Barclays 2006 Annual Report Download - page 127

Barclays PLC
Annual Report 2006 123
Governance
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responsible for approving certain policy statements required by the FSA.
An overview of the Group’s risk management and control framework
can be found on pages 68 to 75.
During 2006, the Committee reviewed the Group’s preparations for
Basel II, receiving a report on progress at each meeting. It also reviewed
key risk issues, including an in-depth review of the Group’s personal
lending impairment experience and received presentations on tax risk
and the credit control environment in our UK Business Banking
operations. The Committee also reviewed the comparative risk stance
taken by the Group in particular risk areas, such as mortgage
underwriting, market risk and commercial property lending.
The Committee’s responsibilities are set out in its terms of reference,
which are available at www.investorrelations.barclays.com.
The chart sets out how the Committee allocated its time at its meetings
during 2006.
In late 2006, the Committee carried out a review of its effectiveness as
part of the overall Board Effectiveness Review. The review concluded
that the Committee continues to operate effectively.
Statement on US Corporate Governance standards
As a non-US company listed on the New York Stock Exchange (NYSE),
we are exempt from most of the NYSE’s Corporate Governance rules
(the NYSE Rules), which domestic US companies must follow. However,
we are subject to the NYSE rules requiring us to have a Board Audit
Committee that meets the requirements of Rule 10A-3 of the US
Securities Exchange Act of 1934 and we must provide an Annual
Written Affirmation to the NYSE of our compliance with the applicable
NYSE Rules. Furthermore, under NYSE Rule 303.A.11, we are required
to disclose any significant ways in which our corporate governance
practices differ from those followed by domestic US companies listed
on the NYSE.
As our main listing is on the London Stock Exchange, we follow the UK’s
Combined Code on Corporate Governance (the Code) adopted by the
Financial Reporting Council. Key differences between the NYSE Rules
and the Code are set out below:
Director independence
Under the NYSE Rules the majority of the Board should be independent.
Under the Code, at least half of the Board (excluding the Chairman) is
required to be independent. The NYSE Rules contain detailed tests for
determining Director independence, whereas the Code requires the
Board to determine whether each Director is independent in character
and judgement and sets out criteria that may be relevant to that
determination. We follow the Code’s recommendations as well as
developing best practices among other UK public companies. Our Board
annually reviews the independence of our non-executive Directors,
taking into account the guidance in the Code and the criteria we have
established for determining independence, which are described on
page 119.
Other
7%
Risk profile/
Risk appetite
40%
Key Risk issues
26%
Internal control/
Risk policies
10%
Regulatory
frameworks
17%
Board Risk Committee allocation of time
Board Committees
We have a Board Corporate Governance and Nominations Committee
and a Board HR and Remuneration (rather than Compensation)
Committee, both of which are broadly comparable in purpose and
constitution to those required by the NYSE Rules and whose terms of
reference comply with the Code’s requirements. Beyond the fact that
the Board Corporate Governance and Nominations Committee is
chaired by the Chairman of the Board and that, from 1st January 2007,
the Chairman is a member of the Board HR and Remuneration
Committee, both of which are permitted by the revised Code, both
Committees are composed solely of non-executive Directors whom
the Board has determined to be independent. We follow the Code
recommendation that a majority of the Nominations Committee should
be independent non-executive Directors, whereas the NYSE Rules state
that the Committee must be composed entirely of independent
Directors. We comply with the NYSE Rules regarding the obligation to
have a Board Audit Committee that meets the requirements of Rule
10A-3 of the US Securities Exchange Act, including the requirements
relating to the independence of Committee members. In April 2006,
we made an Annual Written Affirmation of our compliance with these
requirements to the NYSE. The Code also requires us to have a Board
Audit Committee comprised solely of independent non-executive
Directors. We follow the Code recommendations, rather than the
NYSE Rules, however, regarding the responsibilities of the Board Audit
Committee, although both are broadly comparable. We also have a
Board Risk Committee, comprised of independent non-executive
Directors, which considers and discusses policies with respect to risk
assessment and risk management.
Corporate Governance Guidelines
The NYSE Rules require domestic US companies to adopt and
disclose corporate governance guidelines. There is no equivalent
recommendation in the Code. The Board Corporate Governance
and Nominations Committee has, however, developed corporate
governance guidelines, entitled ‘Corporate Governance in Barclays’,
which have been approved and adopted by the Board.
Code of Ethics
The NYSE Rules require that domestic US companies adopt and disclose
a code of business conduct and ethics for Directors, officers and
employees. Rather than a single consolidated code as envisaged in the
NYSE Rules, we have a number of ‘values based’ business conduct and
ethics policies, which apply to all employees. In addition, we have
adopted a Code of Ethics for the Group Chief Executive and senior
financial officers as required by the US Securities and Exchange
Commission.
Shareholder approval of equity-compensation plans
The NYSE listing standards require that shareholders must be given the
opportunity to vote on all equity-compensation plans and material
revisions to those plans. We comply with UK requirements, which are
similar to the NYSE standards. The Board, however, does not explicitly
take into consideration the NYSE’s detailed definition of what are
considered ‘material revisions’.
Relations with Shareholders
We take a proactive approach to communicating with our 750,000
institutional and private shareholders. Senior executives hold meetings
with our key institutional shareholders to discuss strategy, financial
performance and investment activities in the UK, throughout Europe
and in the US. The Chairman meets regularly with investor bodies and
investors to discuss our approach to corporate governance issues.
In November 2006, we held a corporate governance event for key
institutional investors, the second such event, whose purpose is to
update our major shareholders on our corporate governance practices