BP 2008 Annual Report Download - page 76

BP Annual Report and Accounts 2008
BP board performance report
Role and authority of the committee
The main tasks and requirements for the committee are set out in the
principles and are:
• Evaluating the performance and effectiveness of the group
chief executive;
• Reviewing the structure and effectiveness of the business
organization of BP;
• Reviewing the systems for senior executive development
and determining the succession plan for the group chief executive,
executive directors and other senior members of executive
management;
• Determining any other matter that is appropriate to be considered by
all of the non-executive directors;
• Opining on any matter referred to it by the chairman of any
committee comprised solely of non-executive directors.
Committee activities
The chairman’s committee considered aspects of a number of strategic
issues including the relationship with the company’s partners in TNK-BP.
The committee has reviewed with Dr Hayward the short- and long-term
challenges facing the group. Dr Hayward has kept the committee briefed
on the implementation of the forward agenda and its implications for the
evolution of the executive team and succession within the leadership
cadre. The committee has also reviewed the steps taken by Dr Hayward
to refine the corporate culture and the values within BP. There have been
active discussions around the ‘tone from the top’.
The committee has reviewed the performance of the chairman
andDrHayward.
The chairman’s committee plans to meet four times in 2009.
Nomination committee report
Membership
The committee’s members nominally consist of the chairman and the
chairs of SEEAC, audit and remuneration committees.
Members of the nomination committee during the year were
Peter Sutherland (chairman), Dr DeAnne Julius, Sir Ian Prosser and
Dr Walter Massey. Dr Massey remained a member of the nomination
committee during the year after his retirement from the board to assist in
the search for a successor to BP’s chairman. Sir William Castell has now
joined the committee.
Attendance
The committee met six times during 2008.
Nomination committee meetings Nomination committee
eligible to attend meetings attended
P D Sutherland (chairman) 6 6
Dr D S Julius 6 6
Dr W E Massey 6 6
Sir Ian Prosser 6 6
Role and authority of the committee
The main tasks and requirements for the committee are set out in the
principles and are:
• Identifying, evaluating and recommending candidates for
appointment or reappointment as directors.
• Identifying, evaluating and recommending candidates for
appointment as company secretary.
• Keeping under review the mix of knowledge, skills and experience of
the board to ensure the orderly succession of directors.
• Reviewing the outside directorship/commitments of the non-
executive directors.
Committee activities
During 2008 the primary work of the committee has been the
continuation of the process to select a successor to Mr Sutherland who
is to stand down as chairman.
For this purpose, Sir Ian Prosser, as Senior Independent Director, has
chaired the committee. The committee has been assisted in this
task by Dr Anna Mann of MWM Consulting LLP. The committee has
adopted a robust process. Key strategic issues facing BP for the coming
years were identified through discussions with individual board
members. From these discussions a role description was developed.
This formed the basis of a worldwide search from which in excess of
30 candidates emerged. This broad group has been refined and the
process is continuing. The board has been regularly briefed on the
work of the committee.
As part of the chairman selection process, potential candidates for
non-executive directors roles have been revealed. The committee will
continue actively to keep the skills of the board under review and pursue
its refreshment.
Combined Code compliance
BP complied throughout 2008 with the provisions of the Combined Code
Principles of Good Governance and Code of Best Practice, except in the
following aspects:
A.4.4 Letters of appointment do not set out fixed time commitments
since the schedule of board and committee meetings is subject to
change according to the exigencies of the business. All directors
are expected to demonstrate their commitment to the work of
the board on an ongoing basis. This is reviewed by the nomination
committee in recommending candidates for annual re-election.
B.2.2 The remuneration of the chairman is reviewed by the
remuneration committee, which makes a recommendation to
the board as a whole for final approval, within the limits set by
shareholders. This approach represents a change in policy from
previous years where the chairman’s remuneration was set by the
board without specific reference to the remuneration committee.
Internal control review
In discharging its responsibility for the company’s system of internal
control the board, through its governance principles, requires the group
chief executive to operate with a comprehensive system of controls and
internal audit to identify and manage the risks that are material to BP.
The governance principles were reviewed and confirmed by the board
this year and are consistent with the requirements of the Combined
Code including principle C.2.
The board has established a process by which the effectiveness
of this system of internal control is reviewed as required by provision
C.2.1 of the Combined Code. This process enabled the board and its
committees to consider the system of internal control being operated for
managing significant risks, including social, environmental, safety and
ethical risks, throughout the year. The process did not extend to joint
ventures or associates.
As part of this process, the board and the audit and safety, ethics
and environment assurance committees requested, received and
reviewed reports from executive management, including management of
the business segments and functions, at their regular meetings.
In considering the system, the board noted that such a system is
designed to manage, rather than eliminate, the risk of failure to achieve
business objectives and can only provide reasonable, and not absolute,
assurance against material misstatement or loss.
During the year, the board through its committees regularly
reviewed with the general auditor and executive management processes
whereby risks are identified, evaluated and managed. These processes
were in place for the year under review, remain current at the date of this
report and accord with the guidance on the Combined Code provided by
the Financial Reporting Council. In November, the board considered the
group’s significant risks within the context of the annual plan presented
by the group chief executive.
Board performance and biographies
75