Vodafone 2002 Annual Report Download - page 57

The Nominations Committee meets as required and is chaired by Lord
MacLaurin. The other members of the Committee are Sir Alec Broers,
Sir Christopher Gent, Sir David Scholey and Jürgen Schrempp. Henning Schulte-
Noelle and Arun Sarin left the Committee during the year. The Committee,
which provides a formal and transparent procedure for the appointment of new
directors to the Board, generally engages external consultants to advise on
prospective Board appointees.
Sir David Scholey chaired the Remuneration Committee until 1 August 2001,
when the chairmanship transferred to Penny Hughes. The other members of the
Committee are Lord MacLaurin, Sir David Scholey, Michael Boskin and Jürgen
Schrempp. The Board’s Report to Shareholders on Directors’ Remuneration on
pages 57 to 68 provides further information on this Committee.
Internal Control
Introduction
The Board has established procedures that implement in full the Turnbull
Guidance, “Internal Control: Guidance for Directors on the Combined Code”,for
the year under review and to the date of approval of the Annual Report. These
procedures, which are subject to regular review, provide an ongoing process for
identifying, evaluating and managing the significant risks faced by the Group.
Responsibility
The Board has overall responsibility for the system of internal control. A sound
system of internal control is designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can only provide reasonable and not
absolute assurance against material misstatement or loss. The process of
managing the risks associated with social, environmental and ethical impacts is
discussed under “Corporate Social Responsibility”, below.
Control structure
The Board sets the policy on internal control that is implemented by
management. This is achieved through a clearly defined operating structure with
lines of responsibility and delegated authority. The Group Executive Committee,
chaired by the Chief Executive, manages this on a day-to-day basis.
Written policies and procedures have been issued which clearly define the limits
of delegated authority and provide a framework for management to deal with
areas of significant business risk. These policies and procedures are reviewed
and, where necessary, updated at the Group Policy Committee meetings, chaired
by the Chief Executive.
Control environment
The Group’s operating procedures include a comprehensive system for
reporting information to the directors. This system is properly documented and
regularly reviewed.
Budgets are prepared by subsidiary management and subject to review by both
regional management and the directors. Forecasts are revised on a quarterly
basis and compared against budget. When setting budgets and forecasts,
management identifies, evaluates and reports on the potential significant
business risks.
The Group Operational Review Committee and the Board review management
reports on the financial results and key operating statistics.
Emphasis is placed on the quality and abilities of the Group’s employees with
continuing education, training and development actively encouraged through a
wide variety of schemes and programmes. The Group has adopted a set of
values to act as a framework for its people to exercise judgement and make
decisions on a consistent basis.
Directors are appointed to associated undertakings and joint ventures and attend
the Board meetings and review the key financial information of those
undertakings. Clear guidance is given to those directors on the preparation that
should take place before these Board meetings and their activity at the Board
meeting. It is the Group’s policy that its auditors are appointed as auditors of
associated companies and joint ventures, where possible.
The acquisition of any business requires a rigorous analysis of the financial
implications of the acquisition and key performance figures. A sensitivity analysis
takes place of the key assumptions made in the analysis. Post investment
appraisals of the Group’s investments are conducted on a periodic and timely basis.
A Treasury Report is distributed electronically on a daily basis that reports on
treasury borrowings and investments.
The Board reviews a half-yearly report detailing any significant legal actions
faced by Group companies.
The Group Policy Committee monitors legal, environmental and regulatory
matters and approves appropriate responses or amendments to existing policy.
Monitoring and review activities
There are clear processes for monitoring the system of internal control and
reporting any significant control failings or weaknesses together with details of
corrective action.
A formal annual confirmation is provided by the chief executive officer and chief
financial officer of each Group company detailing the operation of their control
systems and highlighting any weaknesses. Regional management, the Audit
Committee and the Board review the results of this confirmation.
A Group Internal Audit Department, reporting directly to the Audit Committee,
undertakes periodic examination of business processes on a risk basis and
reports on controls throughout the Group.
Reports from the external auditors, Deloitte & Touche, on certain internal controls
and relevant financial reporting matters, are presented to the Audit Committee
and management.
Review of effectiveness
The directors believe that the Group’s system of internal control provides
reasonable but not absolute assurance that problems are identified on a timely
basis and dealt with appropriately.
The directors confirm that they have reviewed the effectiveness of the system
of internal control through the monitoring process set out above and are not
aware of any significant weakness or deficiency in the Group’s system of
internal control for the year under review and to the date of approval of the
Annual Report.
Corporate Governance Vodafone Group Plc 55Annual Report & Accounts and Form 20-F