Directors' Report: Governance - British American Tobacco

More documents

Recommendations

Info

www.bat.com/annualreport2009 In addition, in line with its practice of visiting one of the Group’s key markets annually, the Board held one of its meetings in Turkey, where it received presentations from members of the British American Tobacco Turkey top team, participated in a market visit and visited the factory in Samsun. Management Board The Board delegates to the Management Board responsibility for overseeing the implementation by the Group’s operating subsidiaries of the policies and strategy which it sets, and for creating the conditions for their successful day-to-day operation. The Management Board is chaired by the Chief Executive and its other members are the Finance Director, the Chief Operating Officer and the 10 senior Group executives, whose names appear on the Management Board page. It held 11 meetings in 2009, nine of which were scheduled and two of which were convened to consider specific initiatives, including the Global Integration Project. It is scheduled to hold nine meetings in 2010. Members of the Management Board are invited to attend meetings of the Board from time to time, in particular when the Group’s strategy and budget are under discussion. Board Committees The Board has established four principal Board Committees, to which it has delegated certain of its responsibilities. They are the Audit Committee, the Corporate Social Responsibility (CSR) Committee, the Nominations Committee and the Remuneration Committee. The roles, membership and activities of these Committees are described in more detail later in this Corporate governance statement and, in the case of the Remuneration Committee, in the Remuneration report. The full terms of reference for each Committee are available from the Company Secretary and on www.bat.com. Conflicts of interest The Board has formal procedures for managing compliance with the conflicts of interest provisions of the Companies Act 2006. The Company’s Articles of Association permit the Board to authorise actual and potential conflicts. Directors are required to give advance notice of any conflict issues to the Company Secretary, and these will then be considered either at the next Board meeting or, if the conflict or potential conflict is due to arise prior to the next scheduled Board meeting, at a meeting of the Board’s Conflicts Committee. The full Board will be notified at its next meeting of any matters authorised by the Committee. Once a year, at its meeting in February, the Board reviews all conflict matters which have previously been authorised. The review will take the form of a fresh consideration of each matter. Directors are excluded from the quorum and the vote in respect of any matters in which they have an interest. Directors’ report: Governance British American Tobacco Annual Report 2009 During 2009, a number of actual and potential conflicts were notified to the Company in accordance with these procedures. They were referred to, and, where appropriate, authorised by, the Board and recorded in the register of interests maintained by the Company Secretary. All were considered at meetings of the Board and none were sufficiently significant to warrant disclosure (although see Directors’ interests and indemnities under Appointments to the Board below). Information and professional development All Directors receive induction on joining the Board, covering their duties and responsibilities as directors. Non-Executive Directors also receive a full programme of briefings on all areas of the Company’s business from the Executive Directors, members of the Management Board and other senior executives, and they may request such further information as they consider necessary. During 2009, both Richard Burrows and Gerry Murphy attended induction briefings subsequent to their respective appointments. These included sessions on the Group’s strategy, its organisational structure and its business functions and activities, including its financing principles and statutory reporting cycle, Environmental Health & Safety issues, Research & Development activities and regulation issues. They also attended sessions addressing corporate governance issues and their duties as directors, the Group’s internal control and risk management framework and the role of the external auditors. As Chairman designate, Richard Burrows received a broader level of induction, which included more in-depth sessions on the above subjects, sessions with Jan du Plessis on the role and operation of the Board and the Board strategy review process, and visits to a manufacturing facility in Germany and the Group’s Research & Development site in Southampton. His induction will continue into 2010 with visits to Group key markets and a number of meetings to enable him to introduce himself to institutional shareholders. All Directors receive briefings designed to update their skills and knowledge on a regular basis, for example in relation to the business and on legal and regulatory requirements, and by visits to Company sites (see the key activities of the Board in 2009). They also make use of the opportunity to attend meetings of the Group’s regional audit and CSR committees. In response to feedback received during the Board’s 2009 evaluation (see below), the Board timetable will be extended with effect from 2011 to allow an additional day for training or briefings on relevant matters. 67 From the Chairman Performance and strategy Regional review Financial review Governance Group financial statements Parent Company financial statements Shareholder information
The Board and its Committees receive high-quality, up-to-date information for review in good time ahead of each meeting, and the Company Secretary, under the direction of the Chairman, ensures good information flows within the Board and its Committees and between the Non-Executive Directors and senior management. The Company Secretary is also responsible for advising the Board, through the Chairman, on all governance matters. The appointment and removal of the Company Secretary is a matter for the Board. All Directors have access to the advice and services of the Company Secretary, and a procedure is in place for them to take independent professional advice at the Company’s expense should this be required. The Company has arranged appropriate insurance to provide cover in the event of legal action against its Directors. Evaluation of Board performance An evaluation of the performance of the Board, each of its Committees and of the Executive and Non-Executive Directors is conducted each year using a series of questionnaires. A broad range of standard topics is covered including the programme of regular Board or Committee business, Board behaviours, Group strategy and succession planning. Different questions are used for assessing the skills and contributions of each of the Chairman, the Non-Executive Directors and Executive Directors, given their different roles on the Board. The survey is updated annually to ensure the process remains relevant to internal circumstances as well as the external environment. In 2009, given the debate around corporate governance generally, extra questions were included about the Group’s approach to risk, Board training and Directors’ ability to provide effective challenge. In addition, progress against the 2008 Board action plan was checked, in particular how the smaller Committee membership, introduced in late 2008, has impacted the effectiveness of the Audit and CSR Committees. As it did in 2008, the Board considered whether to introduce an external facilitator to manage the evaluation. However, it concluded that the Company Secretary was well placed to devise updated questions that are relevant and appropriate to the Company and that, having attended Board and Committee meetings throughout the year, the Company Secretary would also understand, and ensure a full and frank discussion around, any concerns raised. The responses to all questionnaires formed the basis for one-to-one, confidential, interviews conducted by the Company Secretary with each of the Directors and the Chairman. Following the interviews, the Company Secretary collated and analysed the results and prepared separate reports, summarising key points and including non-attributable comments given in individual responses. Board and Committee reports were initially discussed with the Chairman of the Board or relevant Committee before being presented by the Company Secretary at a Board or Committee meeting. The main points of discussion and Committee action points, if any, were also reported back to the Board. Reports on the individual performance of each Executive and Non-Executive Director (excluding the Chairman) were raised by the Chairman with that Director as appropriate, and the Chairman’s performance was discussed initially with the Senior Independent Director before he provided feedback to the Chairman. CORPORATE GOVERNANCE STATEMENT CONTINUED The outcome of the 2009 Board review has confirmed that the Directors consider that the Board has a good balance of skills, is working well and continues to be refreshed, with two further appointments in 2009. Acknowledging, however, that there is always room for improvement, the process also identified a number of areas for focus in the coming year, including: ■ strategic risk management and the Group’s overall approach to risk; ■ a review of Board support processes to identify efficiencies and systems solutions; ■ further changes to the arrangements for the Audit and CSR Committees. While smaller meetings have allowed for much more in-depth discussion, particularly around specific risks identified on the Group risk register, members believe that holding meetings simultaneously will relieve pressure on the timings of those Committees, allowing for more thorough debate or specific briefings of relevance to the Committees; ■ additional non-executive appointments; and ■ a revision to the Board calendar from 2011 onwards setting aside a further day in July each year to accommodate longer meetings and/or training. The formal process in 2009 was also supplemented by an informal meeting in September 2009 for Audit Committee members to discuss proposals to improve the effectiveness of that Committee, and in December 2009 for Non-Executive Directors only and Richard Burrows, by then Chairman, at which the Board’s action plan was considered in further detail. In addition to the formal Board evaluation process the Chairman also discusses the effectiveness and performance of Directors immediately before they make themselves available for reappointment. The Notice for this year’s Annual General Meeting confirms that the performance of the Directors being proposed for reappointment continues to be effective and that they continue to show commitment to their role. Shareholder engagement Relations with shareholders The Board maintains a dialogue with shareholders directed towards ensuring a mutual understanding of objectives. Its primary contact with shareholders, facilitated by the Head of Investor Relations, is through the Executive Directors, but the Chairman also maintains contact with major shareholders in order to understand their views on the Company. In addition, the Senior Independent Director and the other Non-Executive Directors are available to meet with major shareholders in order to understand their views and any concerns which they may have. During 2009, a wide range of business and corporate governance issues, including strategy and risk, dividend policy and the share buy-back programme, were discussed with a number of major institutional investors as part of the regular investor relations 68 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: meeting to address Jan du Plessis
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 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
Page 47: 106 British American Tobacco Annual

Directors' Report: Governance - British American Tobacco

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?