Aviva 2009 Annual Report Download - page 89

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Performance review
Aviva plc
Corporate responsibility
Corporate governance report
Annual Report and Accounts 2009
Governance
Shareholder information
Financial statements IFRS
Financial statements MCEV
Other information
The Combined Code on Corporate Governance
The Company is aware of the changing regulatory environment
following the recent economic downturn. This has led to the
review of a number of regulations and corporate governance
guidelines. The Company will aim to comply fully with any
resulting regulatory changes and best practice guidelines, where
it does not already do so.
The Combined Code on Corporate Governance sets out
standards of good practice in the form of principles and
provisions on how companies should be directed and controlled
to follow good governance practice. The Financial Services
Authority (FSA) requires companies listed in the UK to disclose,
in relation to section 1 of the Combined Code, how they have
applied its principles and whether they have complied with
its provisions throughout the accounting year. Where the
provisions have not been complied with companies must
provide an explanation for this.
It is the Board’s view that the Company has been fully
compliant throughout the accounting period with the provisions
set down in section 1 of the Combined Code, apart from a
period during the year when the majority of the members of the
Nomination Committee were not independent non-executive
directors. This was due to the resignation of Nikesh Arora, a
non-executive director, who resigned from the Board on
5 August 2009 following his relocation to the United States
(US). Mary Francis was appointed to the Committee on
2 December 2009 and the Company is once again in
compliance with this aspect of the Combined Code. This report
sets out details of how the Company has applied the principles
and complied with the provisions of the Combined Code during
2009. Further information on the Combined Code can be found
on the Financial Reporting Council’s website, www.frc.org.uk
The Board
The directors are responsible to shareholders for ensuring that
the Company is appropriately managed and that it achieves its
objectives. It meets regularly to determine the Company’s
strategic direction, to review the Company’s operating and
financial performance and to provide oversight that the
Company is adequately resourced and effectively controlled.
The specific duties of the Board are clearly set out in its terms
of reference that address a wide range of corporate governance
issues and list those items that are specifically reserved for
decision by the Board. Matters requiring Board approval include:
— Group strategy and business plans;
— Acquisitions, disposals and other transactions outside
delegated limits;
— Financial reporting and controls;
— Capital structure;
— Dividend policy;
— Shareholder documentation;
— The constitution of Board committees; and
— Key business policies, including the remuneration policy.
The full terms of reference for the Board are available from the
Group Company Secretary. Matters that are not specifically
reserved for the Board and its committees under its terms of
reference, or for shareholders in general meeting, are delegated
to the Group Chief Executive. The Board’s terms of reference
also set out those matters that must be reported to the Board,
such as significant litigation or material regulatory breaches, and
cover how matters requiring consideration by the Board that
arise between scheduled meetings should be dealt with.
The Board and its committees operate in line with work
plans agreed prior to the start of each year. At Board and
committee meetings, directors receive regular reports on the
Group’s financial position, risk management, regulatory
compliance, key business operations and other material issues.
Directors are fully briefed in advance of Board and committee
meetings on all matters to be discussed. The Group Company
Secretary is responsible for following Board procedures and
advising the Board, through the Chairman, on governance
matters. All directors have access to his advice and services.
The Board has adopted a procedure whereby directors
may, in the performance of their duties, seek independent
professional advice at the Company’s expense if considered
appropriate. During the year the members of the Remuneration
Committee sought independent advice from Hewitt New Bridge
Street Consultants on issues surrounding senior executive
remuneration. The Audit Committee and the Risk and
Regulatory Committee also appointed Keith Nicholson, a former
partner at KPMG LLP, to provide advisory services.
The Directors
The Board currently comprises the Chairman, eight independent
non-executive directors and four executive directors. Each non-
executive director serves for a fixed term not exceeding three
years that may be renewed by mutual agreement. Subject to
the Board being satisfied with a director’s performance,
independence and commitment, there is no specified limit
regarding the number of terms a director may serve. Each
director is required to be elected by shareholders at the Annual
General Meeting following his/her appointment by the Board
and to be re-elected at least once every three years. Any non-
executive director who has served on the Board for nine years
or more is required to submit himself/herself for re-election
annually. The Board’s policy is to appoint and retain non-
executive directors, who can apply their wider knowledge and
experiences to their understanding of the Aviva Group, and to
review and refresh regularly the skills and experience the Board
requires through a programme of rotational retirement. In
addition to the strengths of experience, diversity and an
international perspective, the Board also seeks to comply with
the requirements of the Combined Code on the independence
of directors. The process for appointing new directors is
conducted by the Nomination Committee whose report,
including a description of its duties, is set out on page 93.
The Combined Code requires that at least half the Board,
excluding the Chairman, should comprise independent non-
executive directors as determined by the Board. The Nomination
Committee performs an annual review of directors’ interests in
which all potential or perceived conflicts, including time
commitments, length of service and other issues relevant to
their independence, are considered. It is the Board’s view that
an independent non-executive director also needs to be able to
present an objective, rigorous and constructive challenge to
management, drawing on his/her wider experiences to question
assumptions and viewpoints and where necessary defend their
beliefs. To be effective, an independent director needs to
acquire a sound understanding of the industry and the
Company so as to be able to evaluate properly the information
provided. Having considered the matter carefully the Board is of
the opinion that all of the current non-executive directors are
independent and free from any relationship or circumstances
that could affect, or appear to affect, their independent
judgement. Accordingly, over half of the Board members,
excluding the Chairman, are independent non-executive
directors. Each of the directors being proposed for re-election at
the 2010 Annual General Meeting has been subject to a formal
performance evaluation and took part in a peer evaluation
Governance