BP 2008 Annual Report Download - page 72

BP Annual Report and Accounts 2008
BP board performance report
Serving as a director
Induction
The induction of new board members is the responsibility of the
chairman, who is assisted by the company secretary in this task. All new
directors receive a full induction programme, including a ‘core’ element
covering the principles and the legal and regulatory duties of directors.
Non-executive directors receive further induction content devised
according to their own interests and needs, together with the
requirements of the committees on which they will serve. This would
include meetings and briefings on the operations and activities of the
group, the strategy and the annual plan and the company’s financial
performance. The induction programme is targeted for completion within
the first nine to 12 months of non-executive directors taking office, while
the executive director programme is arranged in the course of their
business activities.
Training and site visits
Directors and committee members receive briefings on BP’s business,
its markets, operating environment and other key issues during their
tenure as directors to ensure they have the necessary skill and
knowledge to perform their duties effectively. Board members are also
kept updated on legal and regulatory developments that may impact their
duties and obligations as directors of a listed company.
In the past two years, the board and its committees have sought
greater opportunity to meet at BP’s operating sites. This has enabled
board members to see a selection of BP’s businesses e.g. the Texas City
refinery, gas production in Colorado, exploration and production activities
in Azerbaijan and the alternative energy solar facility in Maryland. These
site visits have given directors the opportunity to meet both operational
staff and government and community leaders in the parts of the world
where BP operates. All non-executive directors are required to participate
in at least one site visit per year.
Outside appointments
BP recognizes that executive directors may be invited to become non-
executive directors of other companies and that such appointments can
broaden their knowledge and experience, to the benefit of the individual
and the group. Executive directors are permitted to take up one external
board appointment, subject to the agreement of the chairman and
reported to the BP board. Fees received for these external appointments
may be retained by the executive director and are reported in the
directors’ remuneration report.
Non-executive directors may serve on a number of outside
boards, provided they continue to demonstrate the requisite
commitment to discharge their duties to BP effectively. The nomination
committee keeps under review the nature of directors’ other interests to
ensure that the efficacy of the board is not compromised and may make
recommendations to the board if it concludes that a director’s other
commitments are inconsistent with those required by BP.
Board evaluation
The principles stipulate that the performance and effectiveness of the
board, including the work of its committees, should be evaluated
annually. In 2008, this evaluation was undertaken internally with the use
of a questionnaire. The questionnaire focused on areas including the
conduct of meetings, activities of the board versus committees,
monitoring and information and board support and built on the review of
board operations and governance that had taken place in 2007. The main
outcome of the evaluation was a requirement for a more systematic
approach to ensure that the skills of the directors met the changing
demands of the business and the environment in which it operates.
Engagement with shareholders
The board is accountable to shareholders for the performance and
activities of the BP group and engages in regular dialogue to
understand their views and preferences. However, the board also
recognizes that, in conducting its business, BP should be responsive
to other relevant constituencies.
During the year, the chairman and deputy chairman met with
institutional shareholders to discuss issues relating to the board,
governance, strategy and performance. The remuneration committee
chairman met with larger shareholders to discuss executive director
remuneration.
The group chief executive, other executive directors and senior
management, company secretary’s office, investor relations and other
teams within BP also engage with a range of shareholders on wider
issues relating to the group, including in particular its safety, operational
and financial performance. Presentations given by the group to the
investment community are available to download from the ‘Investors’
section of BP’s website, as are speeches on topics of broad interest to
shareholders made by the group chief executive and other senior
members of the management team.
AGM
BP’s AGM enables shareholders to ask questions and hear the resulting
discussion about the company’s performance and the directors’
stewardship of the company. Votes on all matters (except procedural
issues) are taken by a poll at the AGM, meaning that every vote cast –
whether by proxy or in person at the meeting – is counted.
The chairman, board committee chairmen and other directors
were present during the 2008 AGM and met shareholders on an
informal basis after the main business of the meeting. In 2008, voting
levels at the AGM increased to 64%, compared with 61% in 2007.
Last year was also the first time that the AGM was webcast. This will
be repeated for the company’s forthcoming meeting. The webcast,
speeches and presentations given at the AGM are available to
download from the BP website after the event, together with the
outcome of voting on the resolutions.
Board committees
The principles allocate the tasks of monitoring executive actions and
assessing performance to certain board committees. These tasks
prescribe the authority and role of the board committees.
Reports for each of the main board committees follow. In
common with the board, each committee has access to independent
advice and counsel as required and each is supported by the company
secretary’s office, which is independent of the executive management of
the group. The main tasks and requirements of each of the board’s
committees are set out in the principles, available at
www.bp.com/corporategovernance.
Audit committee report
Membership
The audit committee comprises four independent non-executive directors
who have been selected to provide a wide range of financial, international
and commercial expertise appropriate to fulfil the committee’s duties.
During the year, Sir Ian Prosser (chairman), Douglas Flint and Erroll
Davis, Jr were members of the audit committee. Sir William Castell
retired from the committee in April 2008 and George David joined in May
2008. The secretary to the committee is David Pearl, deputy company
secretary of BP.
The board considers that Douglas Flint possesses the financial
and audit committee experience, as defined by the Combined Code
guidance and the SEC, and has nominated him as the audit committee’s
financial expert.
Board performance and biographies
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