Statement of Corporate Governance and S172(1) Statement

Financial year ended 31 December 2022

Statement of corporate governance arrangements

As a family owned business, we run the Group in a way consistent with an agreed set of core values, that cover how we deliver value to shareholders and the wider community and how we interact with our stakeholders, including shareholders, employees, customers and suppliers. Accordingly, we have not applied a specific corporate governance code during 2022. The Board will continue to monitor the development of private company corporate governance before deciding, in conjunction with the shareholders, whether it would be beneficial to formally adopt a specific corporate governance code such as the Wates Principles.

Our corporate governance arrangements are as follows:

Purpose and leadership

The Group’s mission statement was set by our founder, Sir Arnold Clark, and is "to provide exceptional value for money and the highest levels of customer service."

The Board sets our overall strategy and values and formally meets on a quarterly basis to monitor performance against that strategy. The Group’s values are embedded in its operations and reinforced during induction for new employees and at regular Director led branch and departmental meetings across the Group. Employee feedback helped to create five core values: Family, Communication, Progression, Community and Recognition. These are the values that guide and inform everything we do and reflect our principles as a business. The Group has a zero-tolerance approach on bribery and corruption, tax evasion and modern slavery. Breach of the Group values is a disciplinary matter. The Board holds regular meetings with groups of local managers to seek feedback on trading conditions and the effectiveness of the Group’s overall strategy. Diversity and inclusion focuses on the right person for the role irrespective of gender, race or religion.

Our strategy

We aim to deliver sustainable business growth through the following objectives:

  • Maintaining strong capital and liquidity bases to ensure the Group has the capability to deal with both market downturns and opportunities.
  • Expanding the geographic footprint of our retail outlets, across both our multi-franchise dealership network and our used car retail network, and related supporting infrastructure.
  • Ensuring that our franchised dealer network is aligned with our view of the future direction of the UK market.
  • Expanding our service capability to best meet the needs of our existing and future customers.
  • Streamlining the customer journey through digitisation of processes and interactions.
  • Providing a sustainable product choice for our customers whilst reducing our environmental impact.

Board composition

The Board comprises of Lady Clark, as non-executive Chairwoman, and 8 Directors:

  • E Hawthorne Chief Executive and Group Managing Director
  • R E Borrie Chief Operating Officer
  • J A Clark Chief Commercial Officer
  • D M Cooper Chief Retail Finance and Leasing Officer
  • J T Graham Group Finance Director
  • S R Grant Group Aftersales Director
  • C S Henry Group People Director
  • W G P Gall Director

Appointments to the Board are discussed with the Chairwoman prior to any appointment being confirmed. All new Directors are required to participate in an induction programme upon appointment. Whilst this encompasses standard governance and regulatory items aimed at ensuring that they fully understand, and are equipped to effectively discharge, their duties as Directors, it is also tailored to their individual training and developmental needs.

The Board contains no independent non-executive Directors. The Board considers that the current Directors bring objective contributions and judgements to Board deliberations in addition to constructive challenge of matters outside their core responsibilities.

The Board is supported by a senior management team made up of individuals with a wide range of backgrounds, skills and experience. Executive Directors hold regular operational meetings with their respective leadership teams and meet with the senior management team on a weekly basis to monitor business performance and agree required actions after which an informal meeting of Executive Directors considers appropriate responses and actions. The Board formally meets quarterly to discuss longer term strategy, with additional annual strategy meetings held with the senior management team.

The Board is committed to developing a more diverse workforce, including at the most senior levels, but recognise that this will be achieved through gradual evolution.

Our ongoing approach includes:

  • Continuing to train and coach our managers on diversity.
  • Working in a collaborative and targeted way to increase female recruitment into the business.
  • Breaking down industry preconceptions to encourage women into areas of the business where they are under-represented, namely our workshops and our sales team.
  • Promoting successes of our female role models internally and externally on social media.
  • Our mentoring programme.

Shareholder relationship

The relationship between the Board and shareholders is managed through formal General Meetings and other family/shareholder meetings. Family/shareholder matters are dealt with in family/shareholder meetings, whilst business matters are dealt with by the Board. Each shareholder receives a copy of the Group Annual Report as well as regular updates on business performance, issues and social responsibility matters.

Director responsibilities

The Board seeks to ensure that the necessary financial, legal and human resources are in place for the Group to be able to meet its objectives, to review management performance and to ensure that its obligations to its shareholders are understood and met.

The health and safety of our customers, staff and wider communities is a priority and the Directors ensure all required resources are available to achieve this, as well as promoting a safety culture on branch visits.

The Board receives regular and timely information on all key aspects of the business, including health and safety, risks and opportunities, the financial performance of the business, strategy, operational matters, market conditions and sustainability, all supported by Key Performance Indicators (KPIs). The Board receives information regarding the sales performance of the business throughout the working day.

All Directors have a clear understanding of their roles and have access to legal advice on their responsibilities or relevant regulations. This ensures the Board receives regular briefings on new regulations impacting the Group, including General Data Protection Regulation and the impact of adopting new accounting standards.


The Group seeks to provide competitive remuneration packages that will attract and retain executives of the calibre required to take forward the Group’s strategy. Remuneration comprises a base salary, biannual discretionary bonus, dependent upon individual qualitative performance, and a competitive benefits package. The remuneration package of each Director is discussed and agreed by the Chief Executive and the Chairwoman, as the senior family representative on the Board. Discussions with the Chairwoman take into account business performance and the level of change to employee remuneration.

Climate change

The far-reaching risks of climate change, and its growing impact on both the environment and the global economy, are well documented and the Group recognises that the automotive sector has always been a significant contributor to global greenhouse gas emissions.

The UK Government has confirmed its ambition to see the end of the sale of new petrol and diesel cars in the UK by 2030 and new measures will require businesses to commit to a Net Zero emissions target by 2050 before they can bid for major government contracts.

During the year, the Group recruited a Group Sustainability Manager and established a Sustainability Office, to advise the Board on the development of a Group Sustainability Strategy and report on the execution of its programme. SENSE (Sustainable Environment for Nature, Society and the Economy) is our sustainability programme and will focus on the decarbonisation of operations, the reduction of our waste, and the improvement of our water use efficiency. It will also develop and execute a Group Roadmap to Net Zero to achieve our emissions reduction targets of 1/3rd reduction by 2030, 2/3rd reduction by 2040, and Net Zero by 2050 (2045 in Scotland).

Board members continue to engage directly with manufacturer partners and the Group continues to invest in the training of our staff in alternative fuel technology. The development of our own Electric Vehicle charging network, at an anticipated capital cost of £23m, commenced this year and is expected to be fully operational by the end of 2023. When the project is complete, we will have over 500 EV chargers available across our network of branches.

In July 2022, we opened our second Innovation Centre in Stafford, with the objective of educating the public on the benefits and viability of alternatively fuelled vehicles.

Opportunity and risk

Led by the Chairwoman, the Board is responsible for generating long-term shareholder value by setting the Group’s strategic direction. The Board is responsible for approval of the Group’s risk appetite, determining the nature and extent of significant risks the Group is willing to take to achieve its objectives. The Board has established delegated authorities and controls to ensure efficient management of the Group’s operations. The Group uses its Internal Audit and Group Risk functions to assist its monitoring of performance and risk. The Board consider the principal risks to be those that could cause the greatest damage if not effectively evaluated, understood and managed. These principal risks are considered to be:

Risk Potential impacts Mitigating actions
Failure to respond to negative market and economic risks
  • Reduced customer confidence has negative impact on sales volume
  • Reduced profitability from inflationary pressures on costs
  • Increased cost of servicing borrowings due to higher interest rates
  • Supply chain issues has a negative impact on sales volume
  • Reduced profitability due to poorer stock turnover
  • Reduced profitability from decline in used car prices
  • Inventory procurement and pricing is regularly reviewed
  • Continued investment in our customer digital journey
  • Our internal processes are challenged to improve efficiency
  • Regular communication with manufacturers to understand supply chain impacts and keep our customers informed
  • Expansion of product offering
  • Monitoring of UK economic conditions and competitor activity
  • Regular reassessment of projected vehicle residual values
  • Regular communication with finance providers to plan for future rate movements
Failure to meet customer expectations
  • Reputational damage
  • Reduced customer retention
  • Reduced sales volume and profitability
  • Continued review of our customer systems to ensure we are “easy to do business with”
  • Investment in quality used car stock
  • Continued development of our digital journey and Click & Collect/Deliver services
  • Customer service quality monitoring and quick customer issue resolution
  • Continued investment in Head Office customer service resource
  • Trading Standards review
  • Mystery shopping
  • Reviewing customer feedback and altering Group processes to improve business efficiency
Failure to maintain relationships with manufacturers and finance providers
  • Reduced access to vehicles on franchise terms
  • Reduction in availability of funding
  • Increased focus on used car and aftersales markets
  • Maintaining a diverse source of vehicles and finance
  • Regular communication with manufacturers and finance companies
Adverse changes to manufacturer delivery systems that bypass the current dealer network
  • Negative impact on sales volume and margins
  • Reduction in customer engagement
  • Diversification of franchise partners
  • Regular discussions with manufacturers to understand their strategies
  • Improved product delivery efficiency
  • Investment in quality used car stock
  • Investment in IT systems to enable easier customer transactions with the Group i.e. through our Customer App
  • Remaining relevant to our customer base
IT systems failure and data security
  • Business interruption or reduced operational efficiency
  • Reputational damage
  • Loss of revenue and profit
  • Working with a range of external cyber security specialists
  • Testing of IT contingency plans
  • Investment in robust IT systems
  • Systems mirroring
  • Continued investment and review of cyber security protocols
  • Business continuity planning
Failure to attract and retain our skilled workforce
  • Loss of knowledge and experience
  • Reduction in customer service
  • Reduced efficiency
  • Investment in our employees through training
  • Equal opportunities policy
  • Effective Board communication and continual consultation with staff on business performance, development and encouraging employee feedback
  • Continued development of our recognition and reward programmes
  • Employee appraisal process
  • Review of market rates and implementation of pay and benefit enhancements
Failure to respond to environmental changes (including moving to greener technologies, tax changes, emission targets)
  • Manufacturer supply issues limit availability and impact revenues
  • Reduced demand for petrol, diesel and old technology hybrid vehicles and potential impact on vehicle residual values
  • Vehicle purchase and use declines due to higher priced AFVs
  • Failure to understand increased investment costs connected with AFVs
  • Diversification of brands and services
  • Regular communication with manufacturers and finance companies
  • Investment in our people
  • Monitoring of sales by fuel type and alignment with inventory profile
  • Investment in Innovation Centres
  • Development of our mobility strategy and products to ensure affordable personal mobility for all
  • Appointment of Group Sustainability Manager
Legislative, regulatory changes and major business interruption
  • Loss of revenue and operating profit contributions
  • Supply chain disruption
  • Business continuity
  • Non-compliance with FCA regulations leading to trading restrictions
  • Financial consequences of non-compliance with HSE.
  • Diversification of brands and services
  • Regular communication with manufacturers and finance companies
  • Investment in our people
  • Involvement with trade bodies and local authorities
  • Availability of significant cash balances and maintenance of alternative funding routes
  • Business interruption planning
  • Board level monitoring of FCA compliance following branch compliance audits
  • FCA compliance training and testing
  • Quarterly Board updates on legislative and regulatory changes
  • Senior manager participation at regulatory focus groups to ensure best practice
  • Promotion of health and safety during Director branch visits

Stakeholder relationship and engagement

The following disclosure describes how the Directors have had regard to the matters set out in Section 172 (1) (a) to (f) and forms the Directors’ statement required under Section 414CZA of The Companies Act 2006.

Engaging with stakeholders to deliver long-term success is a key area of focus for the Board and all decisions take into account the impact on a wide range of stakeholders. Views of stakeholders are gathered by Directors and inform the decisions made in Board meetings. Stakeholders are impacted by, or benefit from, decisions made by the Board in different ways. However, it is the Board’s priority to ensure that the Directors have acted both individually and collectively in the way that they consider, in good faith, would be most likely to promote the success of the Group for the benefit of its members as a whole with regard to all its stakeholders and to the matters set out in paragraphs (a) to (f) of Section 172 (1) of the Companies Act 2006. The Board considers the key stakeholders referred to in the table below:

Stakeholder group Why is it important to engage? How management and/or Directors engaged What were the key topics of engagement? What was the impact of the engagement including any actions taken?
Customers Delivering exceptional customer service and genuine value for money is key to customer retention
  • Director led sessions to assess the quality of customer service across all business units
  • Customer satisfaction surveys are conducted throughout the Group and the results analysed by the Directors and at branch level through our Think Customer initiative
  • Monitoring of complaint levels and root cause analysis of customer complaints
  • Empowerment at all staff levels to resolve customer issues promptly and efficiently thus promoting customer satisfaction
  • Quality of service
  • Product offering improvements
  • Ease of doing Business
  • Business efficiency
  • Improved communication
  • A more customer focused approach using Product Consultants and Product Geniuses
  • A focus on having the right product mix and ensuring that products and services meet individual customer needs
  • Roll out of Click & Collect and Click & Deliver services
  • Development of our Digital Journey strategy, including our website with UK wide stock availability
  • Operating as One Business with customers at the centre and incentivising all staff equally to improve the customer journey
Employees Ensuring the business has the right culture and values is critical to the delivery of a first-class customer experience
  • Monthly update on the Business from the Chief Executive
  • A dedicated employee communication website and app which are updated daily with information on matters of concern to employees
  • Director attendance at regular departmental team meetings to enable two-way information flows and ensure that employee views are taken into account in making major decisions
  • Annual results and strategy presentations led by the Chief Executive and Directors across the business
  • Regular performance appraisals and performance-based bonus scheme
  • Annual employee recognition and service awards
  • Dedicated training facilities and new employee induction course
  • Regular staff surveys for feedback
  • Results of customer surveys
  • Quality of training
  • Service improvement ideas
  • Annual results and performance
  • Employee reward mechanisms
  • Pulling forward of the annual pay review to December 2022
  • A more engaged and valued workforce, delivering a higher standard of customer service
  • Employee remuneration and benefits are updated to reflect changing market conditions
  • Development of ‘Space’- an employee portal for information, advice and support around mental, physical and financial health
  • Ability to roll out our Digital Journey
  • Digital development of our time and attendance system to empower staff to take greater responsibility in their employment
Manufacturers Access to vehicles is important for our franchise businesses as well as our Contract Hire and Daily Rental business
  • Chief Executive/Chief Operating Officer frequently meets with manufacturers’ senior management teams to ensure principal decisions are fully informed
  • Monthly financial performance reporting
  • Attendance at manufacturer conferences
  • Impact of emissions regulations on pricing and availability of stock
  • Impact of supply chain issues on pricing and availability of stock
  • New model developments and pricing
  • Franchise performance and customer satisfaction
  • Proposed moves from franchise to agency delivery structures
  • Improved customer service by matching our detailed product knowledge with customer requirements
  • Development of franchise dealership network
  • A program of maintenance/upgrades at dealerships
Finance providers Access to affordable finance is essential to ensure the ongoing viability of our Contract Hire and Daily Rental businesses and to enable customers to finance vehicle purchases
  • The Chief Retail Finance and Leasing Officer meets with finance company senior management on a regular basis
  • Quarterly review meetings are held with each finance provider
  • Monthly compliance reporting
  • Availability of finance and related interest rates
  • Impact of FCA rules and guidance for a new Consumer Duty
  • Impact of the Bank of England’s actions on UK interest rates and availability of finance
  • How to make finance relevant, affordable, and understandable for customers i.e. treating customers fairly
  • Renewed finance facilities
  • Compliance of all FCA rates requirements
  • Agreed business volume targets and related interest rates
  • Development of online journey using simple and understandable terms to ensure a transparent customer experience
Wider community Giving back to the community is one of our core values
  • Continued support of local schools, charities and sports teams
  • Providing young people placements and commitment to our apprenticeship programme
  • Taking part in charity events and fundraising using our network of contacts
  • Providing charities with the opportunity to engage with Arnold Clark employees and customers
  • Building a greater understanding of the needs of our employees and wider community
  • Giving young people from all backgrounds an equal opportunity
  • Giving charities of all sizes a fair chance at receiving support from the Group
  • Matching of charitable funds raised by employees
  • Sponsorship of major charitable events such as Cash for Kids, Pride and Kiltwalk
  • New apprenticeship placements within the Group
  • Creation of The Arnold Clark Community Fund providing financial assistance to UK registered charities and local community groups
Regulators Compliance with regulatory requirements is essential for the long-term benefit of the Group
  • We are open and transparent in our dealings with regulators
  • We hold frequent meetings with our regulators to fully understand current practice and future developments
  • Trading Standards audit and review
  • Compliance record
  • Future regulatory developments
  • Improvements to processes and procedures
  • Renewal of primary authority arrangements with Trading Standards
  • Compliance with relevant FCA requirements
Shareholders Shareholder support is essential to enable a long term strategic approach
  • Annual Report
  • General meetings
  • Regular family and shareholder meetings
  • Family representation on the Board
  • Strategy
  • Financial stability
  • Culture
  • Diversity
  • Approval of remuneration packages
  • Dividend levels and structure

Principal Decisions

We define principal decisions as both those that are material to the Group and those that are significant to any of our key stakeholder groups. In making the following principal decisions, the Board considered the outcomes from its stakeholder engagement processes in addition to maintaining our reputation for high standards of business conduct and the need to act fairly between members of the Group.

Cyber attack

In late December 2022, we were the victim of a cyber-attack. Our external security network consultants alerted us to unusual activity on our network, and we immediately took steps to minimise the impact of the attack by removing all external connections to our network. Additional information on the cyber attack has been included in the Chief Executive’s Statement.


Despite the downturn in economic conditions, the Board decided to proceed with the acquisitions of Central Car Auctions Limited at a total cost of £19m, and ID Computer Software Ltd at a total cost of £2m. These investments are aligned with our strategy to expand our product offering with end-to-end remarketing capabilities, and improved technological efficiency.

Employee rewards

The Board were focused on ensuring that staff had the financial certainty to budget and plan their own finances given the cost of living challenges experienced. In October, the Board decided to bring forward the Group’s annual pay review exercise by 3 months with pay adjustments being effective from 1st January 2023. We continue to ensure that our minimum pay rates remain significantly above the proposed national minimum wage announced by the UK Government in November 2022.

The Arnold Clark Community Fund

As part of our commitment to give back to our local communities, the Board continued to support the Arnold Clark Community Fund, with over £12m being distributed in 2022.