Setting new standards - Friends Life

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CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY REPORT DIRECTORS AND MANAGEMENT The Nomination Committee Purpose and terms of reference The Committee leads the process, and makes recommendations to the Board, for all new Board appointments. It ensures the existence of a formal, rigorous and transparent procedure, the aim of which is to ensure that appointments are appropriate to the needs of the Group and the balance of the Board. The terms of reference of the Committee, which explain the purpose, delegated authority and duties of the Committee, have been published on the Company’s website and can be obtained on written request to the Company Secretary. Through its agenda, the Committee effectively deals with the duties delegated to it by its terms of reference. Membership and attendance The members of the Committee are Lord MacGregor (Chairman), Lady Judge and Sir Adrian Montague. The attendance record of members at the meetings of the Committee is set out on page 50. The Group Chief Executive attended when required, by invitation. For the entirety of 2006, and up to the date of this report, the Company complied with the requirements of the Combined Code in so far as they related to the work of nomination committees. Activities and work of the Committee Following Keith Satchell’s announcement of his intention to retire in 2007, the succession plans for both executive and non-executive directors were reviewed throughout 2006 and the Committee led the search and recruitment process with the assistance of external executive search consultants. The Committee considered fully the leadership needs of the Group and after considering both internal and external candidates, recommended to the Board that Philip Moore, the existing Group Finance Director, be appointed as Group Chief Executive. Philip Moore was duly appointed as Group Chief Executive on 1 January 2007 in succession to Keith Satchell. As a result of Philip Moore’s appointment, the Committee undertook a further search for a new Group Finance Director. The Committee interviewed a number of candidates and recommended to the Board the appointment of Jim Smart who joined the Company in November 2006 and was formally appointed Group Finance Director on 1 January 2007. The Committee also considered the need for additional non-executive directors in view of the planned retirements of Christopher Jemmett and Lord MacGregor, who are both aged 70, in May 2007. The Committee reviewed the mix of skills and experience that would be of most benefit to the Group and following a further search process recommended the appointment of Sir Mervyn Pedelty as an independent nonexecutive director from 1 October 2006. The Committee is currently progressing the search for a further independent nonexecutive director. The increased number of meetings held by the Committee during the year reflected the additional workload arising from these activities. The Committee has also again reviewed the standard letter of appointment used for the non-executive directors’ contract for services to ensure that it continues to meet the requirements of the Combined Code. The individual terms and conditions of appointment of non-executive directors can be inspected during normal business hours at the Company’s registered office by contacting the Company Secretary. The Committee has assessed whether each independent director is fulfilling his or her duties, confirmed the time required of nonexecutive directors for the fulfilment of their duties, and made recommendations to the Board as to the independence of directors and their suitability for re-election as directors. Finally, the Committee reviewed the relevant parts of the draft 2007 AGM notice to shareholders to ensure its appropriateness as regards those matters to be disclosed that could be regarded as within the Committee’s remit, for example, the biographical details of directors and their independence. For the Board The Rt Hon Lord MacGregor of Pulham Market Chairman, Nomination Committee 19 March 2007 58 Friends Provident Annual Report & Accounts 2006
DIRECTORS’ REPORT CORPORATE GOVERNANCE REPORTS The With-Profits Committees (WPCs) of the Life and Pensions operating companies Purpose and terms of reference The purpose of the WPCs is to bring independent judgment to (i) the assessment of compliance of each Life and Pensions operating company with its published Principles and Practices of Financial Management (PPFM), and (ii) how any competing or conflicting rights and interests of policyholders and, if applicable, shareholders have been addressed. In neither case does this take away any responsibility or accountability from the boards of the relevant companies. This purpose is reflected in each WPC’s written terms of reference which are published on the Company’s website and are subject to annual review by the WPCs. The last review was carried out in June 2006 when the WPCs concluded that the existing terms of reference for the committees remained appropriate. Membership and operations The WPCs are chaired by one of the Company’s independent nonexecutive directors, currently Alison Carnwath. The other members are Peter Nowell (independent external member) and Graham Aslet (former director and Appointed Actuary). All three served throughout the year. During the year, the WPCs reviewed their operations and level of activities against peer practice and were satisfied with the current governance and the infrastructure that were in place to ensure effective discharge of their role. Activities and work of the WPCs The WPCs met four times during 2006, with all members present on every occasion. During the year, the WPCs reviewed the changes made to the Life & Pensions operating companies’ published PPFMs and the consumer friendly With-Profits Summaries, and the main areas of discretion allowed by the PPFMs. In particular, they reviewed the appropriateness of a change in the mix of assets backing the FPLP With-Profits Fund, removal of Market Value Reduction factors, the basis used for determining surrender values, the principles underlying the bonus declarations for FPLP and FPLA made in January and July 2006 and January 2007 and the principles by which benefits are shared among policyholders within the Closed Fund of FPLA. The WPCs also reviewed the content and quality of communications to policyholders, including the With-Profits Actuary’s report on the use of discretion in the management of with-profits business and the board report to policyholders. A process was in place to ensure that the WPCs saw any correspondence that had been sent by policyholders to the WPCs or any of its members and the responses. A number of special projects, which potentially affected the interests of both with-profits policyholders and shareholders, were undertaken during the year. The most important of these projects were (i) the investigation into a smoothing methodology for FPLP with-profits funds to ensure that surrender values for policies in payment would not fall significantly on a change in basis and (ii) development of the Closed Fund Run-off Plan for FPLA. Additionally, management also kept the WPCs informed, on a timely basis, of the following reports and issues during the year: • approach to alternative investments for the FPLP With-Profits Fund; • actuarial valuation reports and individual capital assessment results of the Life and Pension subsidiaries; • comparative analysis of the With-Profits Fund performance; and • initiatives in promoting ‘Treating Customers Fairly’. The WPCs reviewed these and other proposals in accordance with their terms of reference, assessed and confirmed that the proposals were in compliance with the appropriate PPFM and, effectively, treated customers fairly. Any issues arising from these reviews were debated within the WPCs and, in some cases, the WPCs have made recommendations to the Life & Pensions operating companies’ boards that resulted in changes being made by the boards to the original proposals. For the Board Alison Carnwath Chairman, With-Profits Committees 19 March 2007 Friends Provident Annual Report & Accounts 2006 59
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Friends Provident plc Pixham End Do
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