Board effectiveness
Appointments to the Board
There is a formal, rigorous and transparent procedure, which is based on merit and against objective criteria, for the appointment of new directors to the Board. This is described in the section on the Nominations and Governance Committee in Board Committees. Individual non-executive directors are generally expected to serve two three-year terms. At the end of the second three-year term, a rigorous and detailed analysis is undertaken and only then would a non-executive director be invited to serve a third term. The non-executive directors are generally not expected to serve for a period exceeding nine years. The terms and conditions of appointment of the non-executive directors are available for inspection at the Company’s registered office and will be available for inspection at the AGM from 15 minutes before the meeting until it ends.
Information and professional development
Each member of the Board has immediate access to a dedicated online team room and can access monthly information including actual financial results, reports from the executive directors in respect of their areas of responsibility and the Chief Executive’s report which deals, amongst other things, with investor relations, giving Board members an opportunity to develop an understanding of the views of major investors. These matters are discussed at each Board meeting. From time to time, the Board receives detailed presentations from non-Board members on matters of significance or on new opportunities for the Group. Financial plans, including budgets and forecasts, are regularly discussed at Board meetings. The non-executive directors periodically visit different parts of the Group and are provided with briefings and information to assist them in performing their duties.
The Chairman is responsible for ensuring that induction and training programmes are provided and the Company Secretary organises the programmes. Individual directors are also expected to take responsibility for identifying their training needs and to take steps to ensure that they are adequately informed about the Company and their responsibilities as a director. The Board is confident that all its members have the knowledge, ability and experience to perform the functions required of a director of a listed company.
On appointment, individual directors undergo an induction programme covering, amongst other things:
- the business of the Group;
- their legal and regulatory responsibilities as directors of the Company;
- briefings and presentations from relevant executives; and
- opportunities to visit business operations.
If appropriate, the induction will also include briefings on the scope of the Internal Audit function and the role of the Audit Committee, meetings with the external auditor and other areas the Company Secretary deems fit, considering the director’s area of responsibility.
The Company Secretary provides a programme of ongoing training for the directors, which covers a number of sector specific and business issues, as well as legal, accounting and regulatory changes and developments relevant to individual director’s areas of responsibility. Throughout their period in office, the directors are continually updated on the Group’s businesses and the regulatory and industry specific environments in which it operates. These updates are by way of written briefings and meetings with senior executives and, where appropriate, external sources.
The Company Secretary ensures that the programme to familiarise the non-executive directors with the business is maintained over time and kept relevant to the needs of the individuals involved. The Company Secretary confers with the Chairman and senior independent director to ensure that this is the case.
Performance evaluation
Performance evaluation of the Board, its committees and individual directors takes place on an annual basis and is conducted within the terms of reference of the Nominations and Governance Committee with the aim of improving individual contributions, the effectiveness of the Board and its Committees and the Group’s performance. Prior to the 2007 financial year, the evaluation was internally facilitated.
Following on from the externally facilitated evaluation of the Board’s performance during the 2007 financial year, the Board has undertaken a formal self-evaluation of its own performance. The process involved the Chairman:
- sending a template questionnaire to each Board member which was completed and returned;
- undertaking individual meetings with each Board member on Board performance;
- producing a report on Board performance, with the assistance of an external agency, using the completed questionnaire and notes from the individual meetings; and
- preparing a summary which was sent with the report to Board members for discussion at the following Board meeting.
The evaluation was designed to determine whether the Board continues to be capable of providing the high level judgement required and whether, as a Board, the directors were informed and up to date with the business and its goals and understood the context within which it operates. The evaluation also included a review of the administration of the Board covering the operation of the Board, its agenda and the reports produced for the Board’s consideration. The Board will continue to review its procedures, its effectiveness and development in the financial year ahead.
The Chairman leads the assessment of the Chief Executive and the non-executive directors, the Chief Executive undertakes the performance reviews for the executive directors and the senior independent director conducts the review of the performance of the Chairman by having a meeting with all the non-executive directors together and individual meetings with the executive directors and the Company Secretary. Following this process, the senior independent director produces a written report which is discussed with the Chairman.
The evaluation of each of the Board committees was undertaken using an online questionnaire that each member of the committees and others who attend committee meetings or interact with committee members are required to complete. The results of the questionnaires were discussed with the Chairman of the Board and the members of the committees.
The evaluations found the performance of each director to be effective and concluded that the Board provides the effective leadership and control required for a listed company. The Nominations and Governance Committee confirmed to the Board that the contributions made by the directors offering themselves for re-election at the AGM in July 2008 continue to be effective and that the Company should support their re-election.
Re-election of directors
Although not required by the Articles, in the interests of good corporate governance, the directors have resolved that they will all submit themselves for annual re-election at each AGM of the Company. Accordingly, at the AGM to be held on 29 July 2008, all the directors will be retiring and, with the exception of Arun Sarin, Michael Boskin and Jürgen Schrempp who will not offer themselves for re-election, being eligible and on the recommendation of the Nominations and Governance Committee, will offer themselves for re-election.
Independent advice
The Board recognises that there may be occasions when one or more of the directors feel it is necessary to take independent legal and/or financial advice at the Company’s expense. There is an agreed procedure to enable them to do so.
Indemnification of directors
In accordance with the Company’s Articles of Association and to the extent permitted by the laws of England and Wales, directors are granted an indemnity from the Company in respect of liabilities incurred as a result of their office. In respect of those matters for which the directors may not be indemnified, the Company maintained a directors’ and officers’ liability insurance policy throughout the financial year. This policy has been renewed for the next financial year. Neither the Company’s indemnity nor the insurance provides cover in the event that the director is proven to have acted dishonestly or fraudulently.