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The work of the board in governance | |
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| The board has established four key governance policies, which represent a principled approach to corporate governance. These policies
regulate its relationship with shareholders, the conduct of board affairs and its relationship with the group chief executive. To discharge its governance function in the most effective manner, the board has laid down rules for its own activities in a board process policy that covers the conduct of meetings; the cycle of board activities; the provision of information; board officers and their roles; board committees, their tasks and composition; qualifications for board membership and nominations process; assessment of board performance; and obtaining independent advice. The responsibility for implementation of this policy, which includes training of directors, is placed on the chairman. At its heart, the board process policy recognizes that the board's capacity, as a group, is limited. The board therefore reserves to itself the making of broad policy decisions, delegating more detailed considerations either to board committees and officers (in the case of its own processes) or to the group chief executive (in the case of the management of the company's business activity). To this end, the board-executive linkage policy sets out how the board delegates authority to the group chief executive and the extent of that authority. In its goals policy, the board states the long-term outcome it expects the group chief executive to deliver. The restrictions on the manner in which the group chief executive may achieve the required results are set out in the executive limitations policy, which addresses ethics, health, safety, the environment, financial distress, internal control, risk preferences, treatment of employees and political considerations. On all these matters, the board's role is to set general policy and to monitor the implementation of that policy by the group chief executive. The group chief executive explains how he intends to deliver the required outcome in annual and medium-term plans, which also respond to the group's comprehensive assessment of risks. Progress towards the expected outcome is set out in a monthly report that covers actual results and a forecast of results for the current year. This report is reviewed at each board meeting. The board-executive linkage policy also sets out how the group chief executive's performance will be monitored and recognizes that, in the multitude of changing circumstances, judgement is always involved. The group chief executive is obliged through dialogue and systematic review to discuss with the board all material matters currently or prospectively affecting the company and its performance and all strategic projects or developments. This specifically includes any materially under-performing business activities and actions that breach the executive limitations policy. This dialogue is a key feature of the board/executive relationship. The board process policy allocates the tasks of monitoring executive actions and assessing performance to the following committees:
Full reports for each of these committees appear in BP Annual Report and Accounts 2003. The board process policy establishes two further committees, whose tasks are focused on assessing the overall performance of the group chief executive, the structure and effectiveness of the business organization (including the board) and succession planning for both executive and non-executive directors. These are the Chairman's Committee, which comprises all the non-executive directors; and the Nomination Committee, which is formally tasked with the identification and evaluation of candidates for appointment or reappointment as director or company secretary. The nomination committee was established with a fluid membership comprising the chairman, group chief executive and three non-executive directors drawn from the body of non-executives from time to time. During 2003, discussions on board succession planning for both executive and non-executive director appointments (and the appointment of the new company secretary) took place in the wider forum of the chairman's committee, so as to allow the broadest possible non-executive director participation. The board has determined that from now on the nomination committee will comprise the chairman, the senior independent director and the chairmen of each of the audit, the ethics and environment assurance and the remuneration committees. The group chief executive will be invited to attend meetings and participate in discussions when appropriate. External search consultants are retained to propose candidates for appointment to the board, with requisite skills and experience identified in the results of the board's annual evaluation processes. The board met eight times during 2003, five times in the UK and three times in the US. Two of these meetings were two-day strategy discussions. |
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