Directors' Report: Governance - British American Tobacco

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www.bat.com/annualreport2009 Key activities of the Nominations Committee in 2009 The Nominations Committee met five times in 2009. The specific items considered by it included: ■ the recruitment of Dr Gerry Murphy and his appointment to the Board as a Non-Executive Director; ■ the announcement by Jan du Plessis of his intention to take up the role of Chairman of Rio Tinto p.l.c; ■ an updated role profile identifying the skills required for the role of Chairman; ■ the recruitment and appointment to the Board as a Non- Executive Director of Richard Burrows and his subsequent appointment as Chairman on Jan du Plessis’ retirement; ■ continuing measures to refresh the Board, including further non-executive appointments; ■ succession planning for the Executive Directors and members of the Management Board; and ■ changes in the composition of the Management Board. In 2009, the Committee reviewed its effectiveness as part of the Board evaluation process. It concluded that it continues to operate effectively and, in particular, that early discussions around succession planning have helped by setting the context before decisions on timing and candidates are required. The Committee identified a need for additional non-executive appointments. Terms of appointment to the Board The Executive Directors have rolling contracts of one year. The Non- Executive Directors do not have service contracts with the Company but instead have letters of appointment. Details of the Company’s policy on Executive Directors’ service contracts and the terms of appointment for Non-Executive Directors are set out in the Remuneration report. Directors’ interests and indemnities Further details of Directors’ contracts and letters of appointment, remuneration and emoluments, and their interests in the shares of the Company (including interests in share options and deferred shares) as at 31 December 2009 are given in the Remuneration report. No Director had any material interest in a contract of significance (other than a service contract) with the Company or any subsidiary company during the year. Prior to his appointment as a Non-Executive Director, and subsequently as Chairman, Richard Burrows disclosed to the Board that he is a director of Rentokil Initial plc. Although this gives rise to no current conflict of interest, the potential situational conflict was reviewed by the Board and approved in accordance with the Company’s Articles of Association. Directors’ report: Governance The Company’s practice has always been to indemnify its Directors in accordance with the Company’s Articles of Association and to the maximum extent permitted by law. As at the date of this report, such indemnities are in force covering any costs, charges, expenses or liabilities which they may incur in or about the execution of their duties to the Company or to any entity which is an associated company (as defined in Section 256 of the Companies Act 2006), or as a result of duties performed by the Directors on behalf of the Company or any such associated company. Retirement by rotation and reappointment Directors are submitted for reappointment at regular intervals by application of the Company’s Articles of Association. These require that at each Annual General Meeting, all Directors shall retire from office by rotation who held office at the time of each of the two preceding Annual General Meetings and who (at either of those preceding Annual General Meetings): (1) did not previously retire by rotation, or (2) were reappointed following his/her appointment as an additional Director or to fill a vacancy. If the number of Directors retiring in this way is less than one-third of the Directors who are subject to retirement by rotation or if their number is not three or a multiple of three, then additional Directors shall retire by rotation provided that a number not exceeding one-third shall retire from office. Subject to the provisions of the Companies Act 2006 and the Articles of Association, the Directors to retire by rotation will be those who have been in office the longest since their appointment or last reappointment. The Board has progressively refreshed its membership over a number of years. In this context, Non-Executive Directors who serve for a total of more than six years are subject to a particularly rigorous review, and additional service after that time is reviewed annually. This was done in the case of Ana Maria Llopis, given that she has been a Non-Executive Director since February 2003. In accordance with the Articles of Association, and further to recommendations made by the Nominations Committee to the Board, the Directors named below will retire from the Board at the forthcoming Annual General Meeting and, being eligible, will offer themselves for reappointment: Ana Maria Llopis Christine Morin-Postel Anthony Ruys British American Tobacco Annual Report 2009 In addition, Richard Burrows, having been appointed as a Director on 1 September 2009, will also retire from the Board at the forthcoming Annual General Meeting and, being eligible, will offer himself for reappointment. 77 From the Chairman Performance and strategy Regional review Financial review Governance Group financial statements Parent Company financial statements Shareholder information
CONTENTS Introduction 78 Remuneration Committee 79 Summary terms of reference 79 Key activities of the Remuneration Committee in 2009 80 Remuneration policy 80 Salary 81 Performance-related bonus 81 Long-term incentives 82 Share Option Scheme 85 All-employee share schemes 85 Options and awards outstanding 86 Shareholding guidelines 86 Executive Directors’ pension benefits 86 Executive Directors’ service contracts 87 Executive Directors’ external appointments 88 Non-Executive Directors’ terms of appointment 88 Non-Executive Directors’ remuneration policy 88 Chairman’s terms of appointment and remuneration 89 Appendices 90 Tables 1 to 7 90 Status of Remuneration report 97 CURRENT MEMBERS Anthony Ruys (Chairman) Karen de Segundo Robert Lerwill Dr Ana Maria Llopis Christine Morin-Postel Dr Gerry Murphy Sir Nicholas Scheele REMUNERATION REPORT “ As Chairman of the Remuneration Committee, I am committed to ensuring that the Committee is effective and that the proper incentives are in place in the context of the overall remuneration policy. ” Anthony Ruys Remuneration Committee Chairman INTRODUCTION British American Tobacco’s remuneration policy continues to focus on the delivery of the Group’s strategy. In particular, in developing and maintaining a sustainable business by achieving growth, improving productivity, operating responsibly and building a winning organisation. The Remuneration Committee ensures that the relevant business objectives underpin all the performance-related bonus measures at both a corporate and individual level. The Remuneration Committee adopted some time ago a simple and transparent approach for the remuneration packages of the senior executive team with the aim of providing full clarity for both shareholders and eligible participants about the required levels of performance. There is a real focus on business sustainability and the management of key risks which continues to be incorporated into the component parts of the remuneration policy which is detailed below. The Remuneration Committee has decided to carry out a review in 2010 in connection with the International Executive Incentive Scheme (IEIS) and the Long-Term Incentive Plan (LTIP) to ensure that the total remuneration opportunity for the Executive Directors and senior management team is market competitive. This may lead to an approach to shareholders later in the year in the event that any changes are proposed. 78 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 and 14: The Audit Committee has an establis
Page 15 and 16: Corporate social responsibility CSR
Page 17: Appointments to the Board Nominatio
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
Page 47: 106 British American Tobacco Annual

Directors' Report: Governance - British American Tobacco

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