Vodafone 2010 Annual Report Download - page 58

56 Vodafone Group Plc Annual Report 2010
Corporate governance continued
We consider that the terms of reference of these committees, which are available on
our website (www.vodafone.com/governance), are generally responsive to the
relevant NASDAQ rules but may not address all aspects of these rules.
Code of conduct
Under NASDAQ rules US companies must adopt a code of conduct applicable to 
all directors, officers and employees.
We have adopted a Code of Ethics in compliance with Section 406 of the US 
Sarbanes-Oxley Act of 2002 which is applicable to the senior financial and
principal executive officers. We have made our Code of Ethics available to the
public on our website at (www.vodafone.com/governance).
We have also adopted a Group governance manual which provides the first level 
of the framework for governance within which our businesses operate. The
manual is a reference for chief executives and their teams and applies to all
directors and employees.
Quorum
Under NASDAQ rules companies are required to have a minimum quorum of 33.33% 
of the shareholders of ordinary shares for shareholder meetings. However our
articles of association provide for a quorum for general meetings of shareholders of
two shareholders regardless of the level of their aggregate share ownership.
Related party transactions
The NASDAQ rules require companies to conduct appropriate reviews of related 
party transactions and potential conflicts of interest via the company’s audit
committee or other independent body of the board of directors.
We are subject to extensive provisions under the Listing Rules issued by the 
Financial Services Authority in the UK (the “Listing Rules”) governing transactions
with related parties, as def ined therein, and the Companies Act 2006 also restricts
the extent to which companies incorporated in England and Wales may enter into
related party transactions.
Our articles of association contain provisions regarding disclosure of interests by 
our directors and restrictions on their votes in circumstances involving conflicts
of interest.
In lieu of obtaining an independent review of related party transactions for 
conflicts of interests, but in accordance with the Listing Rules, the Companies Act
2006 and our articles of association, we seek shareholder approval for related
party transactions that meet certain financial thresholds or where transactions
have unusual features.
The concept of a related party for the purposes of NASDAQ’s listing rules differs in 
certain respects from the definition of a transaction with a related party under the
Listing Rules.
Shareholder approval
NASDAQ requires shareholder approval for certain transactions involving the sale 
or issuance by a listed company of share capital.
Under the NASDAQ rules, whether shareholder approval is required for such 
transactions depends on, among other things, the number of shares to be issued
or sold in connection with a transaction, while we are bound by the provisions of
the Listing Rules which state that shareholder approval is required, among other
things, when the size of a transaction exceeds a certain percentage of the size of
the listed company undertaking the transaction.
In accordance with our articles of association we also seek shareholder approval 
annually for issuing shares and to dis-apply the pre-emption rights that apply
under law in line with limit guidelines issued by investor bodies.
Report from the Audit Committee
The Audit Committee assists the Board in carrying out its responsibilities in relation
to financial reporting requirements, risk management and the assessment of
internal controls. The Audit Committee also reviews the effectiveness of the
Company’s internal audit function and manages the Company’s relationship with
the external auditors.
The composition of the Audit Committee is shown in the table on page 53 and its
terms of reference can be found on the Vodafone website (www.vodafone.com/
governance). By invitation of the Chairman of the Audit Committee, the Chief
Executive, the Chief Financial Officer, the Group Financial Controller, the Director
of Financial Reporting, the Group Audit Director and the external auditors also
attend the Audit Committee meetings. Also invited to attend certain meetings
are relevant people from the business to present sessions on issues designed
to enhance the Audit Committee’s awareness of key issues and developments
in the business which are relevant to the Audit Committee in the performance of
its role.
During the year ended 31 March 2010 the principal activities of the Audit
Committee were as follows:
Financial reporting
The Audit Committee reviewed and discussed with management and the external
auditors the half-year and annual financial statements focusing on, without
limitation, the quality and acceptability of accounting policies and practices, the
clarity of the disclosures and compliance with financial reporting standards and
relevant financial and governance reporting requirements. To aid their review, the
Audit Committee considered reports from the Group Financial Controller and the
Director of Financial Reporting and also reports from the external auditors,
Deloitte LLP, on the scope and outcome of their half-year review and annual audit.
Risk management and internal control
The Audit Committee reviewed the process by which the Group evaluated its
control environment, its risk assessment process and the way in which significant
business risks were managed. It also considered the Group Audit Director’s reports
on the effectiveness of internal controls, significant identified frauds and any
identified fraud that involved management or employees with a significant role in
internal controls. The Audit Committee was also responsible for oversight of the
Group’s compliance activities in relation to Section 404 of the Sarbanes-Oxley Act.
Internal audit
The Audit Committee monitored and reviewed the scope, extent and effectiveness
of the activity of the Group internal audit department and received reports from
the Group Audit Director which included updates on audit activities and
achievement against the Group audit plan, the results of any unsatisfactory audits
and the action plans to address these areas, and resource requirements of the
internal audit department. The Audit Committee held private discussions with the
Group Audit Director throughout the year. An external evaluation of the internal
audit department was undertaken during the year. It was confirmed to the Audit
Committee that internal audit operates well within the standards expected of a
company in the top ten of the FTSE.
External auditors
The Audit Committee reviewed and monitored the independence of the external
auditors and the objectivity and effectiveness of the audit process and provided
the Board with its recommendation to the shareholders on the reappointment of
Deloitte LLP as external auditors. The Audit Committee approved the scope and
fees for audit and permitted non-audit services provided by Deloitte LLP.
Private meetings were held with Deloitte LLP to ensure that there were no
restrictions on the scope of their audit and to discuss matters without management
being present.
Audit Committee effectiveness
The Audit Committee conducts a formal review of its effectiveness annually, and
concluded its performance was effective. Further details on the evaluation
process can be found under “Performance evaluation” on page 52.
Nick Land
On behalf of the Audit Committee