BP 2009 Annual Report Download - page 75

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BP Annual Report and Accounts 2009
Board performance and biographies
Board performance and biographies
Board evaluation
BP undertakes an annual evaluation of the performance and
effectiveness of the board, including the work of its committees.
Evaluation of individual directors is undertaken by the chairman, with the
chairman’s committee evaluating the performance of the chairman.
By building on the results of the previous year’s evaluation, the
board tries to achieve a continuous cycle of evaluation, targeted actions
arising from the review and performance improvement. Actions taken by
the board during the year in response to the outcome of the 2008 review
included greater focus on key areas of board learning, the undertaking of
an investor audit to obtain feedback on BP’s performance and expanded
presentation of capital investment effectiveness.
For the 2009 evaluation, an external facilitator was engaged to
provide me with an understanding of the dynamics and performance of
the board as part of my induction as chairman.
Following a review of different providers, Boardroom Review was
selected as external facilitator and it was determined that they had no
other connection with the company. Boardroom Review undertook one-
to-one interviews with each board member plus those who provide
advice and support to the board and its committees. This was followed
by observation of the board and each committee meeting in session. The
evaluation report prepared by Boardroom Review was presented and
discussed by the board in January 2010. The evaluation identified several
areas of significant strength, including:
• Strategic involvement: including the detailed and dynamic
examination of information on the external environment and the
impact and penetration of the work of the committees.
• Board dynamics: examples cited include the breadth and depth of
executive and non-executive experience and the open and
transparent culture of the board.
• Executive leadership: in particular the operational and performance
focus of the executive team and their commitment to develop the
board’s understanding of future options, strategic partnerships and
operational excellence.
Issues identified in the evaluation for the board to consider further
included:
• Strategy and risk: while the way in which the board dealt with
strategy was seen to be a strength, the enhanced focus on risk
meant the board was seeking ways to further improve its
conversations on this.
• The balance of formal and informal time: the time pressure on the
board to balance workload coupled with the increasing expectations
and responsibilities placed on board members. As a result, the board
is considering how best to maximize its time together, including
options such as scheduling more informal sessions outside board
meetings whilst still encouraging board members to observe
committee meetings of which they are not members in order to
better understand the issues.
• Board and committee tenure: with the retirement of several board
members and the planned refreshment of the board, it was noted
that board committees would be faced with turnover. Going forward,
the board will examine ways of ensuring that committees do not face
members retiring within the same timeframe and that there is
appropriate cross membership between related committees.
• Discussion of people and culture: with the ongoing process of change
within the company, there is challenge for the board to maintain
oversight on issues such as long-term retention, cultural values and
practices across the group. The board is looking at how its
committees can maintain a holistic view of these issues and how
employee engagement, staff morale and retention strategy is
monitored and influenced.
Time commitment and outside appointments
Letters of appointment to the BP board do not set out fixed time
commitments for board duties as the company believes that the time
required may change depending upon the demands of business.
Membership of the board represents a significant time commitment and
it is expected that directors will allocate sufficient time to the company to
perform their responsibilities effectively. The nomination committee
keeps this under review.
The company recognizes that executive directors may be invited
to become non-executive directors of other companies. Such
appointments can broaden their knowledge and experience, to the
benefit of both the individual and the group. BP permits executive
directors to take up one external board appointment, subject to the
agreement of the chairman which is then 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 support and external advice
The chairman, assisted by the company secretary, ensures that board
members receive timely and clear information on all matters relevant
to the work and tasks of the board. Support to the board and its
committees is provided through the company secretary’s office, which
reports to the chairman. The company secretary has no executive
functions, with his appointment determined by the nomination
committee and his remuneration determined by the remuneration
committee.
Any BP director is entitled to obtain independent, professional
advice relating to their own responsibilities and the affairs of BP; this
advice will be at the expense of the company and facilitated through the
company secretary’s office. No BP directors sought such advice in 2009.
Board communication
Engagement with shareholders
The board represents the interests of all shareholders and seeks to act
fairly between them. It is accountable to shareholders for the
performance and activities of BP and engages in regular dialogue to
understand their views and preferences.
The chairman, the group chief executive, other executive and non-
executive directors and senior management, the company secretary’s
office, investor relations and other teams within BP engage with a range
of shareholders on issues relating to the group. 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
interest to shareholders made by the group chief executive and other
senior management.
Peter Sutherland held a number of one-to-one meetings with
investors over the course of the year to discuss issues relating to
governance, succession, strategy and performance. The chair of the
remuneration committee had meetings with institutional investors to
discuss executive director remuneration.
A meeting was held in March 2009 for BP’s largest shareholders
with the chairman and the chairs of the board committees. Each chair
gave a short presentation on his or her committee’s work and the key
challenges the committee faced in the year ahead, before opening the
session up to questions. The meeting was aimed at providing our largest
investors with an overview of the board’s activities in advance of the
AGM in April. Following positive feedback from both committee chairs
and investors, a similar event will be held in 2010.