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

Corporate governancePrincipal accountants’ feesand servicesThe audit committee has established policies and procedures for theengagement of the independent registered public accounting firm, Ernst& Young LLP, to render audit and certain assurance and tax services. Thepolicies provide for pre-approval by the audit committee of specificallydefined audit, audit-related, tax and other services that are not prohibitedby regulatory or other professional requirements. Ernst & Young areengaged for these services when its expertise and experience of BP areimportant. Most of this work is of an audit nature. Tax services wereawarded either through a full competitive tender process or following anassessment of the expertise of Ernst & Young relative to that of otherpotential service providers. These services are for a fixed term.Under the policy, pre-approval is given for specific services withinthe following categories: advice on accounting, auditing and financialreporting matters; internal accounting and risk management controlreviews (excluding any services relating to information systems designand implementation); non-statutory audit; project assurance and advice onbusiness and accounting process improvement (excluding any servicesrelating to information systems design and implementation relating to BP’sfinancial statements or accounting records); due diligence in connectionwith acquisitions, disposals and joint ventures (excluding valuation orinvolvement in prospective financial information); income tax and indirecttax compliance and advisory services; employee tax services (excludingtax services that could impair independence); provision of, or accessto, Ernst & Young publications, workshops, seminars and other trainingmaterials; provision of reports from data gathered on non-financial policiesand information; and assistance with understanding non-financial regulatoryrequirements. BP operates a two-tier system for audit and non-auditservices. For audit related services, the audit committee has a preapprovedaggregate level, within which specific work may be approved bymanagement. Non-audit services, including tax services, are pre-approvedfor management to authorize per individual engagement, but above adefined level must be approved by the chairman of the audit committeeor the full committee. The audit committee has delegated to the chairmanof the audit committee authority to approve permitted services providedthat the chairman reports any decisions to the committee at its nextscheduled meeting. Any proposed service not included in the approvedservice list must be approved in advance by the audit committee chairmanand reported to the committee, or approved by the full audit committee inadvance of commencement of the engagement.The audit committee evaluates the performance of the auditorseach year. The audit fees payable to Ernst & Young are reviewed by thecommittee in the context of other global companies for cost effectiveness.The committee keeps under review the scope and results of audit workand the independence and objectivity of the auditors. External regulationand BP policy requires the auditors to rotate their lead audit partner everyfive years. (See Financial statements – Note 16 on page 209 and Auditcommittee report on page 127 for details of audit fees.)Memorandum and Articlesof AssociationThe following summarizes certain provisions of the company’sMemorandum and Articles of Association and applicable English law. Thissummary is qualified in its entirety by reference to the UK Companies Act2006 (Act) and the company’s Memorandum and Articles of Association.For information on where investors can obtain copies of the Memorandumand Articles of Association see Documents on display on page 170.At the AGM held on 17 April 2008 shareholders voted to adopt newArticles of Association, largely to take account of changes in UK companylaw brought about by the Act. Further amendments to the Articles ofAssociation were approved by shareholders at the AGM held on 15 April2010. These amendments reflect the full implementation of the Act,among other matters.Objects and purposesBP is incorporated under the name BP p.l.c. and is registered in Englandand Wales with the registered number 102498. The provisions regulatingthe operations of the company, known as its ‘objects’, were historicallystated in a company’s memorandum. The Act abolished the need to haveobject provisions and so at the AGM held on 15 April 2010 shareholdersapproved the removal of its objects clause together with all otherprovisions of its Memorandum that, by virtue of the Act, are treated asforming part of the company’s Articles of Association.DirectorsThe business and affairs of BP shall be managed by the directors. Thecompany’s Articles of Association provide that directors may be appointedby the existing directors or by the shareholders in a general meeting. Anyperson appointed by the directors will hold office only until the next generalmeeting and will then be eligible for re-election by the shareholders. Thereis no requirement for a director to retire on reaching any age.The Articles of Association place a general prohibition on a directorvoting in respect of any contract or arrangement in which the director hasa material interest other than by virtue of such director’s interest in sharesin the company. However, in the absence of some other material interestnot indicated below, a director is entitled to vote and to be counted in aquorum for the purpose of any vote relating to a resolution concerning thefollowing matters:• The giving of security or indemnity with respect to any money lent orobligation taken by the director at the request or benefit of the companyor any of its subsidiaries.• Any proposal in which the director is interested, concerning theunderwriting of company securities or debentures or the giving of anysecurity to a third party for a debt or obligation of the company or any ofits subsidiaries.• Any proposal concerning any other company in which the director isinterested, directly or indirectly (whether as an officer or shareholderor otherwise) provided that the director and persons connected withsuch director are not the holder or holders of 1% or more of the votinginterest in the shares of such company.• Any proposal concerning the purchase or maintenance of any insurancepolicy under which the director may benefit.136 BP Annual Report and Form 20-F 2011