BP Annual Report and Form 20-F 2011 - Company Reporting

Corporate governanceAntony Burgmans who, given his length of service on the board, willrespond to any internal board matters, act as a sounding board for thechairman and serve as an intermediary for other directors if necessary.Sir William stepped down as chairman of the safety, ethics andenvironment assurance committee (SEEAC) and Paul Anderson became itschairman from 9 December 2011.Ian Davis stepped down as a member of the audit committee on3 February 2012 and Frank Bowman joined the Gulf of Mexico committeeon the same date.Neither the chairman nor the senior independent director areemployed as executives of the group. The board maintains a successionplan for the chairman and senior independent director, in addition to thegroup chief executive and senior management.Appointment and tenureThe chairman and our non-executive directors (NEDs) serve on the basisof letters of appointment. BP does not place a term limit on director’sservice as we propose all directors for annual re-election by shareholders (apractice we have followed since 2004).Tenure of board directors as at 6 March 20120-3 years8 NEDs4-6 years 7-9 years3 NEDs 1 NEDThe governance principles require our non-executive directors to beindependent in character and judgement and free from any business orother relationship which could materially interfere with the exercise of theirjudgement. The board has determined that those non-executive directorswho served during 2011 fulfilled this requirement and were independent.The board also satisfied itself that there is no compromise to theindependence of, or existence of conflicts of interest for, those directorswho serve together as directors on the boards of outside entities or whohave other appointments in outside entities. These issues are consideredon a regular basis at board meetings. The nomination committee keepsunder review the nature of non-executive directors’ other interests toensure that the effectiveness of the board is not compromised. Thecommittee may make recommendations to the board if it concludes that adirector’s other commitments are inconsistent with those required by BP.Time commitment and outside appointmentsLetters of appointment for non-executive directors do not set out a fixedtime commitment for board duties as we believe that the time requiredby directors may fluctuate depending on demands of the business andother events. However, it is expected that directors will allocate sufficienttime to the company to perform their duties effectively. The chairman’sappointment letter sets out the time commitment expected of him.Following an approach from the Volvo Group, the chairmandiscussed with the board, through the chairman’s committee, whetherto take an additional post as a part-time non-executive chairman of Volvo.During this process, our senior independent director led a discussion ofnon-executive directors without the chairman present to hear their views.The board concluded that Mr Svanberg has sufficient time to carry out bothcommitments and supported the chairman taking on this additional role.The chairman will step down from his existing non-executive directorshipat Ericsson before assuming the chairmanship of Volvo in April 2012; healso confirmed to the board that he does not intend to seek any additionalroles outside those at BP and Volvo.Executive directors are permitted to take up one external boardappointment, subject to the agreement of the chairman and provided suchexternal appointment is reported to the BP board. Fees received for anexternal appointment may be retained by the executive director and arereported in the Directors’ remuneration report.DiversityBP recognizes the importance of diversity, including gender, at all levelsof the company as well as the board. The company is committed toincreasing diversity across our operations and has in place a wide range ofactivities to support the development and promotion of talented individuals,including women.During the year, the board responded to Lord Davies’ report ongender diversity and confirmed its goal to increase the number of womenon the BP board to three by 2013 and work towards the recommendationof 25% female representation by 2015. With the appointment of ProfessorCorporate governanceBP governance frameworkDelegationNominationNominationcommitteecommitteeRemunerationRemunerationcommitteecommitteeChairman’scommitteeOwners/shareholdersBoardGulf of MexicocommitteeSEEACAuditcommitteeBP Board GovernancePrinciples• BP goal• Governance process• Delegation model• Executive limitationsStrategy/group risks/annual planGroup chief executiveGCE’s delegationsMonitoring,information andassuranceErnst & YoungInternal auditFinance functionSafety & operationalrisk functionGeneral counselGroup complianceofficerExternal marketand reputationresearchIndependent expertIndependent advice(if requested)DelegationDelegation of authoritythrough policy withmonitoringAccountabilityRCMResourcecommitmentsmeetingGPCGroup peoplecommitteeExecutive managementGDCGroupdisclosurescommitteeGFRCGroupfinancial riskcommitteeGORCGroupoperations riskcommitteeAccountabilityAssurance throughmonitoring and reportingBP Annual Report and Form 20-F 2011 121