internal control bulletins and accounting guidelines. The application of these policies and procedures is monitored within the individual businesses and by the director of internal audit, head of compliance and the Group chief counsel.

Operating companies are required to maintain and update documentation of their internal controls and processes. This documentation incorporates an analysis of business risks, detailed control activities and monitoring, together with controls over security of data and the provision of timely and reliable information to management. IT and financial controls are also included.

The internal audit department was responsible for reviews and testing of the documentation and the relevant controls for a majority of the Group during 2014, the results of which were reported to the Audit Committee.

Financial reporting

Each operating company annually updates a three-year strategic plan, which incorporates financial objectives. These are reviewed by the parent company’s management and are agreed with the chief executive of the relevant operating company.

The Group operates a rigorous procedure for the development of operating company budgets which build up the Group’s budget. During the final quarter of each financial year, operating companies prepare detailed budgets for the following year for review by the parent company. The Group’s budget is reviewed by the Board before being adopted formally. Operating company results are reported monthly and are reviewed locally, regionally and globally by the business groups and by Group management on a consolidated basis and ultimately by the Board. The results are compared to budget and the previous year, with full-year forecasts prepared and updated quarterly throughout the year. The Company reports to share owners four times a year.

At each year-end, all operating companies supply their full-year financial results with such additional information as is appropriate. This information is consolidated to allow the Group to present the necessary disclosures for International Financial Reporting Standards (IFRS) as adopted by the European Union.

The Disclosure Committee gives further assurance that publicly-released information is free from material omission or misstatement.

Remuneration

Non-executive directors do not participate in the Company’s pension, share option or other incentive plans.

The Board considers that the non-executive directors’ remuneration conforms with the requirements of the UK Corporate Governance Code.

The fees payable to non-executive directors represent compensation in connection with Board and Board committee meetings and where appropriate for devoting additional time and expertise for the benefit of the Group in a wider capacity.

Details of directors’ remuneration and service contracts form part of the report of the Compensation Committee.

Relations with share owners

Dialogue with share owners

The relationship with share owners, potential share owners and investment analysts is given high priority by the Company.

The Company has a well-developed and continuous program to address the needs of share owners, investment institutions and analysts for a regular flow of information about the Company, its strategy, performance and competitive position. Given the wide geographic distribution of the Company’s current and potential share owners, this program includes regular visits to investors, particularly by the Group chief executive, the Group finance director, the deputy Group finance director and the head of investor relations, in the UK, Continental Europe and the major financial centres in North America and also in Asia Pacific and Latin America. The Company’s non-executive chairman is available to meet with investors and regularly consults with investors’ governance representatives and advisory bodies. The Company provides a preliminary announcement, an interim management statement at the end of the first and third quarters that includes a trading update, an interim report at half year and a trading update and presentation at the AGM.

The Company ensures that it has a proper dialogue with share owners and their representative bodies through executive and non-executive directors in relation to remuneration and corporate governance matters. In 2014, the chairman and senior independent director held extensive rounds of discussions with share owners and advisory groups regarding senior executive compensation, and CEO, chairman and Board succession planning. The chairman and senior independent director provide thorough feedback to the Board on issues raised with them by share owners.

WPP’s website, wpp.com, provides current and historical financial information, including trading statements, news releases and presentations and the Company’s statement of its corporate governance practices.

The Annual General Meeting

The 2015 AGM will be held on Tuesday 9 June 2015 at 12 noon at 8 Northumberland Avenue, London WC2N 5BY. A separate notice convening the meeting is distributed to share owners and will be published on WPP’s website, wpp.com. All resolutions for which notice has been given will be decided on a poll.