Vodafone 2005 Annual Report Download - page 62

Corporate Governance
60 |Governance
Introduction
Statement of Corporate Governance Policy
The Board of directors of the Company is committed to high standards of corporate
governance, which it considers are critical to business integrity and to maintaining
investors’ trust in the Company. The Group expects all its directors and employees to
act with honesty, integrity and fairness. The Group will strive to act in accordance with
the laws and customs of the countries in which it operates; adopt proper standards of
business practice and procedure; operate with integrity; and observe and respect the
culture of every country in which it does business.
The Combined Code
The Company’s ordinary shares are listed in the United Kingdom on the London Stock
Exchange. As such, the Company is required to make a disclosure statement
concerning its application of the principles of and compliance with the provisions of the
revised Combined Code on corporate governance (the “Combined Code”). For the
financial year ended 31 March 2005, the directors confirm that, save for the one
matter referred to below, the Company has been in compliance with the provisions of
section 1 of the Combined Code. The disclosures provided below are nevertheless
intended to provide the reader with an explanation of the Company’s corporate
governance.
The Combined Code provides that a company’s Remuneration Committee should be
composed entirely of independent non-executive directors. Lord MacLaurin, the
Chairman of the Board, is not treated as being independent for the purposes of the
Combined Code and although the Board concluded that the Chairman provided
important contributions to the work of the Remuneration Committee, his offer to step
down as a member to ensure the Company’s strict compliance with the Combined
Code was accepted. He stepped down in March 2005.
US Listing Requirements
The Company’s ADSs are listed on the NYSE and the Company is, therefore, subject to
the rules of the NYSE as well as US securities laws and the rules of the SEC. The
NYSE requires US companies listed on the exchange to comply with the NYSE’s
corporate governance rules, but foreign private issuers such as the Company are
exempt from most of those rules. However, pursuant to NYSE Rule 303A.11, the
Company is required to disclose a summary of any significant ways in which the
corporate governance practices it follows differ from those required by the NYSE for US
companies, as summarised below.
The Sarbanes-Oxley Act of 2002 (US) applies to the Company. The Company has
established a Disclosure Committee with responsibility for reviewing and approving
controls and procedures over the public disclosure of financial and related information,
and other procedures necessary to enable the Chief Executive and Financial Director to
provide their Certifications of the Annual Report on Form 20-F that is filed with the
SEC. The Company has also adopted a corporate code of ethics for senior financial
officers, separate from and additional to its Business Principles, described below. A
copy of this code is available on the Group’s website. The Company is making good
progress on the work required to ensure compliance with section 404 of the Sarbanes-
Oxley Act, which is required for the financial year ending 31 March 2007.
Differences from New York Stock Exchange corporate
governance practices
Independence
The NYSE rules require that a majority of the Board must be comprised of independent
directors and the rules include detailed tests that US companies must use for
determining independence. The Combined Code requires a company’s board to assess
and make a determination as to the independence of its directors. While the
Company’s Board does not explicitly take into consideration the NYSE’s detailed tests, it
has carried out an assessment and has determined in its judgement that all of the non-
executive directors are independent within the requirements of the Combined Code. As
at the date of this Annual Report, the Company’s board comprised the Chairman, five
executive directors and nine non-executive directors.
Committees
Under NYSE rules, US companies are required to have a nominating/corporate
governance committee and a compensation committee, composed entirely of
independent directors. The Company’s Nominations and Governance Committee and
Remuneration Committee have terms of reference and composition that comply with
the Combined Code requirements. The Nominations and Governance Committee is
chaired by the Company Chairman, and its other members are non-executive directors
of the Company and the Chief Executive. The Remuneration Committee is composed
entirely of non-executive directors whom the Board has determined to be independent
in the manner described above. The Company’s Audit Committee is composed entirely
of non-executive directors whom the Board has determined to be independent in the
manner described above and who meet the requirements of Rule 10A-3 of the
Securities Exchange Act. The Company considers that the terms of reference of these
committees are generally responsive to the relevant NYSE rules but may not address all
aspects of these rules.
Corporate Governance Guidelines
Under NYSE rules, US companies must adopt and disclose corporate governance
guidelines. Vodafone has posted its statement of compliance with the Combined Code
on its website at www.vodafone.com. The Company also has adopted a Group
Governance Manual that applies to all directors and employees. The Company
considers that its corporate governance guidelines are generally responsive to, but may
not address all aspects of, the relevant NYSE rules.
Business Principles
In addition to the formal requirements of the Listing Authorities and Stock Exchanges
described above, the Group has developed and implemented its own Business
Principles which define its relationships with all of its stakeholders and govern how
Vodafone conducts its day-to-day business. These can be found on the Group’s
website at www.vodafone.com.
The Business Principles apply to all Vodafone’s mobile operating subsidiaries. Chief
Executives are responsible for ensuring application of the Business Principles within
their business. Vodafone also promotes the Business Principles to its associated
undertakings and business partners.
Every employee is expected to act in accordance with the Business Principles. A
confidential email facility has been established for employees to report any concerns.
The Group tracks implementation of its Business Principles through its internal audits.
Directors and Organisation
Board Composition
The Company’s Board of directors consists of fifteen directors, fourteen of whom
served throughout the 2005 financial year. At 31 March 2005, in addition to the
Chairman, Lord MacLaurin, there were five executive directors and nine non-executive
directors. The Deputy Chairman, Paul Hazen, is the nominated senior independent
director and his role includes being available for approach or representation by
directors or significant shareholders who may feel inhibited from raising issues with the
Chairman. He is also responsible for conducting an annual review of the performance
of the Chairman and, in the event it should be necessary, convening an annual meeting
of the non-executive directors.
Sir John Bond joined the Board as a non-executive director on 1 January 2005.
Ken Hydon and Sir David Scholey will retire on conclusion of the Company’s AGM on