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

Corporate governancecontinued to make progress in addressing the main safety, ethical andenvironmental challenges confronting it since it was formed in 2003. Thecommittee will continue to monitor progress regularly.The committee continued to receive reports on the joint ventureoperations in Iraq, and in particular was briefed by the company’s head ofsecurity on the risks and management of security in Iraq. As mentionedabove, the committee reviewed the company’s shipping activities in 2011and was briefed on the function’s response to the threat of piracy in thewaters off the Somali coast.The committee also examined quarterly audit reports from BP’sinternal audit and safety and operational risk functions which highlightedkey findings and material actions arising from audits which had takenplace at segment, functional and regional levels and tracked their closeout. During the year the committee also received written reports from thegroup ethics and compliance officer.Activities from the executive-level group operations risk committee(GORC) are reported to the SEEAC by the group chief executive andexecutive vice president S&OR at each meeting. Improved co-ordinationof agenda planning was achieved to facilitate executive management levelreview of key risk topics prior to board level review at SEEAC. The SEEACalso received regular updates on the company’s interaction with regulatoryagencies.Committee evaluationFor its 2011 evaluation, the SEEAC again used a questionnaireadministered by external consultants to examine the committee’sperformance and effectiveness. The committee responded to the samequestions as used in 2010 so that any change trends could be discerned.The topics covered included the balance of skills and experience among itsmembership, quality and timeliness of information the committee receives,the level of challenge between committee members and management andhow well the committee communicates its activities and findings to theboard.In 2010 the committee had concluded that it should increase its sitevisits and training. In 2011, as reported above, the committee believed ithad increased these activities significantly and agreed it should continue todo so in 2012. It also noted that given its broad remit across non-financialrisk, it would need to continue to balance that breadth with heightenedfocus on specific risk and performance topics. It viewed its increaseduse of member visits and briefings as important tool towards achievingthat heightened focus. Overall the committee considered that its currentmembership provided a well-balanced and experienced resource, and alsonoted the valuable contribution made by Mr Wilson in his capacity as theindependent expert.Gulf of Mexico committeeChairman’s introductionThe Gulf of Mexico committee was very active in 2011, meeting 16 timesover the course of the year. In addition to overseeing efforts to mitigate theeffects of the spill, the company’s strategy for resolving claims, and actionsto restore the group’s reputation, the committee focused a considerableportion of its attention on legal matters. Some of these legal mattersincluded settlements reached with BP’s partners in the Macondo well andvarious contractors, preparations for the upcoming trial in the Multi-DistrictLitigation and ongoing governmental investigations.We have been joined in meetings by the leadership, managementand counsel of the Gulf Coast Restoration Organization (GCRO), which wasformed in mid-2010 to manage the company’s long-term response to thetragic Deepwater Horizon oil spill. The committee members’ understandingof the important issues and numerous interdependencies has beenfacilitated by the frequency of meetings and the breadth of topics covered.I believe the committee has maintained a rigorous approach to itswork, providing effective oversight on behalf of the board, to which reportsare provided following committee meetings. The report below summarizesthe activities of the committee in 2011. I anticipate 2012 will be an equallydemanding year but the committee is well prepared to conduct its tasks.Ian DavisGulf of Mexico committee chairCommittee membersIan Davis – committee chairPaul AndersonFrank Bowman (joined the committee 3 February 2012)Sir William CastellGeorge DavidIn 2011 the membership of the Gulf of Mexico committee remained thesame as in 2010, including two US-based non-executive directors and theprevious and present chairmen of the SEEAC. There is cross-membershipwith the audit committee, helping to inform discussions at the latterregarding financial controls and incident-related costs. Frank Bowmanjoined the committee in February 2012.Each meeting of the committee is attended by Lamar McKay,President and CEO of the GCRO, and by Jack Lynch, chief counsel to theGCRO. The chairman, group chief executive and group general counsel jointhe meeting whenever possible. Meetings also include private sessionsattended by non-executive members only.Committee role and structureThe purpose of the committee is to provide non-executive oversight of theGCRO and to support efforts to rebuild trust in BP and BP’s reputation witha particular focus on the US.The work of the committee is fully integrated with the work of theboard on reputation, safety, strategy and financial planning, and the boardretains ultimate accountability for oversight of the group’s response to theincident.Directors are invited to attend and observe committee meetings.Committee meeting minutes are circulated to the board, and thecommittee chairman provides verbal reports on the committee’s activitiesat board meetings.The committee met 16 times in 2011.During the course of 2011, the committee has undertaken thefollowing tasks:• Oversee and receive regular reports on work undertaken to mitigate theeffects of the oil spill in the Gulf of Mexico area.• Oversee GCRO’s co-ordinated response programme for affectedcommunities and states, along with its strategies for managing externalrelationships on issues relating to the incident.• Oversee the legal strategy for litigation and investigations involving thegroup arising from the incident or its aftermath.• Oversee GCRO’s strategy for resolving claims, recognizing theindependent role of the Gulf Coast Claims Facility.130 BP Annual Report and Form 20-F 2011