G4S Annual Report and Accounts 2011

Governance Financial statements Shareholder information
Corporate governance statement
“We understand that corporate governance is not
just about reporting against compliance with a code.
Rather it is about ensuring that the way we operate
in all our businesses maintains an appropriate
balance of dynamic entrepreneurship and controls.
We strive to ensure that this balance exists and
works properly at board level and throughout
the group as a whole.”
Alf Duch-Pedersen
Chairman
Compliance with the UK Corporate
Governance Code
The board’s statement on the company’s corporate governance
performance is based on the UK Corporate Governance Code published
in June 2010 (“the Code”) which is available on the Financial Reporting
Council’s website (http://www.frc.org.uk/corporate/ukcgcode.cfm).
The Listing Rules require companies to disclose how they apply the Code’s
main principles and report how they have done so. The Code recognises
that alternatives to following provisions may be justified in particular
circumstances if good governance can be achieved by other means,
provided the reasons are explained clearly and carefully. In such cases,
companies must also illustrate how their actual practices are consistent
with the principle in question and contribute to good governance.
The company complied throughout the year under review with the
provisions of the Code. This section of the report sets out how the
company has applied these provisions.
Our governance framework
CEO
Executive
Committee
Regional
Management
Nomination
Committee
Capex
Committee
Remuneration
Committee
G4S plc board
Group Risk
Committee
Regional Risk
Committees
Audit
Committee
Group
Internal Audit
CSR
Committee
CFO
Regional
Finance
The board sits at the top of the company’s governance framework, setting
broad strategic targets, monitoring progress, approving proposed actions
and ensuring appropriate controls are in place and effective.
Management decisions, development of strategies and policies and
implementation of board decisions falls to the executive committee.
Regional management teams have responsibility for businesses within their
regions and are tasked with implementing policies and controls at business
levels, as well as ensuring they meet agreed financial goals.
The presence of a majority of independent non-executive directors ensures
objectivity, challenge and debate. It is the primary responsibility of the board
to provide effective leadership for the group and this is done by, amongst
other things, ensuring that decision making is conducted throughout the
group within a strong internal control framework – and by setting values
and standards.
There is a detailed schedule of matters reserved to the board which is
set out under 12 separate categories: strategy and management; structure
and capital; financial reporting and controls; internal controls; contracts;
communication; board membership and other appointments; remuneration;
delegation of authority; corporate governance matters; policies; and other.
By way of example, board approval is required for major investments,
including the acquisition or disposal of any business worth more than £5m;
any changes to the group’s long-term objectives and commercial strategy;
and the annual operating and capital expenditure budgets.
The board fulfils a number of its most important functions through its four
committees. Descriptions of the work of three of these committees is set
out elsewhere in this report.
The CSR Committee has existed since January 2010 and has been chaired
by Mark Elliott since then. Initially, it reported to the Audit Committee,
but in late 2011 it was formally constituted as a committee of the board in
recognition of the desire of the board to increase its focus on corporate
social responsibility. Its first meeting as a full board committee was held in
January 2012. Its activities will therefore be reported on in greater detail
in the company’s 2012 report.
The terms of reference of each of the above committees are available
on the company’s website: www.g4s.com
Board balance
Board composition
The board comprises the non-executive chairman (Alf Duch-Pedersen),
a non-executive deputy chairman (Mark Seligman), five other non-executive
directors, the chief executive (Nick Buckles), the chief financial officer
(Trevor Dighton) and a chief operating officer (Grahame Gibson).
The board considers all the non-executive directors to be independent.
The senior independent director is Lord Condon. Lord Condon was
deputy chairman until October 2011, when Mr Seligman took on that
role. Thorleif Krarup, a non-executive director, retired from the board
on 31 January 2011.
The directors bring a wide range of skills and experience to the board.
This experience and their roles on the board is described in more detail
on pages 49 to 51.
Succession
Mr Duch-Pedersen has announced his intention to retire from the
board during 2012 once a replacement chairman has been appointed.
The process for selecting his successor is being conducted by the
Nomination Committee, led by Lord Condon and assisted by an
external recruitment consultant. As deputy chairman, Mr Seligman has
been co-opted onto the committee for the purposes of this exercise.
Mr Duch-Pedersen is not directly involved in the selection process.
The final selection of the new chairman will be a matter for the entire
board as, currently, none of the existing directors have put themselves
forward as a candidate for the role.
Director re-election
The company’s articles of association require that all continuing directors
are subject to election by shareholders at the next Annual General Meeting
following their appointment and that they submit themselves for re-election
at least every three years and that at least one-third of the directors not
standing for election for the first time stand for re-election at each Annual
General Meeting. However, in accordance with the Code provision on
re-election of directors, all the continuing directors will stand for re-election
at the Annual General Meeting in 2012.
G4S plc
Annual Report and Accounts 2011
57