BT 2004 Annual Report Download - page 54

Non-executive directors are appointed initially for three
years, subject to three months’ termination notice
from either BT or the director. At the end of the first
three years the appointment may be continued by
mutual agreement. Each non-executive director is
provided, upon appointment, with a letter setting out
the terms of his or her appointment, including
membership of Board committees, the fees to be paid,
the time commitment expected from the director and
covering such matters as the confidentiality of
information and the company’s share dealing code.
The appointment letter was reviewed by the
Nominating Committee following the publication of the
new Combined Code and new letters sent to all
non-executive directors which align the company’s
letter, as appropriate, to the sample letter annexed to
the new Code.
Election and re-election
All directors are required by the company’s articles of
association to be elected by shareholders at the first
AGM after their appointment, if appointed by the
Board. A director must subsequently retire by rotation
at an AGM at intervals of not more than three years.
The director may seek re-election.
Service agreements
The Chairman and executive directors have service
agreements, which are approved by the Remuneration
Committee. Information about the periods of these
contracts is in the Report on directors’ remuneration.
Independent advice
The Board has a procedure for directors, in furtherance
of their duties, to take independent professional advice
if necessary, at the company’s expense. In addition, all
directors have access to the advice and services of the
Secretary, the appointment and removal of whom is a
matter for the whole Board. He advises the Board on
appropriate procedures for the management of its
meetings and duties (and the meetings of the
company’s principal committees), as well as the
implementation of corporate governance and
compliance within the group.
Training and information
On appointment, the directors take part in an
induction programme when they receive information
about BT, the role of the Board and the matters
reserved for its decision, the terms of reference and
membership of the principal Board and management
committees, and the powers delegated to those
committees, the company’s corporate governance
practices and procedures, including the powers
reserved to the group’s most senior executives, and
the latest financial information about the group. This is
supplemented by visits to key BT locations and
meetings with members of the Operating Committee
and other key senior executives. Throughout their
period in office the directors are continually updated
on BT’s business, the competitive and regulatory
environments in which it operates, technology and
corporate social responsibility matters and other
changes affecting BT and the communications industry
as a whole, by written briefings and meetings with
senior BT executives. Directors are also advised on
appointment of their legal and other duties and
obligations as a director of a listed company, both in
writing and in face-to-face meetings with the
Secretary. They are reminded of these duties each year
and they are also updated on changes to the legal and
governance requirements upon the company and
themselves as directors. During the 2004 financial
year, for example, they have been advised on the
changes to UK corporate governance brought about by
the new Combined Code, continued to receive
briefings on the US Sarbanes-Oxley Act of 2002, which
affects BT because its securities are registered with the
US Securities and Exchange Commission (SEC), and
various corporate proposals from the European
Commission. They also received an updated briefing
on UK, US and international financial reporting
developments.
Guidelines are in place concerning the content,
presentation and delivery of papers for each Board
meeting, so that the directors have enough
information to be properly briefed sufficiently far ahead
of each Board meeting and at other appropriate times.
Board evaluation
During summer 2003 the Board carried out, through a
questionnaire and discussion with directors, an
evaluation of its performance and the quality of board
processes. The results of that exercise were considered
by the Board in July 2003 and a number of actions
agreed. A further evaluation, including on the
performance of directors and the Board’s committees,
will be carried out during 2004.
Directors’ and officers’ liability insurance and
indemnity
For some years the company has purchased insurance
to cover its directors and officers against their costs in
defending themselves in civil legal proceedings taken
against them in that capacity and in respect of
damages resulting from the unsuccessful defence of
any proceedings. To the extent permitted by UK law,
the company also indemnifies its directors and officers.
Neither the insurance nor the indemnity provide cover
where the director has acted fraudulently or
dishonestly.
Principal Board committees
To meet best corporate governance practice, Audit,
Remuneration and Nominating Committees have long
been an established part of BT’s system of governance.
Each committee has written terms of reference, which
are available on the company’s website. The minutes
of Audit and Nominating Committee meetings are
sent, at their request, to directors who are not a
member of a committee. In the case of the
Remuneration Committee, minutes are circulated, on
request, to other non-executive directors as well as to
members of the committee.
BT Annual Report and Form 20-F 200453 Corporate governance