BT 2006 Annual Report Download - page 44

The directors submit their report and the audited financial
statements of the company, BT Group plc, and the group,
which includes its subsidiary undertakings, for the 2006
financial year.
It is BT’s policy to achieve for all our operations best practice
in our standards of business integrity. This includes a
commitment to maintaining the highest standards of corporate
governance and ethics throughout the group.
The directors consider that BT has, throughout the year,
complied with the provisions set out in section 1 of the 2003
Combined Code on Corporate Governance and that the
Operating and financial review has been prepared in
accordance with the principles in the Reporting Statement on the
Operating and Financial Review issued by the Accounting
Standards Board.
INTRODUCTION
BT Group plc is the listed holding company for the BT group of
companies.
The Operating and financial review on pages 6 to 39 and
the Report of the Audit Committee, the Report of the
Nominating Committee and the Report on directors’
remuneration on pages 48 to 61 form part of this report. The
audited financial statements are presented on pages 65 to 122.
PRINCIPAL ACTIVITY
The group’s principal activity is the supply of communications
solutions and services and includes: networked IT services;
local, national and international telecommunications services;
and broadband and internet products and services. In the 2006
financial year, approximately 87% of revenues were derived
from operations in the UK. The group’s key performance
indicators can be found in the Operating and financial review.
THE BOARD
Directors
The names and biographical details of the directors of the
company are given on pages 40 to 41 in the Board of directors
and Operating Committee. All served throughout the financial
year, with the exception of Matti Alahuhta and Phil Hodkinson,
who were appointed on 1 February 2006. Lou Hughes served as
a director until 31 March 2006.
Election and re-election
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 at intervals of not
more than three years. The director may seek re-election.
In accordance with the articles of association, Matti Alahuhta
and Phil Hodkinson, having been appointed as directors by the
Board, retire at the forthcoming annual general meeting (AGM)
and will be proposed for election. Sir Anthony Greener, Maarten
van den Bergh and Clayton Brendish retire by rotation and will
be proposed for re-election. Details of these directors’ contracts
of appointment are included in the Report on directors’
remuneration.
Composition and role
The Board, which operates as a single team, is currently made
up of the part-time Chairman, the Chief Executive, four other
executive directors and eight non-executive directors. All of the
non-executive directors during the 2006 financial year met, and
continue to meet, the criteria for independence set out in the
Combined Code and are therefore considered by the Board to
be independent. In line with BT’s policy, the Board comprised a
majority of independent non-executive directors throughout the
2006 financial year.
The Board’s principal focus is the overall strategic direction,
development and control of the group. In support of this the
Board approves the group’s values, business practice policies,
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. It also has oversight and control of the
group’s operating and financial performance and reviews the
risk register. These responsibilities are set out in a formal
statement of the Board’s role. The Board has agreed the
group’s corporate governance framework, including
empowering the company’s key management committee, the
Operating Committee, to make decisions on operational and
other matters. The roles and powers of this committee are set
out on page 43. Their powers and the authorities delegated to
individual members of the Operating Committee are available to
everyone in the group on the group’s intranet site.
Historically the Board met every month, except in August.
The standard Board cycle changed in the 2006 financial year to
nine meetings each year. The Board met 11 times during the
2006 financial year including two ad hoc meetings to consider
time-critical matters.
The roles of the Chairman and the Chief Executive are
separate. They are set out in written job descriptions, approved
by the Nominating Committee. In addition to chairing the Board,
the Chairman is responsible for consulting the non-executive
directors, particularly the Deputy Chairman, on corporate
governance issues, matters considered by the Nominating
Committee, which the Chairman chairs, and the individual
performances of the non-executive directors. The Chairman and
the non-executive directors hold regular dinners at which they
discuss matters without the executive directors being present.
With the Chief Executive and the Secretary, the Chairman
ensures the Board is kept properly informed, is consulted on all
issues reserved to it and that its decisions are made in a timely
and considered way that enables the directors to fulfil their
fiduciary duties. The Chairman ensures that the views of the
shareholders are known to the Board and considered
appropriately. He represents the company in specified strategic
and Government relationships, as agreed with the Chief
Executive, and generally acts as the bridge between the Board
and the company’s executive team, particularly on the group’s
broad strategic direction. The Chief Executive has final
executive responsibility, reporting to the Board, for the success
of the group. The Chairman’s other current significant
commitments are shown in the Board of directors and
Operating Committee.
The Secretary manages the provision of timely, accurate and
considered information to the Board for its meetings and, in
consultation with the Chairman and Chief Executive, at other
appropriate times. He recommends to the Chairman and the
Chief Executive, for Board consideration where appropriate, the
company’s corporate governance policies and practices and is
responsible for their communication and implementation. The
appointment and removal of the Secretary 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.
REPORT OF THE DIRECTORS
BT Group plc Annual Report and Form 20-F 2006 Report of the directors42