BP 2010 Annual Report Download - page 107

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Corporategovernance
Corporate governance
Inordertoensurethatlessonslearntfromtheeventareembeddedinto
thecontrolsintheOperatingManagementSystemofthecompany,the
companyisundertakingasignicantexercisetoimplementthe
recommendationsoftheBP’sInvestigationReport,andconsiderother
reportsandinvestigationsintotheincident.
Theboardestablishedanadditionalcommittee,theGulfofMexico
committee,toengagewithmanagementonaregularbasistomonitorthe
responsetotheGulfofMexicospillandthemanagementofrisksarising
fromtheincident.
Intheboard’sview,theinformationitreceivedwassufcientto
enableittoreviewtheeffectivenessofthecompany’sriskmanagement
andinternalcontrolsystemsinaccordancewiththeInternalControl
RevisedGuidanceforDirectors(Turnbull).
Subjecttodetermininganyadditionalappropriateactionsarising
fromitemsstillinprocess,theboardissatisedthat,wheresignicant
failingsorweaknessesininternalcontrolswereidentiedduringtheyear,
appropriateremedialactionsweretakenorarebeingtaken.
UK Corporate Governance Code compliance
BPcompliedthroughout2010withtheprovisionsoftheUKCorporate
GovernanceCode,exceptinthefollowingaspects:
B.3.2 Lettersofappointmentdonotsetoutxed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.
D.2.2 Theremunerationofthechairmanisnotsetbytheremuneration
committee.Instead,thechairman’sremunerationisreviewedbythe
remunerationcommittee,whomakesarecommendationtothe
boardasawholefornalapproval,withinthelimitssetby
shareholders.
BPalsocompliedwiththeJune2008CombinedCode,withthe
exceptionofA.4.4(lettersofappointment)andB.2.2(remunerationofthe
chairman)forthesamereasonsasoutlinedabovefortheUKCorporate
GovernanceCode.
Corporategovernancepractices
IntheUS,BPADSsarelistedontheNewYorkStockExchange(NYSE).The
signicantdifferencesbetweenBP’scorporategovernancepracticesasa
UKcompanyandthoserequiredbyNYSElistingstandardsforUS
companiesarelistedasfollows:
Independence
BPhasadoptedarobustsetofboardgovernanceprinciples,whichreect
theUKCorporateGovernanceCodeanditsprinciples-basedapproachto
corporategovernance.Assuch,thewayinwhichBPmakesdeterminations
ofdirectors’independencediffersfromtheNYSErules.
BP’sboardgovernanceprinciplesrequirethatallnon-executive
directorsbedeterminedbytheboardtobe‘independentincharacterand
judgementandfreefromanybusinessorotherrelationshipwhichcould
materiallyinterferewiththeexerciseoftheirjudgement’.TheBPboardhas
determinedthat,initsjudgement,allofthenon-executivedirectorsare
independent.Indoingso,however,theboarddidnotexplicitlytakeinto
considerationtheindependencerequirementsoutlinedintheNYSE’s
listingstandards.
Committees
BPhasanumberofboardcommitteesthatarebroadlycomparablein
purposeandcompositiontothoserequiredbyNYSErulesfordomestic
UScompanies.Forinstance,BPhasachairman’s(ratherthanexecutive)
committee,nomination(ratherthannominating/corporategovernance)
committeeandremuneration(ratherthancompensation)committee.
BPalsohasanauditcommittee,whichNYSErulesrequireforbothUS
companiesandforeignprivateissuers.Thesecommitteesarecomposed
solelyofnon-executivedirectorswhomtheboardhasdeterminedtobe
independent,inthemannerdescribedabove.
TheBPboardgovernanceprinciplesprescribethecomposition,
maintasksandrequirementsofeachofthecommittees(see the board
committee reports on pages 97-104).BPhasnot,therefore,adopted
separatechartersforeachcommittee.
UnderUSsecuritieslawandthelistingstandardsoftheNYSE,
BPisrequiredtohaveanauditcommitteethatsatisestherequirements
ofRule10A-3undertheExchangeActandSection303A.06oftheNYSE
ListedCompanyManual.BP’sauditcommitteecomplieswiththese
requirements.TheBPauditcommitteedoesnothavedirectresponsibility
fortheappointment,re-appointmentorremovaloftheindependent
auditors–instead,itfollowstheUKCompaniesAct2006bymaking
recommendationstotheboardonthesemattersforittoputforwardfor
shareholderapprovalattheAGM.
OneoftheNYSE’sadditionalrequirementsfortheauditcommittee
statesthatatleastonememberoftheauditcommitteeistohave
‘accountingorrelatednancialmanagementexpertise’.Asreportedin
BP Annual Report on Form 20-F,theboarddeterminedthatDouglasFlint
possessedsuchexpertiseandalsopossessesthenancialandaudit
committeeexperiencessetforthinboththeUKCorporateGovernance
CodeandSECrules(see Audit committee report on page 97).Upon
MrFlint’sretirementinApril2011,MrNelsonwillbecometheaudit
committeenancialexpertasdenedinItem16AofForm20-F.
Shareholder approval of equity compensation plans
TheNYSErulesforUScompaniesrequirethatshareholdersmustbegiventhe
opportunitytovoteonallequity-compensationplansandmaterialrevisionsto
thoseplans.BPcomplieswithUKrequirementsthataresimilartotheNYSE
rules.Theboard,however,doesnotexplicitlytakeintoconsiderationthe
NYSE’sdetaileddenitionofwhatareconsidered‘materialrevisions’.
Code of ethics
TheNYSErulesrequirethatUScompaniesadoptanddiscloseacodeof
businessconductandethicsfordirectors,ofcersandemployees.BPhas
adoptedacodeofconduct,whichappliestoallemployees,andhasboard
governanceprinciplesthataddresstheconductofdirectors.InadditionBP
hasadoptedacodeofethicsforseniornancialofcersasrequiredbythe
SEC.BPconsidersthatthesecodesandpoliciesaddressthematters
speciedintheNYSErulesforUScompanies.
BPAnnualReportandForm20-F2010 105