Directors' Report: Governance - British American Tobacco

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www.bat.com/annualreport2009 and/or individual market audit and CSR committees. A corporate audit committee sits at the same level as the regional committees and focuses on the risks and the control environment within the Group’s operations which do not fall within the regional committees’ remit, for example head office central functions, global programmes and above-region projects. It comprises members of the Management Board and is chaired by a Management Board member responsible for one of the Group’s Regions to maximise its independence from central executive management. It is in turn supported by separate audit committees covering the Group’s global IT and operations functions, which were introduced as separate committees in 2009. The relevant external and internal auditors regularly attend meetings of these committees and have private audiences with members of the committees at least once each year. In addition, central, regional and individual market management, along with internal audit, supports the Board in its role of ensuring a sound control environment. Risk management and internal control processes Risk registers, based on a standardised methodology, are used at Group, regional, area and individual market level to identify, assess and monitor the key risks (both financial and non-financial) faced by the business at each level. Mitigation plans are required to be in place to manage the risks identified and the risk registers and mitigation plans are reviewed and, where appropriate, updated on a regular basis. They are also reviewed regularly by the relevant regional audit and CSR committee, the corporate audit committee and, in the case of the Group risk register, by the Board’s Audit Committee. Group companies and other business units are required at least annually to complete a checklist of the key controls which they are expected to have in place, called Control Navigator. Its purpose is to enable them to self-assess their internal control environment, assist them in identifying any controls which may require strengthening and support them in implementing and monitoring action plans to address control weaknesses. The Control Navigator checklist is reviewed annually to ensure that it remains relevant to the business and covers all applicable key controls. In addition, at each year end, Group companies and other business units are required to: ■ review their system of internal control, confirm whether it remains effective and report on any material weaknesses and the action being taken to address them; and ■ review and confirm compliance with the Standards of Business Conduct and identify any material instances of non-compliance or conflicts of interest identified. The results of these reviews are reported to the relevant regional audit and CSR committee or to the corporate audit committee and, where appropriate, to the Board’s Audit Committee to ensure that appropriate remedial action has been, or will be, taken where necessary. Directors’ report: Governance British American Tobacco Annual Report 2009 The Group’s internal audit function provides advice and guidance to the Group’s businesses on best practice in risk management and control systems. It is also responsible for carrying out audit checks on Group companies and other business units, and does so against an audit plan presented annually to the Audit Committee, which focuses in particular on higher risk areas of the Group’s business. Review The Turnbull Guidance (the Guidance) sets out best practice on internal control for UK-listed companies to assist them in assessing the application of the Code’s principles and compliance with the Code’s provisions with regard to internal control. The current version of the Guidance applies to listed companies for financial years beginning on or after 1 January 2006. The processes described above, and the reports that they give rise to, enable the Board and the Audit Committee to monitor the internal control framework on a continuing basis throughout the year and to review its effectiveness at the year end. The Board, with advice from its Audit Committee, has completed its annual review of the effectiveness of the system of internal control for the period since 1 January 2009. No significant failings or weaknesses were identified and the Board is satisfied that, where specific areas for improvement have been identified, processes are in place to ensure that the necessary remedial action is taken and that progress is monitored. The Board is satisfied that the system of internal control is in accordance with the Guidance. 73 From the Chairman Performance and strategy Regional review Financial review Governance Group financial statements Parent Company financial statements Shareholder information
Corporate social responsibility CSR Committee CURRENT MEMBERS Karen de Segundo (Chairman) Dr Ana Maria Llopis Dr Gerry Murphy Sir Nicholas Scheele Attendance at meetings in 2009 Meetings Meetings eligible Name attended to attend Karen de Segundo (Chairman) 4 4 Ana Maria Llopis 4 4 Gerry Murphy 1 3 4 Sir Nicholas Scheele 3 4 Thys Visser 2 1 2 Notes: 1 Gerry Murphy became a member on 13 March 2009. 2 Thys Visser ceased to be a member on 30 April 2009. The Chairman, Chief Executive and the Management Board member responsible for Corporate and Regulatory Affairs attend meetings by invitation but are not members. CORPORATE GOVERNANCE STATEMENT CONTINUED Summary terms of reference The CSR Committee is responsible for: ■ reviewing and making appropriate recommendations to the Board as regards the Company’s management of corporate social responsibility (CSR) and the conduct of business in accordance with the Statement of Business Principles; ■ monitoring and reviewing the effectiveness of the Group’s strategy for, and management of, significant social, environmental and reputational issues; ■ reviewing and monitoring the Group’s plans for, and progress towards, business sustainability; and ■ monitoring the effectiveness of the CSR governance process. The Committee’s terms of reference were reviewed and updated in March 2009. The full terms of reference are available from the Company Secretary and on www.bat.com. The CSR Committee is authorised by the Board to review activity within the business with respect to CSR. It is authorised to seek the information it requires from, and require the attendance at any of its meetings of, any Director or member of management, and all employees are expected to cooperate with any request made by the Committee. It is authorised by the Board to obtain independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. The Chairman of the Committee reports to the subsequent meeting of the Board on the Committee’s work and the Board receives a copy of the minutes of each meeting. The papers considered by the Committee are available to any Director who is not a member, should they wish to receive them. The CSR Committee held three scheduled meetings and one unscheduled meeting in 2009. With effect from 2009, the number of scheduled CSR Committee meetings held annually was increased from two to three, with an additional full meeting being added in July in consequence of the Committee’s expanded remit following the amendment of its terms of reference in December 2008, and in order to establish greater continuity between meetings. The unscheduled meeting took place at the beginning of April to approve the Group’s annual Sustainability Report and will again take place in 2010. 74 British American Tobacco Annual Report 2009 Directors’ report: Governance
Page 1 and 2: GOVERNANCE Board of Directors A sum
Page 3 and 4: 1. Richard Burrows (Irish) Chairman
Page 5 and 6: CONTENTS Chairman’s introduction
Page 7 and 8: meeting to address Jan du Plessis
Page 9 and 10: The Board and its Committees receiv
Page 11 and 12: Accountability and audit Audit Comm
Page 13: The Audit Committee has an establis
Page 17 and 18: Appointments to the Board Nominatio
Page 19 and 20: CONTENTS Introduction 78 Remunerati
Page 21 and 22: The Remuneration Committee reviewed
Page 23 and 24: For the Executive Directors and Man
Page 25 and 26: in each company’s index over the
Page 27 and 28: The Company also operates the Free
Page 29 and 30: Executive Directors’ external app
Page 31 and 32: Appendices to the Remuneration repo
Page 33 and 34: REMUNERATION REPORT CONTINUED Table
Page 39 and 40: CONTENTS Companies Act 2006 98 Prin
Page 41 and 42: Articles of Association The followi
Page 43 and 44: 2) a Director to accept or continue
Page 45 and 46: The Disclosure and Transparency Rul
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Directors' Report: Governance - British American Tobacco

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