Holiday Inn 2005 Annual Report Download - page 22

COMBINED CODE COMPLIANCE
The Board is committed to compliance with the principles set out in
the Combined Code on Corporate Governance (the Code) and, in
the opinion of the Board, the Company has complied with the Code
requirements as they apply for the year ended 31 December 2005
with the exception only of the item highlighted in this report (the
temporary combined role of Chairman and Chief Executive).
As InterContinental Hotels Group PLC’s shares are listed on the
New York Stock Exchange (NYSE), the Company is subject to
the rules of the NYSE, US securities laws and the rules of the
Securities and Exchange Commission (SEC). A statement outlining
the differences between the Company’s corporate governance
practices and those followed by US companies may be found on
the Company’s website at www.ihgplc.com/investors as required
by the SEC.
The Board is responsible for the Group’s system of internal control
and risk management and for reviewing its effectiveness. In order
to discharge that responsibility, the Board has established the
procedures necessary to apply the Code, including clear operating
procedures, lines of responsibility and delegated authority.
Business performance is managed closely and, in particular, the
Board, the Executive Committee and the Regional Executive
Committees have established processes, as part of the normal
good management of the business, to monitor:
• strategic plan achievement, through a comprehensive series
of Group and regional strategic reviews;
• financial performance, within a comprehensive financial
planning and accounting framework;
• capital investment performance, with detailed appraisal and
authorisation processes; and
• risk management, (through an ongoing process, which has been
in place up to the date of the accounts) providing assurance
through reports from both the Head of Risk Management and
the Head of Internal Audit that the significant risks faced by the
Group are being identified, evaluated and appropriately managed,
having regard to the balance of risk, cost and opportunity.
In addition, the Audit Committee receives:
• reports from the Head of Internal Audit on the work carried out
under the annual internal audit plan, including an annual report
on the operation of the monitoring processes set out above to
support the Board’s annual statement on internal control; and
• reports from the external auditor.
The Board has conducted a review of the effectiveness of the
system of internal control during the year ended 31 December 2005,
taking account of any material developments which have taken
place since the year end.
The review was carried out through the monitoring process set out
above, which accords with the Turnbull Guidance. The system of
internal control is designed to manage, rather than eliminate,
the risk of failure to achieve business objectives and it must be
recognised that it can only provide reasonable and not absolute
assurance against material misstatement or loss. In that context,
the review, in the opinion of the Board, did not indicate that the
system was ineffective or unsatisfactory.
To comply with the Group’s US obligations, arising from the
Sarbanes-Oxley Act 2002, a project is well under way to identify,
evaluate and test critical internal financial controls across all our
business units. This should enable representations to be made
regarding the effectiveness of internal financial controls when the
Group is required to report in compliance with these US obligations
for the December 2006 year end.
With regard to insurance against risk, it is not practicable to insure
against every risk to the fullest extent. The insurance market
remains difficult both as to breadth and cost of coverage and in
some cases external insurance is not available at all or not at an
economic price. The Group regularly reviews both the type and
amount of external insurance that it buys, bearing in mind the
availability of such cover, its price and the likelihood and
magnitude of the risks involved.
BOARD AND COMMITTEE STRUCTURE
To support the principles of good corporate governance, the Board
and Committee structure operates as set out below.
THE BOARD
The Board’s current composition of the Non-Executive Chairman,
four Executive and seven Non-Executive Directors meets the
requirement of the Combined Code for at least half the Board,
excluding the Chairman, to be independent Non-Executive
Directors. In the Board’s view, all of the current Non-Executive
Directors satisfy the tests set out in the Code for independence.
The Board is responsible to the shareholders for the strategic
direction, development and control of the Group. It therefore
approves strategic plans and capital and revenue budgets. It
reviews significant investment proposals and the performance
of past investments and maintains an overview and control of
the Group’s operating and financial performance. It monitors
the Group’s overall system of internal controls, governance and
compliance. The Board ensures that the necessary financial and
human resources are in place for the Group to meet its objectives.
The Board has established a schedule of matters which are
reserved for its attention and decision. These may be found on
the Company’s website.
The Board adopts objective criteria for the appointment of
Directors, and the roles of the Chairman and of the Chief Executive
have been defined in writing and approved by the Board.
The Board has responsibility for the planned and progressive
refreshing of the Board and its Committees. It establishes and
regularly reviews its policy in both of these areas and it is the
Nomination Committee’s responsibility to evaluate formally the
required skills, knowledge and experience of the Board, in a
structured way.
corporate governance
20 InterContinental Hotels Group 2005