Setting new standards - Friends Life

CORPORATE GOVERNANCE
CORPORATE SOCIAL RESPONSIBILITY REPORT
DIRECTORS AND MANAGEMENT
Reporting to shareholders
The Company places considerable importance on communications
with shareholders and responds to them on a wide range of
issues. It has an ongoing programme of dialogue and meetings
with major institutional shareholders, where a wide range of
relevant issues including strategy, performance, management and
governance are discussed. Further, the Chairman and the senior
independent director are available to meet major shareholders and
the Chairman writes annually to the 20 largest shareholders,
emphasising his availability should they wish to meet with him.
During 2006, no such meetings with the Chairman were requested
by shareholders. Twice during the year, the Chairman and the
directors met with the Company’s joint brokers, JPMorgan
Cazenove and Merrill Lynch, following completion of the executive
presentations to major shareholders. This helps the non-executive
directors to maintain an up-to-date understanding of the views of
major shareholders.
At its AGM, the Company complies with the provisions of the
Combined Code relating to the disclosure of proxy votes, the
separation of resolutions and the attendance of directors,
particularly committee chairmen. The timing of the despatch of
the formal notice of the AGM complies with the Combined Code.
The outcome of every general meeting of shareholders, including
detailed voting results and votes withheld, is published on the
Company’s website following the close of the meeting.
Institutional investors
As an institutional investor, the Company aims to exercise wise
stewardship over the companies in which it invests. The
Company’s approach to socially responsible investments has been
enhanced by the Responsible Engagement Overlay (reo ® )
developed by the Company’s fund manager, F&C, which complies
with the principles set out in the Institutional Shareholders’
Committee’s Code of Activism, including comprehensive and
considered voting and dialogue, where appropriate, with investee
companies. The Company’s policy on socially responsible
investment can be found on the corporate website
www.friendsprovident.com/sri, which also includes the voting
reports, voting policy and latest newsletter.
Internal controls and risk management
The Group has in place an ongoing process for identifying,
evaluating and managing the significant risks it faces. The Board
regularly reviews the process through the risk committee structure
and confirms that it complies with the ‘Internal Control: Revised
Guidance for Directors On The Combined Code’ published by the
Financial Reporting Council and the ABI Disclosure Guidelines on
Socially Responsible Investment, which focus on social, ethical
and environmental (SEE) risks.
The Board of the Company is ultimately responsible for the
Group’s systems of internal control and for reviewing their
effectiveness. These systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives, as no
business can be successful without taking some risk. They can
thus provide reasonable but not absolute assurance against
material mis-statement or loss.
The Board has conducted an annual review of the effectiveness
of the Group’s systems of internal controls and risk management.
The Company’s Audit and Compliance Committee has also
received:
• a review of the operation of the Group’s risk management
framework from the Group’s risk management function;
• a report from the Group’s independent internal audit function
of the framework’s effectiveness; and
• assurances from the Group Risk Committee that the risk
committees within the operating subsidiaries have reviewed
the effectiveness of the internal controls and risk management
activities within their respective remits.
These reports commented on the controls that had operated
during the year under review and where any significant failings or
weaknesses were identified, actions have been taken or are being
taken to remedy them. Through this process, the Audit and
Compliance Committee was able to recommend to the Board the
approval of the statements concerning internal controls and risk
management statements.
52 Friends Provident Annual Report & Accounts 2006