BT 2003 Annual Report Download - page 55

Corporate governance
written briefings and meetings with senior BT
executives. Directors are also advised on appointment
of their legal and other duties and obligations as
a director of a listed company, both in writing and in
face-to-face meetings with the Secretary. They are
reminded of these duties each year and they are also
updated on changes to the legal and governance
requirements of the company and upon themselves as
directors. During the 2003 financial year, for example,
they have received briefings on the recommended
changes to UK corporate governance put forward by
Derek Higgs and Sir Robert Smith, the Enterprise Act
and the provisions of the US Sarbanes-Oxley Act of
2002 that affect BT because its shares are registered
with the US Securities and Exchange Commission (SEC).
Guidelines are in place concerning the content,
presentation and delivery of papers for each Board
meeting, so that the directors have enough information
to be properly briefed.
The Board has agreed that it will carry out an
evaluation of its performance. This will be carried out
by questionnaire and, where appropriate, individual
interviews during summer 2003, with a subsequent
review at a board meeting.
Principal Board committees
The Chief Executive, Ben Verwaayen, chairs
the Operating Committee, which meets weekly. The
other members are the Group Finance Director,
the Chief Executives of BT Retail, BT Wholesale and
BT Global Services and the Chief Broadband Officer.
The Secretary attends all meetings. The Committee
has collective responsibility for running the group’s
business end-to-end. To do that, it develops the group’s
strategy and budget for Board approval, recommends
to the Board the group’s capital expenditure and
investments budgets, monitors the financial,
operational and customer quality of service
performance of the whole group, allocates resources
across the group within plans agreed by the Board,
plans and delivers major cross-business programmes
and reviews the senior talent base and succession plans
of the group.
A sub-committee of the Operating Committee,
the Management Council, meets monthly. It consists
of the Operating Committee members plus a number
of other senior executives. It is an advisory forum
supporting the Chief Executive and the Operating
Committee in policy formulation, in areas such as public
policy, reputation and business practices policies,
human resources and employment policies. Through a
specific sub-committee of its own the Management
Council monitors the performance of the BT Pension
Scheme, draws material matters on pensions policy to
the Board’s attention, reviews public policy, regulatory
and Government activities in the pensions area and
oversees internal and external communications on
pensions matters.
The Nominating Committee, consisting of
the Chairman, the Deputy Chairman and two other
non-executive directors, ensures an appropriate
balance of experience and abilities on the Board, using
this evaluation to review annually the size and
composition of the Board and to recommend any
proposed changes to the Board. It keeps under review
the need for appointments to the Board, prepares
a description of the specific experience and skills
needed for an appointment, considers candidates who
are put forward by the directors and external
consultants, and recommends to the Board
the appointments of all directors after having met
short-listed candidates. It also reviews the time
required from the Deputy Chairman and other
non-executive directors to carry out their duties and
advises the Board on succession planning for
the positions of the Chairman, Deputy Chairman, Chief
Executive and all other Board appointments. In
the Board’s opinion, it is appropriate for the Chairman
to chair the Nominating Committee in its task
of reviewing and agreeing the structure of the board
and considering candidates as directors, both executive
and non-executive. The Committee met once during
the 2003 financial year.
The Audit Committee, comprising solely
independent non-executive directors, is chaired by
Sir Anthony Greener. The members of the Committee
all bring relevant experience from senior executive
levels. The Committee recommends the appointment
and reappointment of the company’s auditors,
ensuring that key partners are rotated at appropriate
intervals, and considers the resignation or dismissal
of the auditors, recommending to the Board
appropriate action to appoint new auditors. It reviews
the auditors’ performance, including the scope of
the audit, and recommends to the Board appropriate
remuneration. The Committee monitors the extent
of non-audit work to be performed by the company’s
auditors to ensure that the provision of non-audit
services does not impair their independence or
objectivity. It discusses with the auditors the scope
of their audits before they commence, reviews
the results and considers the auditors’ Management
Letter and reports the results of those reviews to the
Board. The Audit Committee reviews the company’s
published financial results, the Annual Report and Form
20-F and other published information for statutory and
regulatory compliance. It also reviews the disclosure
made by the Chief Executive and Group Finance
Director during the certification process for the annual
report about the design or operation of internal
controls or material weaknesses in the controls,
including any fraud involving management or other
employees who have a significant role in the company’s
financial controls. The Board, as required by UK law,
takes responsibility for all disclosures in the annual
report. The Audit Committee monitors and reviews the
standards of risk management and internal control, the
effectiveness of internal control, financial reporting,
accounting policies and procedures, and the company’s
statements on internal controls before they are agreed
by the Board for each year’s annual report. It also
reviews the company’s internal audit function and its
relationship with the external auditors, including
internal audit’s plans and performance. The Group
Finance Director and the Secretary attend its meetings.
Each year, the Committee sets aside time to seek
54 BT Annual Report and Form 20-F 2003