Vodafone 2004 Annual Report Download - page 54

associated with social, environmental and ethical impacts is also discussed under
“Corporate Social Responsibility and Environmental Issues”.
Control structure
The Board sets the policy on internal control that is implemented by management.
This is achieved through a clearly defined operating structure with lines of
responsibility and delegated authority. The Group Executive Committee, chaired by the
Chief Executive, manages this on a day-to-day basis.
Written policies and procedures have been issued which clearly define the limits of
delegated authority and provide a framework for management to deal with areas of
significant business risk. These policies and procedures are reviewed and, where
necessary, updated at Group Policy Committee meetings, chaired by the Chief
Executive.
Control environment
The Group’s operating procedures include a comprehensive system for reporting
information to the directors. This system is properly documented and regularly
reviewed.
Budgets are prepared by subsidiary management and subject to review by both
regional management and the directors. Forecasts are revised on a quarterly basis
and compared against budget. When setting budgets and forecasts, management
identifies, evaluates and reports on the potential significant business risks.
The Group Operational Review Committee, the Group Executive Committee and the
Board review management reports on the financial results and key operating statistics.
Emphasis is placed on the quality and abilities of the Group’s employees with
continuing education, training and development actively encouraged through a wide
variety of schemes and programmes. The Group has adopted a set of values to act as
a framework for its people to exercise judgement and make decisions on a consistent
basis.
Directors are appointed to associated undertakings and joint ventures and attend the
Board meetings and review the key financial information of those undertakings. Clear
guidance is given to those directors on the preparation that should take place before
these Board meetings and their activity at the Board meeting. It is the Group’s policy
that its auditors are appointed as auditors of associated companies and joint ventures,
where possible.
The acquisition of any business requires a rigorous analysis of the financial
implications of the acquisition and key performance figures. A sensitivity analysis takes
place of the key assumptions made in the analysis. Post investment appraisals of the
Group’s investments are conducted on a periodic and timely basis.
A Treasury Report is distributed electronically on a daily basis that reports on treasury
borrowings and investments.
The Board reviews a half-yearly report detailing any significant legal actions faced by
Group companies.
The Group Policy Committee monitors legal, environmental and regulatory matters and
approves appropriate responses or amendments to existing policy.
Monitoring and review activities
There are clear processes for monitoring the system of internal control and reporting
any significant control failings or weaknesses together with details of corrective action.
A formal annual confirmation is provided by the chief executive officer and chief
financial officer of each Group company detailing the operation of their control
systems and highlighting any weaknesses. Regional management, the Audit
Committee and the Board review the results of this confirmation.
The Chief Executive and the Financial Director undertake a review of the quality and
timeliness of disclosures that includes formal annual meetings with the regional chief
executives and the Disclosure Committee.
A Group Audit Department, reporting directly to the Audit Committee, undertakes
periodic examination of business processes on a risk basis and reports on controls
throughout the Group.
Reports from the external auditors, Deloitte & Touche LLP, on certain internal controls
and relevant financial reporting matters, are presented to the Audit Committee and
management.
Review of effectiveness
The directors, the Chief Executive and the Financial Director consider that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable and not absolute assurance of achieving the desired control objectives.
The Group’s management is required to apply judgement in evaluating the risks facing
the Group in achieving its objectives, in determining the risks that are considered
acceptable to bear, in assessing the likelihood of the risks concerned materialising, in
identifying the Company’s ability to reduce the incidence and impact on the business
of risks that do materialise and in ensuring the costs of operating particular controls
are proportionate to the benefit.
The directors, the Chief Executive and the Financial Director confirm that they have
reviewed the effectiveness of the system of internal control and the disclosure controls
and procedures through the monitoring process set out above. The Chief Executive
and the Financial Director have evaluated the disclosure controls and procedures as of
the end of the period covered by this Annual Report. They are not aware of any
significant weakness or deficiency in the Group’s system of internal control. The
directors, the Chief Executive and the Financial Director have concluded that the
disclosure controls and procedures are effective for the year under review and to the
date of approval of the Annual Report.
During the period covered by this Annual Report, there were no changes in the
Company’s internal controls over financial reporting or in other factors that have
materially affected or are reasonably likely to materially affect internal controls over
financial reporting.
Relations with Shareholders
The Company holds briefing meetings with its major institutional shareholders in the
UK, the US and in Continental Europe, usually twice each year after the interim results
and preliminary announcement, to ensure that the investing community receives a
balanced and complete view of the Group’s performance and the issues faced by the
Group. Telecommunications analysts of stockbrokers are also invited to presentations
of the financial results. The Company, through its Investor Relations team, responds to
enquiries from shareholders.
The principal communication with private investors is through the provision of the
Annual Review & Summary Financial Statement, the interim results and the AGM, an
occasion which is attended by all the Company’s directors and at which all
shareholders present are given the opportunity to question the Chairman and the
Board as well as the Chairmen of the Audit, Remuneration and Nominations and
Governance Committees. All substantive resolutions at the Company’s AGMs are
decided on a poll. The poll is conducted by the Company’s Registrars and scrutinised
by Electoral Reform Services. The proxy votes cast in relation to all resolutions are
disclosed to those in attendance at the meeting and the results of the poll are
published in national newspapers in the UK, the US and Ireland, on the Company’s
website and announced via the regulatory news service. Financial and other
information is made available on the Company’s website, www.vodafone.com, which is
regularly updated.
Vodafone Group Plc Annual Report 2004
52
Corporate Governance continued