The Board
As at the date of this report, the Board has 12 members: three Executive Directors, and nine non-executive Directors all of whom (except the Chairman) are deemed independent under the provisions of the Combined Code. No individual or group of individuals dominates the Board's decision-making. Collectively, the non-executive Directors bring a wide range of international experience and expertise as they all currently occupy or have occupied senior positions in industry and public life and as such each contributes significant weight to Board decisions.
In 2006 we appointed two new Directors: Sanjiv Ahuja, Chief Executive of Orange SA, on 19 May and Raymond Viault, former Vice Chairman of General Mills, Inc., on 1 September. Baroness Wilcox retired from the Board on 31 December 2006, following a commitment to the Company of almost 10 years. David Thompson and Rick Braddock will have both served on the Board for over nine years as at the date of this report. Rick Braddock will therefore retire at the AGM; David has agreed, at the request of the Board, to remain on the Board for a further period to enable a smooth succession for the key role as Chairman of the Audit Committee. As such he will be proposed for re-election by the shareowners at the forthcoming AGM. As noted below, the Board has considered David Thompson's independence and determined that he remains independent. With effect from 1 June 2007, Ellen Marram will join the Board as a non-executive Director. Biographies of each of the Directors as at the date of this report are listed on the Board of Directors and Group Secretary page.
Board meetings and attendance:
The attendance of the individual Directors at Board and Committee meetings ("mtgs") during 2006 was as follows:
| Board (7 mtgs) |
Strategy (1 mtg) |
Audit (4 mtgs) |
Corporate and Social Responsibility (24 mtgs) |
Nomination (34 mtgs) |
Remuneration (4 mtgs) |
|
|---|---|---|---|---|---|---|
| Sir John Sunderland | 7 | 1 | n/a | 2 | 3 | n/a |
| Roger Carr2 | 6 | 1 | 3 | 1 | 2 | 4 |
| Todd Stitzer | 7 | 1 | n/a | 2 | n/a | n/a |
| Ken Hanna | 7 | 1 | n/a | n/a | n/a | n/a |
| Bob Stack | 7 | 1 | n/a | 2 | n/a | n/a |
| Sanjiv Ahuja1 | 5 | 1 | n/a | 1 | 1 | n/a |
| Wolfgang Berndt2 | 7 | 1 | 4 | 1 | 1 | 4 |
| Rick Braddock2 | 6 | 1 | 2 | 0 | 0 | 3 |
| Lord Patten2 | 7 | 1 | n/a | 2 | 1 | n/a |
| David Thompson2 | 7 | 1 | 4 | 2 | 1 | 4 |
| Rosemary Thorne2 | 7 | 1 | 4 | 1 | 1 | 4 |
| Raymond Viault3 | 3 | 1 | n/a | n/a | n/a | n/a |
| Baroness Wilcox2 | 7 | 1 | n/a | 2 | 2 | n/a |
NB. n/a means that the specified Director is not a member of that Committee, although he or she may attend meetings at the invitation of the chairman of the Committee.
| 1 | Sanjiv Ahuja was appointed a non-executive Director on 19 May 2006. He has not missed a Board meeting since his appointment. |
|---|---|
| 2 | When Directors have not been able to attend meetings due to conflicts in their schedule, they receive and read the papers for consideration at that meeting, and have the opportunity to relay their comments in advance, and if necessary follow up with the relevant chairman on the decisions taken at the meeting. |
| 3 | Raymond Viault was appointed a non-executive Director on 1 September 2006. He has not missed a Board meeting since his appointment. |
| 4 | The Nomination Committee and Corporate and Social Responsibility Committee memberships were amended in July 2006 to include all the non-executive Directors. |
Role of the Board
The Board has responsibility for the overall management and performance of the Group and the approval of its long-term objectives and commercial strategy. Whilst the Board has delegated the day to day management of the Group to the Chief Executive Officer, there is a formal schedule of matters reserved for the Board which provides a framework for the Board to oversee control of the Group's affairs. The Chief Executive Officer is supported by his Executive Committee. The Board met 7 times during 2006, with an additional meeting on 19 October 2006 dedicated to a review of the Group's strategy. The Board is also assisted in carrying out its responsibilities by the various Board committees, including a Standing Committee consisting of any two Directors which was formed on 17 February 2006 and which deals with routine business between Board meetings; following a formal decision, the Board may also delegate authority to the Committee to facilitate finalising matters within agreed parameters.
How the Board operates
Reserved and delegated authorities: The Board has a formal schedule of matters reserved to it for decision, which includes:
- Responsibility for the strategic direction of the Group;
- Committing to major capital expenditure, acquisitions and disposals;
- Satisfying itself as to the integrity of financial information;
- Reviewing the effectiveness of the Group's system of internal control and risk management process;
- Authorisation of any material borrowings and any issue of equity securities;
- Agreeing treasury policy including the agreement of foreign currency and interest risk parameters;
- Ensuring adequate succession planning for the Board and senior management and appointing and removing Directors and Committee Members;
- Approval of annual and interim results;
- Dividend policy;
- Monitoring institutional investor guidelines and corporate governance principles
- Undertaking a formal and rigorous review annually of its own performance, that of its committees and individual Directors; and
- Reviewing the Company's corporate governance arrangements.
Other matters are delegated to Board Committees or to individual executives.
Information flow:
Senior executives below Board level attend certain Board meetings and make presentations on the results and strategies of their business units. Board members are given appropriate documentation in advance of each Board and Committee meeting. In addition to formal Board meetings, the Chairman and Chief Executive Officer maintain regular contact with all Directors and hold informal meetings with the non-executive Directors to discuss issues affecting the business.
Independent professional advice:
The Board has approved a procedure for Directors to take independent professional advice if necessary, at the Company's expense (up to a maximum cost of £25,000 p.a. each). Before incurring professional fees the Director concerned must consult the Chairman of the Board or two other Directors (one of whom must be a non-executive). No such advice was sought by any Director during the year.
Group Secretary:
The Group Secretary is responsible for advising the Board on all corporate governance matters, ensuring that all Board procedures are followed, ensuring good information flow, facilitating induction programmes for Directors and assisting with Directors' continuing professional development. All Directors have direct access to the advice and services of the Group Secretary. Any questions shareowners may have on corporate governance matters, policies or procedures should be addressed to the Group Secretary.
Board effectiveness
Induction:
On joining the Board, Directors are given background information describing the Company and its activities. Raymond Viault and Sanjiv Ahuja, who were appointed as Directors during 2006, received an induction pack of information on our business following their appointment. This included guidance notes on the Group, the Group structure, its operations, information on corporate governance and brokers' reports. Meetings were arranged with the members of the Chief Executive's Committee and other senior executives below Board level from each Group function, as well as some of our advisers. Appropriate visits have been arranged to our sites. Meetings are also arranged with the Group departments who provide support to the relevant Board Committee the Directors will serve on.
Continuing professional development:
During 2006 we held two seminars for Board members. The first covered the Market Abuse Directive and a briefing on corporate governance and company law. The second session dealt with further corporate governance and company law matters including the Transparency Directive and the Takeover Code; there was also a presentation on social, environmental and ethical issues and regulatory compliance. These formal sessions are in addition to written briefings to the Board on areas of regulatory and legislative change.
Performance evaluation:
During the year the Board has undertaken a formal and independent evaluation of its performance and effectiveness using external consultants, Egon Zehnder. The review combined qualitative dialogue and a quantitative questionnaire to establish a comprehensive foundation from which to track Board effectiveness going forward. The review covered Board effectiveness in terms of dynamics and processes and individual Director contributions. The Board discussed the findings and recommendations at its meeting in October. Subsequently, the Chairman and the Senior Independent non-executive Director (as described below) reviewed the personal feedback collated for each Director and shared their respective feedback with each other, facilitated by Egon Zehnder. Overall the review concluded that the Board is well functioning and captures the benefits of a unitary board with issues generally raised in good time for consultation, debate and effective decision-making. The Executive team is responsive to challenges from the nonexecutives who were engaged and probing. Governance and Board processes in general are robust and recommendations on improvements are already well in hand. Each of the committees was also reviewed and progress has been made.
The CEO and Chairman's job descriptions
The roles of the Chairman and Chief Executive Officer are separate and their responsibilities are clearly defined as follows:
Chairman
Sir John Sunderland, the Chairman, spends 2-3 days a week on the business of the Group. Sir John's role and responsibilities are as follows:
- Ensures the effective running of the Board, its agenda and processes;
- Ensures the Board agrees the strategy for the Company and checks on its implementation;
- Promotes the highest standards of corporate governance and ensures appropriate communication with shareowners on these and our financial performance;
- Ensures the maintenance of our "Purpose and Values" (a framework for our strategic intent);
- Ensures we have an adequate succession planning process at the Board and senior management level;
- Acts externally in maintaining appropriate relationships and projects the Company and our views; and
- Works with the Chief Executive Officer and the Chief Executive's Committee to provide support and advice as appropriate.
Chief Executive Officer
Todd Stitzer is our Chief Executive Officer. Todd's role and responsibilities are as follows;
- Develop and translate strategies into a manageable set of goals and priorities and communicate and implement these;
- Provide motivation and leadership to the regions and functions; chairing the Chief Executive's Committee and setting its style and tone;
- Manage and lead on major transactions and operating issues facing the business;
- Set the overall policy and direction of our business operations, investment and other activities within a framework of prudent and effective risk management, and ensure that functions to control those risks operate satisfactorily;
- Ensure the soundness of our financial structure, results (including cash flow) and forecasts and take corrective action when necessary;
- Ensure that our financial management is performed to the highest levels of integrity, quality and transparency and in the interests of shareowner value;
- Ensure that our business standards are of the highest order, fully in compliance with laws and regulations and that we operate in a manner consistent with 'Our Business Principles';
- Ensure that growth in shareowner value is compatible with an increased accountability for social and environmental performance;
- Develop policies and strategies for managing health and nutrition issues and related obesity concerns;
- Develop and maintain strong communication programmes and dialogues to inform shareowners, analysts etc. of our results and progress; and
- With the Chairman, provide external leadership and represent the Company with major customers and industry organisations.
External directorships for executive Directors
Subject to certain conditions, and unless otherwise determined by the Board, each executive Director is only permitted to accept one appointment as a non-executive director of another listed company. The Board considers that executive Directors can gain valuable experience and knowledge through such appointments.
Details of the fees received by the Directors for external appointments can be found in the Directors' Remuneration Report.
Non-executive Directors
The Board reviews the independence of all non-executive Directors annually and have determined that all such Directors (except Sir John Sunderland) are independent and have no cross-directorships or significant links which could materially interfere with the exercise of their independent judgement.
Senior independent non-executive Director:
Roger Carr is the Senior independent non-executive Director and our Deputy Chairman. Roger's responsibilities include meeting major shareowners as and when requested and chairing meetings of the non-executive Directors without executive management or the Chairman being present.
Terms of appointment:
Sir John Sunderland was appointed for an initial term of one year which has now been extended to 2008. All other non-executive Directors are appointed for an initial term of three years. Thereafter, subject to satisfactory performance, they may serve one or two additional three-year terms, with a thorough review of their continued independence and suitability to continue as Directors being undertaken if they are to remain on the Board for more than nine years. The terms and conditions of appointment for the non-executives are summarised in the Directors' remuneration report and are available on request from the Group Secretary.
Meetings of non-executive Directors:
The non-executive Directors meet separately (without the Chairman being present) at least once a year principally to appraise the Chairman's performance. During September 2006, they held one such meeting chaired by Roger Carr and attended by all the non-executive Directors except for Sanjiv Ahuja.