The Baker Panel Report - ABSA

BOARD OVERSIGHT> Panel’s review relating to the boardThe Panel notes that it has had no direct interaction with the Board of Directors of BP p.l.c. The Panel did receive a presentation relating to theBoard and corporate governance from BP’s corporate secretary and has also received from BP, in addition to copies of reports to the EEAC,copies of portions of some minutes relating to EEAC meetings. Moreover, in its interviews of executive and corporate management, the Panelhas inquired into matters relating to Board oversight of process safety.As discussed in the previous section of this report, the Panel has reviewed the annual reports provided to the EEAC for 1999 through 2005.These reports informed the EEAC of process safety incidents, risks, and certain problems with the company’s HSSE management systems andsteps that management proposed to mitigate the known risks and correct identified problems. As discussed above, the steps that managementtook were not effective to implement an integrated, comprehensive, and effective process safety management system for BP’s U.S. refineries. Inthe absence of an effective management system for process safety, by what means could or should the Board have exercised effective oversightof process safety affecting BP’s U.S. refineries?> Role of the board in BP’s governance systemThe Panel notes that the Board exercises “judgement in carrying out its work in policy-making, in monitoring executive action and in its activeconsideration of group strategy.” 148 The Board does not manage BP’s affairs. The Board delegates this management function to the GroupChief Executive. The delegation is made subject to limitations set forth in the Board’s executive limitations policy, which defines the boundariesof executive action. Within those boundaries, the Board monitors and gains assurance that the boundaries of delegated management authorityare observed. The EEAC primarily serves this monitoring function for process safety. Two executive limitations relate to safety:“The CEO will not cause or permit anything to be done without taking into account the effect on long-term shareholder value of thehealth, safety and environmental consequences of the actions . . . .”“The CEO will not cause or permit employees or other parties doing work for the Group to be subject to undignified, inequitable,unfair, or unsafe treatment or conditions.”> U.K. guidance on the role of the boardThe Panel recognizes that the concept of a Board’s role on health and safety matters is evolving. The United Kingdom has been at the forefrontof evolving concepts about the role of boards of directors in overseeing an organization’s health and safety performance.In 2000, the U.K. Health and Safety Commission issued a strategy statement describing a plan for revitalizing workplace safety. One actionpoint under the strategy was the development of a code of practice on responsibilities of directors for health and safety. In discussing the actionpoint, the Commission observed that “in organisations that are good at managing health and safety, health and safety is a board room issueand a board member takes direct responsibility for the co-ordination of effort.” 149The Health and Safety Commission subsequently promulgated the Directors’ Responsibilities for Health and Safety in 2001 as voluntaryguidance on health and safety responsibilities for directors. Although this guidance does not establish any legal duties, it proposes thefollowing five action points as best practices: The board needs to accept formally and publicly its collective role in providing health and safety leadership in its organisation.Performance Evaluation, Corrective Action, and Corporate Oversight C 232