This report sets out how the board of River Island Holdings Limited complies with the requirements of the section 172 of the Companies Act 2006 (the “Act”, and “s172”) and how it engages with stakeholders.
S172 of the Act requires directors to take into consideration the interests of stakeholders and other matters in their decision making. The directors of the group continue to have regard to the interests of the group’s employees and other stakeholders, such as customers and suppliers, and the impact of its activities on the community, the environment, and the group’s reputation for good business conduct, when making decisions. In this context, acting in good faith and fairly, the directors consider what is most likely to promote the success of the group for its members in the long term. The directors understand the need to regularly review the identity of the key stakeholder groups.
The directors are fully aware of their responsibilities to promote the success of the group in accordance with s172 of the Act and the company secretary ensures sufficient consideration is given to issues relating to matters set out in s172(1)(a)-(f).
In 2020 in particular, as the business faced the significant challenges of the coronavirus pandemic, coupled with preparation for the UK’s exit from the European Union, the board have placed particular emphasis on these requirements and their responsibilities as the custodians of the business to ensure that the business operates in a way that it can remain sustainable as a long term business, as a conscientious employer, a diligent and considerate member of the community in which it lives and operates, and as a partner to the wider stakeholder group it works with.
As a family owned business, the River Island board includes members of the shareholder family who meet regularly to ensure that the business operates in a transparent and responsible manner, which underpins its long term sustainability. The shareholders bring a wealth of knowledge and experience to support the group’s decision making on strategy and future development of the River Island brand.
In addition to the formal board meetings, regular meetings and dialogue take place between individual shareholders and the group’s executives as well as independent advisors. These cover the group’s financial performance, strategic direction, investment decisions and product.
Employees are a key foundation of the group and are recognised as its most important asset. Employees’ interests include a positive working environment, health and wellbeing, investment in training and development, inclusivity and diversity and open, honest communications.
Customers sit at the heart of the business and delivering excellent product and service, wherever they shop, is paramount. Directors actively engage with the customers through a number of channels including stores, social media and direct interviews to better understand their needs and concerns. Feedback received by the customer contact centre is regularly reported and reviewed. Executive directors provide updates to the board on customer perceptions and the market sentiment.
The interests of customers are considered in all key decisions, including store portfolio changes, product range development, selection and monitoring of suppliers to ensure quality and safety standards are met, amongst many others.
Being a socially responsible business and creating a positive impact on all the communities it operates in has always been an integral part of the group’s culture.
As a fashion business, the group is mindful of its impact on the communities it operates in. They and the wider public expect it to act as a responsible company and neighbour, and to minimise any adverse impact on local communities and the environment. Interests of all the communities have helped to shape the work on sustainability strategy over the year. The business continued to invest in developing its approach to sustainability, strengthening the team and driving accountability through its Corporate Social Responsibility Board, to implement commitments to reduce impact on the environment and create a positive impact on the society.
Suppliers and partners
Strong relationships and engagement with suppliers and partners are fundamental to the success of the business. The group is proud of its relationships with these stakeholder groups, the majority of which are long-term.
The group's suppliers’ and partners’ interests include long term success of River Island, fair terms, long term partnerships and ethical conduct. The group shares its strategic priorities with its suppliers and partners through regular dialogue and events. It has a strong and productive working relationships with its wholesale and franchise partners, underpinned by clear commercial agreements. The group work collaboratively with all its partners to deliver outcomes in the best interest of both parties. A large number of its supplier relationships span a number of years. The group report on and regularly assess the results of its Payment Practises Reporting and review the terms in place to ensure they remain fair.
The group manages its tax affairs responsibly and proactively to comply with tax legislation. The group’s policy is to engage with HMRC constructively, honestly and in a timely and professional manner, and seeks to resolve disputed matters through active and transparent engagement. Engagement with HMRC is led by the group’s inhouse tax team of qualified tax professionals. The group finance director provides regular updates to the board on tax matters.
Case study - coronavirus pandemic
Constructive two way engagement has never been more important than during the 2020 coronavirus pandemic. This case study sets out more details of how the business engaged with a broad stakeholder base over this period to navigate through unprecedented circumstances.
At the outset of the pandemic, protecting employees was the first priority. River Island took a number of proactive steps to ensure the safety and wellbeing of its people, including closing its stores ahead of the government mandated closure dates, as well as closing the distribution centre in
Milton Keynes, to make the site coronavirus safe. During the periods of closure, much of the workforce was placed on furlough. To support the furloughed employees, salaries were topped up above the furlough scheme cap to at least 80% of normal pay.
As the pandemic unfolded, the business faced unprecedented levels of change and uncertainty making increased employee engagement more important than ever. Communication regarding health and safety, changing trading restrictions and working patterns, including the furlough scheme implementation, were regularly provided for employees. Use of new methods and technology enabled interactive communication with all employees. A wellbeing programme was developed, supporting areas such as mental health, children at home and financial wellbeing.
The business placed emphasis on fair treatment of its suppliers as it tried to respond to the store closures and changing consumer demand. All suppliers received regular communications, and the business honoured all of its commitments for stock already produced. Buyers worked closely with suppliers to agree any amendments to unmade orders, ensuring fairness in challenging circumstances.
River Island remained open for its community and customer base throughout the pandemic, taking a number of steps to ensure customers health and wellbeing when in stores, and fair treatment through actions such as extended period for returns and delivery fees waived for online orders.
The group recognised the urgent need of its community and, using its own resources and leveraging its wide network of suppliers, launched a number of initiatives, including: a charitable t-shirt range with all proceeds going to NHS charities, donation of fabric for PPE manufacture, use of own transport fleet to deliver PPE and emergency supplies to hospitals around the UK. In addition, hundreds of staff volunteered to support good causes in the local communities.
River Island participated in a number of government initiatives designed to support businesses through the forced period of closure such as the job protection scheme. The business took steps to ensure that any claims made under these initiatives were compliant by conducting audits, and proactively engaging with the authorities to ensure correct methods and framework were followed prior to submitting any claims.
The board acknowledged that during times of crisis it is even more important to keep in regular contact with shareholders. At the peak of the pandemic, weekly updates were held by video conference with the shareholder base, providing them with an update on performance and the actions the business was taking to successfully navigate through the pandemic.
Corporate governance statement
The group has always recognised the importance of having strong values, purpose, and an approach to corporate governance that will support and enhance its business and goals, and its approach to doing business in the right way.
The group has carefully considered the fundamental principles of corporate governance for private business and is satisfied that its existing approach to all areas of the business are covered by its current business practices. For this reason, the group will continue to operate in the way it has always done - in a fair and equitable way, that places emphasis on the importance of its people and its partnerships with suppliers, customers and its community.
Purpose and leadership
Business strategy is regularly reviewed at board level, providing an overview of strategy at a channel, divisional and wider business level. Consistent two-way feedback is facilitated between the executive board and the operating board, with direction on board expectations and bottom up feedback on the execution of company strategy and performance.
Extensive work is being undertaken to develop clearly articulated values and a clear people promise, defined and reviewed in line with brand strategy. All brand value and core strategic work is presented to the main board and explored in detail at that level. Clear view of the customer provides direction for merchandise planning, design and marketing.
The main board is made up of senior executives, family members/shareholders, and independent advisors, providing the business with extensive knowledge and skills across a range of business areas, internal and external, and accountability and reporting lines for executive functions. The main board also includes a new and independent CEO (joined September 2019), who took over the role from a family/shareholder CEO.
Below the main board sits an operating board, formed of senior business executives and leaders across key divisions of the business. This provides clear reporting to the main board and the wider organisation.
Opportunity and risk
Business strategy is regularly reviewed at board level, providing an overview of the current plans and future business opportunities, as well as any risks which are being actively mitigated and managed or may be encountered in the future.
The corporate risk register and framework is owned and updated by the internal audit and risk function, with input from the board and all business functions. Financial risk is regularly monitored and reported to the board. This looks at risks to trade, trading environment, financial performance, margins, product performance, profit and free cash flow.
During the coronavirus pandemic, the board implemented emergency measures to manage the risk to the business and protect the financial and operational stability of the business. A monitoring committee representing all divisions of the business was established and met daily to assess the risks and impacts to the business, its people and stakeholders, and provide regular updates to the board. In addition, a Brexit risk mitigation strategy was developed and implemented, and a steering group established which met regularly to review and report on Brexit related risks.
Extensive resources were put into health and safety to develop initiatives and measures designed to protect the business, its staff, and customers throughout and after lockdown.
The directors develop and maintain the remuneration policy, which is monitored and operated by the Chief People Officer and the HR team. The policy is designed to attract and retain the best talent across the organisation and comprises of both fixed and variable elements, with the latter linked to delivery of corporate targets. Remuneration is regularly benchmarked both internally and externally to ensure it remains sufficiently competitive.
Stakeholder relationships and engagement
The board is committed to effective communication and engagement with its stakeholders.