The following information is from the 2022 Annual Report and Accounts for the Motion JVCO Limited, the ultimate parent company of the Merlin Entertainments Group.

Overview

The Board is committed to maintaining the highest standards of governance across the Group and recognises that a strong governance framework is fundamental to achieving Merlin’s strategic objectives.

Merlin’s overriding purpose is to work with stakeholders to create truly memorable experiences for visitors and long term value for our investors. Our corporate governance framework has been developed to safeguard these objectives.

Board and Committee responsibilities

The Board and the Merlin Board

The Company is managed by its Board of Directors (the Board) which comprises representatives of its principal shareholders and an independent Chairman. The Board meets as required by the Shareholder Investment Agreement, to provide governance over the Group and to consider those matters requiring specific approval by the Company.

The same shareholder representative Directors and independent Chairman, together with the Group’s Chief Executive Officer and Chief Financial Officer, meet regularly as the Merlin Board to provide leadership and set the strategy for the Group.

The responsibilities of the Merlin Board are detailed below:

  • overseeing strategy, management and approval of major policies;
  • determining the capital structure;
  • maintaining the system of internal controls and risk management;
  • approval of the annual capital expenditure budget, major capital projects and strategic transactions;
  • overseeing financial performance and reviewing financial reports;
  • establishing and maintaining an effective corporate governance framework, in conjunction with the Board;
  • effective engagement with shareholders and other stakeholders; and
  • reviewing recommendations from Committees.

Board Committees

The following Committees have been in operation during the year and unless otherwise stated, remain.

Health, Safety and Security Committee

This Committee ensures that health, safety and security (HSS) matters are managed effectively and proactively throughout the Group, by overseeing our policies and procedures for HSS, monitoring our processes for identifying and managing risks, and monitoring the skills, effectiveness and levels of resource within our HSS teams.

The Committee membership comprises an independent chair and representatives from each of the investor consortium, two of whom are Board members. Meetings are also attended by the Group Chief Executive Officer and Group Chief Financial Officer, together with the Group Safety, Engineering and Security Director and the Chief Operating Officer of Gateway Attractions & Resort Theme Parks Operating Groups.

Audit Committee

This Committee assists the Board in discharging its responsibilities regarding financial reporting by monitoring the integrity of our financial statements including considering whether the financial statements are ‘fair, balanced and understandable’.

It assists the Board and the Merlin Board in relation to external and internal audits, including monitoring and reviewing the effectiveness of the internal audit function and overseeing the performance and independence of external auditors. It also assists the Merlin Board in matters of risk management and internal controls, including monitoring and reviewing the effectiveness of our whistleblowing and fraud policies and our internal control and risk management.

The Committee membership comprises representatives from two members of the investor consortium, one of whom is a Board member.

Remuneration Committee

The Remuneration Committee assists the Merlin Board in determining its responsibilities in relation to remuneration, including making recommendations on the executive remuneration policy determining the individual remuneration and benefits package of each of the members of the Merlin Executive Committee and recommending and monitoring the remuneration of senior management below the Merlin Executive Committee.

The Committee considers all material elements of Merlin’s remuneration policy, remuneration and incentives of Executive Directors and senior management with reference to independent remuneration research and professional advice and makes recommendations on the framework for executive remuneration. The Committee is also responsible for making recommendations for the grants of awards under share incentive plans.

Following the retirement announcements from the outgoing Chief Executive Officer and the Chief Development Officer, the Committee approved their retirement packages for remuneration and benefits.

The Remuneration Committee’s membership comprises the independent Chairman and representatives of each of the investor consortium, all of whom are Board members.

Other Committees

In addition to the Board Committees, there are four non-Board Committees:

  • Executive Committee

    – chaired by the Chief Executive Officer, this Committee is responsible for managing the Group’s day-to-day operations and the development of strategic plans for consideration by the Merlin Board. It implements the Group’s strategy and ensures that the business complies with all applicable statutory, regulatory and governance requirements.

Three operational Committees make recommendations to the Executive Committee and have specific areas of responsibility as follows:

  • Commercial and Strategic Risk Management Committee

    – provides oversight and guidance on management of commercial and strategic risk.
  • Development Board

    – reviews initial proposals for significant capital expenditure and development projects.
  • Investment Board

    – appraises major capital expenditure and development projects.

2022 priorities

During 2022 the main areas of focus for the Merlin Board were as follows:

  • Consolidating the improved business performance and strategic acquisitions.
  • Approving the acquisitions of Cadbury World and the COEX Aquarium.
  • Approving major capital projects.
  • The recruitment of a new Chief Executive Officer following the announcement of Nick Varney’s retirement.
  • Approving the appointment of a new Chief Development Officer following the retirement of his predecessor.
  • Agreeing an amendment to the Licence and Co-operation Agreement with KIRKBI.
  • Monitoring the progress of LEGOLAND park projects in China.
  • Reviewing ‘next generation’ LEGO Discovery Centres.
  • Approving the Group’s five year strategic plan towards the end of the year.

Corporate governance framework

During 2022 the Board and the Merlin Board maintained a strong corporate governance framework and they continue to apply the Wates Corporate Governance Principles for Large Private Companies. Details of how the Group approaches these principles are set out below.

Principle One – Purpose and Leadership

An effective board develops and promotes the purpose of a company, and ensures that its values, strategy and culture align with that purpose.

Merlin’s strategy has been to create a high growth, high return family entertainment company. The business is based on strong brands and a global portfolio which is naturally balanced against the impact of external factors. This strategy is aligned with our purpose of delivering memorable experiences to our millions of visitors and our vision of being the global leader in location based entertainment.

The Merlin Board continues to review and challenge Merlin’s strategy, performance, responsibility, and accountability so that every decision made is of the highest quality, and in line with the Company’s culture. This is set out in ‘The Merlin Way’ values which are embedded throughout the business, from day-to-day management to Merlin Board reviews.

The Group receives feedback from guests and employees via guest satisfaction surveys and employee engagement surveys; where relevant this feedback is incorporated in Board papers.

Whilst the Board holds overall responsibility for developing and promoting the purpose of the Group, the Merlin Board and the Executive Committee ensure that the values, strategy and culture are embedded globally on their behalf.

The Board Committees and Executive Committee review the effectiveness of key internal policies. For example, the Audit Committee reviews the effectiveness of the Group’s whistleblowing and fraud policies across the organisation.

Principle Two – Board Composition

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

The Board is appointed in accordance with the Shareholder Investment Agreement. Each investor has nominated suitably qualified representatives to sit on the Board and the Merlin Board. The Directors possess a wide range of skills, backgrounds, experience, and knowledge across a broad range of businesses. The composition of the Board is considered appropriate for the size and complexity of the Company.

An Audit Committee, Remuneration Committee and Health, Safety and Security Committee have been established. They have been in operation throughout the year. The Chairman of the Board and of each Committee is responsible for leading and facilitating constructive meetings. The Chairman of the Board regularly elicits feedback from other Board members on meeting effectiveness and governance.

Careful consideration has been given to the appointment of the Chair of each Committee. The Audit Committee is chaired by an individual with recent and relevant financial experience. The Remuneration Committee is chaired by the independent Chairman. The Health, Safety and Security Committee is chaired by an independent health and safety expert.

Throughout 2022, the Board, Merlin Board and Executive Committee together was comprised of 12 men and two women.

Principle Three – Directors 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 understands its responsibility for promoting the success of the Company for the benefit of shareholders and with consideration of its stakeholders. This is done in a way which is consistent with its ethical, legal, and regulatory responsibilities and the Company’s constitution. The Board, the Merlin Board and Committees are bound by a Shareholder Investment Agreement and respective terms of reference which give clear guidance on the matters and key strategic decisions which require Board or Committee approval.

The Merlin Board met six times during 2022, of which three meetings were conducted in person. The Merlin Board are provided with appropriate board packs in advance of the meetings, including project approval papers and updates on trading, financial performance, employee engagement and welfare, legal matters and management of key business risks. When making decisions, only the shareholder representatives have voting rights.

Key financial information is collated from the Company’s accounting systems. The Group’s financial information is externally audited, and its controls are reviewed regularly by the Group's internal audit function. The Board delegates the scrutiny of financial information and controls to the Audit Committee. The Merlin Board delegates authority for the day-to-day management of the Company to the Executive Committee which meets at least eight times each year.

Principle Four – Opportunity and Risk

A board should promote the long term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.

Oversight of risk management is performed on an ongoing basis through interaction with management and by risk being a regular item on Merlin Board agendas. Two Committees have specific responsibilities for risk management. The Health, Safety and Security Committee oversees the key areas of health, safety and security while wider risk management and internal controls activities and commercial risks are considered by a sub-committee of the Executive Committee, chaired by executive management, which reports back to the Executive Committee regularly.

The Board retains overall responsibility for risk management and the Merlin Board approves the risk management framework which sets out the responsibilities, oversight, monitoring, reporting and management processes. Long term strategic opportunities are highlighted through the Group’s strategic planning processes that the Board oversees. Other opportunities are brought to the attention of the Board when they arise.

Principle Five – Remuneration

A board should promote executive remuneration structures aligned to the long term sustainable success of a company, considering pay and conditions elsewhere in the company.

Remuneration matters during the year were considered by the Remuneration Committee. All matters relating to remuneration are considered by that body and recommended to the Merlin Board for approval, in line with the Committee’s terms of reference. Our remuneration policies and principles are aligned with the Group's performance to support our overall values, purpose and strategy. A series of key principles underpin the Merlin remuneration structure - pay should be based on results and performance; consistent with best practice; and aligned to the long term success of the Company.

During the year the Remuneration Committee ensured awards under the management long term incentive plans for new employees and leavers were managed appropriately.

Principle Six – 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 are aware of the importance of fostering effective stakeholder relationships to enable the long term success of the Group. The Group’s business model also focuses on our interactions with customers, employees and investors.

During 2022, new Board paper guidance was issued within the business which requires all new proposals for capital projects to include a section on stakeholder engagement, including customers and employees, and how their views have been factored into project plans. Furthermore, Board papers also address the sustainability, accessibility and health and safety aspects of projects. This has improved the quality of Board papers and strengthened stakeholder voices in the Group’s development pipeline.

Section 172 Statements

Motion JVCO Limited and a number of its UK subsidiaries are required to publish a statement explaining how the Directors have given due regard to the matters set out in s.172 of the Companies Act 2006 when performing their duties.

The s.172 statement for Motion JVCO Limited can be found on page 30 of its most recent Annual Report.

The most recent s.172 statements for our UK subsidiaries which are required to produce such statements are provided below:

Merlin Attractions Operations Limited - Section 172 Statement

Merlin Entertainments (SEA LIFE) Limited - Section 172 Statement