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

Corporate governanceCorporate governance practicesIn the US, BP ADSs are listed on the New York Stock Exchange (NYSE).The significant differences between BP’s corporate governance practicesas a UK company and those required by NYSE listing standards for UScompanies are listed as follows:IndependenceBP has adopted a robust set of board governance principles, whichreflect the UK Corporate Governance Code and its principles-basedapproach to corporate governance. As such, the way in which BP makesdeterminations of directors’ independence differs from the NYSE rules.BP’s board governance principles require that all non-executive directorsbe determined by the board to be ‘independent in character and judgement andfree from any business or other relationship which could materially interferewith the exercise of their judgement’. The BP board has determined that, inits judgement, all of the non-executive directors are independent. In doing so,however, the board did not explicitly take into consideration the independencerequirements outlined in the NYSE’s listing standards.Code of ethicsThe company has adopted a code of ethics for its group chief executive,chief financial officer, group controller, general auditor and chief accountingofficer as required by the provisions of Section 406 of the Sarbanes-OxleyAct of 2002 and the rules issued by the SEC. There have been no waiversfrom the code of ethics relating to any officers.BP also has a code of conduct, which is applicable to all employees.This was updated (and published) on 1 January 2012.CommitteesBP has a number of board committees that are broadly comparable inpurpose and composition to those required by NYSE rules for domesticUS companies. For instance, BP has a chairman’s (rather than executive)committee, nomination (rather than nominating/corporate governance)committee and remuneration (rather than compensation) committee.BP also has an audit committee, which NYSE rules require for both UScompanies and foreign private issuers. These committees are composedsolely of non-executive directors whom the board has determined to beindependent, in the manner described above.The BP board governance principles prescribe the composition,main tasks and requirements of each of the committees (see the boardcommittee reports). BP has not, therefore, adopted separate charters foreach committee.Under US securities law and the listing standards of the NYSE,BP is required to have an audit committee that satisfies the requirementsof Rule 10A-3 under the Exchange Act and Section 303A.06 of the NYSEListed Company Manual. BP’s audit committee complies with theserequirements. The BP audit committee does not have direct responsibilityfor the appointment, re-appointment or removal of the independentauditors – instead, it follows the UK Companies Act 2006 by makingrecommendations to the board on these matters for it to put forward forshareholder approval at the AGM.One of the NYSE’s additional requirements for the auditcommittee states that at least one member of the audit committee is tohave ‘accounting or related financial management expertise’. The boarddetermined that Brendan Nelson possessed such expertise and alsopossesses the financial and audit committee experiences set forth in boththe UK Corporate Governance Code and SEC rules (see audit committeereport). Mr Nelson is the audit committee financial expert as defined inItem 16A of Form 20-F.Shareholder approval of equity compensation plansThe NYSE rules for US companies require that shareholders must be giventhe opportunity to vote on all equity-compensation plans and materialrevisions to those plans. BP complies with UK requirements that aresimilar to the NYSE rules. The board, however, does not explicitly takeinto consideration the NYSE’s detailed definition of what are considered‘material revisions’.Code of ethicsThe NYSE rules require that US companies adopt and disclose a code ofbusiness conduct and ethics for directors, officers and employees. BP hasadopted a code of conduct, which applies to all employees, and has boardgovernance principles that address the conduct of directors. In additionBP has adopted a code of ethics for senior financial officers as required bythe SEC. BP considers that these codes and policies address the mattersspecified in the NYSE rules for US companies.134 BP Annual Report and Form 20-F 2011