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

Corporate governanceAssuranceThe board undertook a number of activities as part of its assurancerole, including assessing the effectiveness of the company’s system ofinternal controls and risk management. The group’s financial performancewas considered, as was a review of BP’s technology function and theperformance and role of the technology group within the outlook for energydemand and supply.The board received an overview of BP’s activities in the US andreceived several updates during the year on legal issues, in particular onlitigation and enquiries resulting from events in the Gulf of Mexico. Theboard discussed the UK Bribery Act and the steps the company was takingto comply with the Act; as a result of this discussion the board endorsedthe updated anti-bribery policy outlined in BP’s code of conduct.L. Duane Wilson, the independent expert appointed by the boardto provide an objective assessment of BP’s progress in implementing therecommendations of the BP US Refineries Independent Review Panel,presented his fourth annual report to the board where he assessed BP’sprogress against the Panel’s 10 recommendations. Further details ofMr Wilson’s work are outlined in the report of the SEEAC and his report ispublished on BP’s website at bp.com/independentexpert.RiskThe board discussed the progress and outcome of the review of BP’srisk management system over the year. The outcome of the review hasresulted in clearer and more consistent reporting, definitions and templatesfor BP’s risk management activities, as well as greater alignment of theserisk management activities with existing BP business processes.The board and its monitoring committees (audit, SEEAC and Gulfof Mexico) monitored the group risks which had been allocated followingthe board’s review of the annual plan at the end of 2010. The annual planand the group strategy are central to our risk management programme asthey provide a framework for the board to consider significant risks andmanage the group’s overall risk exposure as well as underpin the modelof delegation and assurance for the board in its oversight of executivemanagement and other activities.ReputationThe board considers reputation from two perspectives – the reputationalrisks to the group and the processes the company has in place to managethese risks. During the year, the board reviewed external reputation datawhich looked at BP’s reputation in the UK and US. It also discussed thegroup’s communications strategy and its reputation management plan.BP’s group-wide renewed values were launched in 2011 as partof a programme of change called ‘We are BP’, by which the renewedvalues will be reflected in how employees’ performance is assessed andrewarded. The renewed values were also embedded within the updatedcode of conduct.GovernanceAs described above, over the year the board reviewed its system of boardgovernance and established a working group to assist in this process. Themain outcomes of the review were strengthened board processes aroundinformation, risk and revisiting the role and tasks of the board and itscommittees.The board seeks to understand the views of its shareholders, andfeedback from investors is given to the board – either directly followingmeetings with the chairman or other board members or indirectly throughan annual investor audit undertaken by a third party. Following our AGM inApril 2011, the board examined the voting results for each resolution andconsidered the comments received from institutional investors to explaintheir voting position.Governance• Board governancereview• Investor audit• Board evaluationStrategy• Russia• Strategy: group• Strategy: biofuels;Canadian heavy oil• Annual plan• Competitor analysis• Disposal programmeBP boardactivitiesin 2011Reputation• Group reputation review• Communications• Reputation management• Crisis managementRisk• Risk management review• Group risk: upstream capability• Group risks for 2012Assurance• Group financial outlook• Independent expert’sannual report• Legal update• Technology review• US overview• Corporate reporting• UK Bribery ActShareholder engagementThe company continued its open dialogue with shareholders. Ourexecutive directors and members of our executive management team heldinvestor meetings following our strategy and financial results. We also heldmeetings on operating and non-financial issues, including presentationson BP’s Energy Outlook 2030, an update on BP’s activities in Canadianoil sands, our Alternative Energy and Refining and Marketing businessesand BP’s environmental and social requirements for new projects. Theseevents were intended to give shareholders a wider perspective on thecompany’s thinking behind its strategy and an understanding of theprocesses and standards we use to underpin our operations.The chairman, senior independent director and chair of ourremuneration committee held a number of one-to-one meetings withinstitutional investors to discuss strategy, the board’s view on the company’sperformance and governance and our remuneration structure. In additionthe chairman, with two members of our senior executive team, spoke atgroup investor events in the US and UK to outline the company’s progresson the Bly Report recommendations, the remit and work of the safety andoperational risk function and the work of the board. In March 2011 we heldour annual investor event with our chairman and the chairs of our boardcommittees. We continue to receive positive feedback on this event and findit an effective way for our largest shareholders to hear about the work of ourboard and our committees, and for our non-executive directors to engage indialogue with investors. We intend to hold a similar event in March 2012.During the year we focused on enhancing communication withour private shareholders, including a revision of dividend materials andthe shareholder information pages of our website. We continued our ‘lostshareholder’ programme which returns shares and unclaimed dividends toshareholders who have failed to keep their contact details up to date.Materials from our investor presentations, including information on thework of our board and its committees can be downloaded from theinvestors page of our website.124 BP Annual Report and Form 20-F 2011