BP 2008 Annual Report Download - page 70

BP Annual Report and Accounts 2008
BP board performance report
BP board performance report
Letter from the chairman
I am once again pleased to introduce our board performance report. The
report reviews the work of the board and its committees as my tenure as
chairman moves to a close. Over the past 12 years, both the calibre of
individuals who have served on the board and our system of governance
has stood us in good stead. The strong set of principles on which we
base our governance framework, which include clarity of roles, separation
of powers, independence and appropriate skills, remain valid today.
I have been encouraged from discussions with shareholders over
time that our approach to governance and the dialogue which we
continue to have with them is welcomed. This is important to us and no
more so than during the testing times in which we operate.
Recent events and the current economic climate have inevitably
triggered further debate about governance. This I welcome. The
framework of governance does need to be kept under review and, where
necessary, challenged by investors, regulators and companies
themselves to ensure that the system is delivering.
Under such a review I believe that BP’s governance approach can
show its strength. It requires active engagement on behalf of the
company and investors alike. I do not believe that our comply or explain
system is broken and it is important for us that the principles-based
system continues.
Peter Sutherland
Chairman
24 February 2009
Board governance principles
The board governance principles (‘principles’) are designed to enable the
board and the executive management to operate within a clear
framework. The principles describe the role of the board, its processes,
its relationship with executive management and the main tasks and
requirements of the board committees. The principles are available at
www.bp.com/corporategovernance.
In carrying out its work, the board focuses on key tasks, which
include the active review of the long-term strategy and the annual plan,
monitoring the decisions and actions of the group chief executive, the
performance of BP, the succession of executive management and the
oversight of risk.
The principles outline how the board delegates its authority for
executive management of the company to the group chief executive,
subject to monitoring by the board and a clearly defined set of limitations.
These ‘executive limitations’ require that any executive action taken in the
course of business takes specific issues into consideration, including
health, safety and the environment, any reputational impact on BP, risk
and the framework for internal control.
Operating the principles
The group chief executive through the annual plan describes to the board
how the strategy is to be delivered, together with an assessment of the
group’s risks. During the year, the board monitors progress and keeps the
strategy under review.
The group chief executive is obliged to review and discuss with
the board all strategic projects or developments and all material matters
currently or prospectively affecting the company and its performance.
The principles are kept under review by the board to ensure they
remain relevant and up to date.
Board activities in 2008
As outlined above, the board focuses on key areas in carrying out
its work. Forward agendas are set to determine a high level work
programme for the board based on its core tasks (including dealing with
strategy and monitoring) but additional items are added throughout the
year depending on the exigencies of the business as they arise. During
the year the board was involved in the following activities:
Strategy and Risk
The board undertook extensive discussions on strategic options for the
group, including the future business and competitive environment,
technology developments, pricing and demand models and portfolio
options. The identification and management of group risks were reviewed
by the board, together with how these risks and their mitigation were
embedded in the group’s annual plan.
Review of capital expenditure and post investment review
While the audit committee reviewed project delivery performance, the
board undertook an annual review of the group’s project sanctioning
process and delegation of authority. The process and criteria for each
stage of a project was discussed, together with examples of projects
with different lead times and complexities.
Business review
Business reviews were held with both segments (Exploration and
Production and Refining and Marketing) and the finance and information
technology and services (IT&S) functions.
Global economic environment and energy markets
The board actively monitored developments in the global energy
markets and economic environment. Issues considered included
the supply/demand balance, the relationship between oil prices,
energy consumption and GDP growth and turbulence in the
financial markets.
Other areas
Other areas discussed by the board included interactions with BP’s
partners in TNK-BP, the results of a group-wide employee satisfaction
survey and the findings of a report on BP’s reputation in the UK and US.
The board also received a presentation from the independent expert
appointed to provide an objective assessment of BP’s progress in
implementing the recommendations of the BP US Refineries
Independent Safety Review Panel (the Panel).
The board is supported in its tasks by the company secretary,
who reports to the chairman and has no executive functions. His
remuneration is determined by the remuneration committee.
Board meetings and attendance
The board met nine times during 2008, of which one meeting was a
two-day strategy session and another meeting was a one-day strategy
session.
Board meetings Board meetings
eligible to attend attended
P D Sutherland 9 9
Sir Ian Prosser 9 9
A Burgmans 9 9
C B Carroll 9 9
Sir William Castell 9 9
G David 7 7
E B Davis, Jr 9 8
D J Flint 9 7
Dr D S Julius 9 9
Sir Tom McKillop 9 9
Dr W E Massey 4 4
Dr D C Allen 3 3
I C Conn 9 9
Dr B E Grote 9 9
Dr A B Hayward 9 9
A G Inglis 9 9
Board performance and biographies
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