BT 2003 Annual Report Download - page 54

Corporate governance
BT’s policy is to achieve best practice in our standards
of business integrity for all our operations. This
includes a commitment to maintaining the highest
standards of corporate governance throughout
the group.
During the year there have been recommendations
on UK corporate governance by Derek Higgs and
Sir Robert Smith, and hence proposed changes to
the UK’s Combined Code on Corporate Governance.
This section of the annual report describes how BT
has applied the Code and where it stands on some
of the key proposed changes resulting from the above
recommendations. The directors consider that BT has,
throughout the year, complied with the provisions
of the current Code.
The Board
The Board meets every month, except in August.
Additionally, it meets on an ad hoc basis to consider
matters which are time critical. The Board met 14
times during the 2003 financial year.
The Board’s principal focus is the overall strategic
direction, development and control of the group. In
support of this focus the Board approves the group’s
strategic plans, annual budget, capital expenditure
and investments budgets, larger capital expenditure
proposals and the group’s overall system of internal
controls, governance and compliance authorities and it
has oversight and control of the group’s operating and
financial performance. These responsibilities are set
out in a formal statement of the Board’s role which,
together with the powers of the Operating Committee
and Management Council and the authorities delegated
to individual members of the Operating Committee, are
made available to everyone in the group on the group’s
intranet site.
The Board, which operates as a single team, is
currently made up of the part-time Chairman, five
executive directors and seven independent non-
executive directors. It is BT’s policy that the board will
comprise a majority of independent non-executive
directors. The desired combination of experience, skills
and other attributes that the non-executive directors as
a whole are to bring to the Board is agreed and
regularly reviewed by the Nominating Committee. This
profile is used by the Committee to assess
the suitability as non-executive directors of candidates
put forward by the directors and outside consultants
before the Committee meets short-listed candidates.
Between them, the current non-executive directors
bring experience and independent judgement, gained
at the most senior levels, of international business
operations and strategy, marketing, technology,
communications and political and international affairs.
The non-executive directors provide a strong
independent element on the Board. Sir Anthony
Greener, the Deputy Chairman, is the senior
independent director. In his capacity as the chairman
of the Remuneration Committee,hemeets with BT’s
major institutional shareholders. The Deputy Chairman
will also continue to be available to discuss matters
with institutional shareholders where it would be
inappropriate for those discussions to take place with
either the Chairman or the Chief Executive. He will also
attend, at his discretion and in consultation with
the Chairman and the Chief Executive, other meetings
with shareholders during the year. The Chairman and
the non-executive directors hold regular dinners
at which they discuss matters without the presence
of the executive directors.
Sir Anthony Greener chairs the Audit and
Remuneration Committees.Heisalso a member
of the Nominating Committee. Maarten van den Bergh
sits on all three committees. Both directors bring great
breadth of relevant experience to these committees,
whose total memberships are six, five and four
directors, respectively.
Non-executive directors are appointed initially for
three years. At the end of that period the appointment
may be continued by mutual agreement, subject
normally to three months’ termination notice from
either BT or the director. The longest serving non-
executive director has been in office for nearly three
and a half years.
All directors are required by the company’s articles
of association to be elected by shareholders at the first
AGM after their appointment, if appointed by
the Board. A director must subsequently retire by
rotation at an AGM if he or she was elected or last
re-elected at or before the AGM in the third year before
the year in question. The director may seek re-election.
The Chairman and executive directors have service
agreements, which are approved by the Remuneration
Committee. Information about the periods of these
contracts is in the Report on directors’ remuneration
on page 63.
The Board has a procedure for directors, in
furtherance of their duties, to take independent
professional advice if necessary, at the company’s
expense. In addition, all directors have access to
the advice and services of the Secretary,
the appointment and removal of whom is a matter for
the whole Board. He advises the Board on appropriate
procedures for the management of its meetings and
duties (and the meetings of the company’s principal
committees), as well as the implementation
of corporate governance and compliance within
the group.
On appointment, the directors take part in an
induction programme when they receive information
about BT, the role of the Board and the matters
reserved for its decision, the terms of reference and
membership of the principal Board and management
committees, and the powers delegated to those
committees, the company’s corporate governance
practices and procedures, including the powers
reserved to the group’s most senior executives, and
the latest financial information about the group.
This is supplemented by visits to key BT locations and
meetings with members of the Operating Committee
and other key senior executives. Throughout their
period in office the directors are continually updated
on BT’s business, the competitive and regulatory
environments in which it operates, corporate social
responsibility matters and other changes affecting BT
and the communications industry as a whole, by
BT Annual Report and Form 20-F 2003 53