Statement from the independent non-executive directors
The Corporate governance statement sets out the Company's compliance with the Combined Code on Corporate Governance (the 'Code'). As that statement makes clear, the Board believes that good governance is about more than adherence to the Code. The Board is committed to ensuring that good governance systems and processes are in place and effective throughout the Group to promote sound decision-making and a culture of 'doing business the right way'.
A number of incremental changes have been made recently to support good governance and increased transparency and accountability across the Group. At Board level, it was decided in November last year, that all the non-executive directors should be members of all the principal Board Committees: Audit, Nomination and Remuneration*. Thus, all the non-executive directors can participate fully in issues such as succession planning, establishing appropriate remuneration levels and incentive schemes and managing risk. Discussions at Board meetings benefit from the insights gained by the independent non-executive directors through their participation in Board committees.
Below Board level, one of the changes put in place by the Chief Executive was to designate each of the corporate senior management team as an 'investor director' of one of the five divisions. In addition to their functional responsibility at Group level (such as Director of Human Resources or General Counsel) the investor directors participate in the monthly divisional board meetings of their respective division, and are available to the divisions' senior management teams, to discuss difficult issues, review strategy, act as a sounding board and provide counsel. As such the corporate senior management team gain more exposure and understanding of the issues facing the divisions, and the divisions each gain a trusted, but robust and independent adviser, who can provide a different perspective to the matters under review.
Although key areas are managed at an operational level in the divisions and are reported and monitored at divisional board meetings, a number of Group-wide structures exist to ensure targets and standards are met, best practice is shared and Group size is leveraged wherever practicable. In addition to the Executive Committee (comprising all the Chief Executive's direct reports), Group-wide committees or similar structures exist for a number of functional areas including environment, health and safety, security, IT, business ethics, and procurement. The objectives, findings and priorities for these critical areas are reviewed regularly at Executive Committee and Board level. As is appropriate in a globally diverse business in the 21st century, increasing use is made of share-point sites, web-based training, information platforms and other tools for remote sharing of information to ensure good communication from the Board and senior management team to the businesses and vice versa, and to facilitate cost-effective knowledge exchange between businesses.
The Board, in particular the non-executive directors, challenge themselves on a regular basis as to the value they bring to the Group and the businesses within it. In these turbulent economic times, which have seen public and shareholder confidence in a number of previously highly regarded, international companies shaken to the core, the non-executive directors are conscious more than ever of the need to contribute to good governance. This includes ensuring that the assessment of risk and reward in relation to any significant decision for the Group is based on sound, robustly tested arguments.
As part of the Board's formal annual appraisal process, the directors ask themselves a number of questions about their performance as a team and individually. The areas covered include the following:
- whether there is a constructive relationship between the non-executive directors and the executive directors
The non-executive directors in particular bring a range of skills and experience to the Board gained outside the Group. Each individual brings a different perspective, and has a part to play in contributing to Board discussions and listening to others' views. Whilst each Board member is committed to the success of the Group, there is no assumption that a matter presented by the executive directors will automatically be approved by the non-executive directors, whose independence of view is respected. The non-executive directors are satisfied that Board discussions are a free and open exchange of views and that debate and challenge are welcomed in discussions with the executive directors. Overall, the directors believe that the relationship between the non-executive directors and the executive directors is constructive, and beneficial to the Group, its shareholders and other stakeholders.
- whether the executive directors and the members of the Executive Committee work well as a team
The Board has regular contact with the members of the Executive Committee, and managers who report to members of the Executive Committee, through the frequent participation by various members of management in Board and Board Committee meetings, and other less formal discussions. For example, the Group Financial Controller, the Director, Tax and Treasury, and the Director, Internal Audit attend meetings of the Audit Committee. The non-executive directors are satisfied that the executive directors and members of senior management work well together to implement the strategy and direction set by the Board.
- whether adequate responses are provided in relation to additional information sought, or follow up questions asked, by the non-executive directors
The non-executive directors are satisfied that where additional information or clarification is requested, it is provided fully and promptly, either directly or through the executive directors or the Company Secretary. If any of the non-executive directors has a particular interest in a matter or has relevant experience, he or she is encouraged to share experience or views directly with the relevant executives responsible for implementation of the decision or project.
The independent non-executive directors are satisfied that the Company's corporate governance controls have been effective throughout the financial year ended 31 July 2009.
Peter Jackson
Senior Independent Director
*The Chairman is not a member of the Audit Committee, in accordance with the Code (C.3.1) and the Terms of Reference of the Audit Committee, but is invited to attend meetings.