BP 2005 Annual Report Download - page 160

158 Making energy more
(AGM). BP is keen to promote the use of electronic platforms in
the reporting arena.
Dialogue with directors Presentations given at appropriate intervals
to representatives of the investment community are available to all
shareholders by internet broadcast or open conference call, details
of which are given on www.bp.com. Less formal processes include
contacts with institutional shareholders by the chairman and other
directors. This is supported by the dialogue with shareholders
concerning the governance and operation of the group maintained
by the company secretary’s office, investor relations and other
BP teams, which meet with investors and shareholder groups
representing both large and small investors.
Our board is accountable to shareholders for the performance
and activities of the entire BP group. It embeds shareholder
interest in the goals established for the company.
AGM and voting The chairman and board committee chairmen were
present at the 2005 AGM to answer shareholders’ questions and hear
their views during the meeting. Members of the board met informally
with shareholders afterwards. Given the size and geographical
diversity of our shareholder base, we recognize that opportunities
for shareholder interaction at the AGM are limited. However, all votes
at shareholder meetings, whether by proxy or in person, are counted,
since votes on all matters, except procedural issues, are taken by
way of a poll. In 2005, we were pleased to note that voting levels
increased to 62%, with more than 98% of votes being cast in line
with the board’s recommendations.
Directors’ elections Directors stand for re-election each year.
New directors are subject to election at the first opportunity following
their appointment. All names submitted to shareholders for election
are accompanied by biographies. Voting levels demonstrate continued
support for all our directors and affirm the board’s assertion of the
independence of all our non-executive directors.
HOW OUR BOARD GOVERNS THE COMPANY
The board’s governance policies outline its relationship with
shareholders, the conduct of board affairs and the board’s relationship
with the group chief executive. The policies recognize the board’s
separate and unique role as the link in the chain of authority between
the shareholders and the group chief executive. It is this unique task
that gives the board its central role in governance.
Owners/shareholders
Authority Accountability
Delegation Assurance
through Board through
policy with monitoring
monitoring and reporting
Group chief executive
(GCE’s management framework delegations)
Executive management
GOVERNANCE AND THE ROLE OF OUR BOARD
The governance of companies continues to be under scrutiny.
Regulators and commentators maintain their focus on structural
elements. We believe too little attention is paid to the underlying
purpose of governance. Governance lies at the heart of all the
board does and it is the task our owners entrust to the board.
Governance is not an exercise in compliance nor is it a higher
form of management. Governance is a more powerful concept.
It has a clear objective: ensuring the pursuit of the company’s
purpose. The board’s activity is focused on this task, which is unique
to it as the representative of BP’s owners. This task is discharged
by the board through undertaking such activities as are necessary
for the effective promotion of long-term shareholder interest.
In promoting the long-term interest of shareholders, the board
has to ensure that the business is responsive to the views of
those with whom it comes into contact. This can include gaining
an understanding of the environmental and social consequences
of the company’s actions. However, it remains a matter of business
judgement as to how these consequences are properly taken into
account in maximizing shareholder value.
Governance is the system by which the company’s owners and
their representatives on the board ensure that it pursues, does not
deviate from and only allocates resources to its defined purpose.
As a company, we recognize the importance of good governance
and that it is a discrete task from management. Clarity of roles is
key to our approach. Policies and processes depend on the people
who operate them. Governance requires distinct skills and processes.
Governance is overseen by the BP board, while management is
delegated to the group chief executive by means of the board
governance policies.
Our board governance policies use a coherent, principles-
based approach, which anticipated many developments in UK
governance regulation. These policies ensure that our board and
management operate within a clear and efficient governance
framework that places long-term shareholder interest at the heart
of all we do.
To that end, our board exercises judgement in carrying out its
work in policy-making, in monitoring executive action and in its active
consideration of group strategy. The board’s judgements seek to
maximize the expected value of shareholders’ interest in the company,
rather than eliminate the possibility of any adverse outcomes.
ACCOUNTABILITY TO SHAREHOLDERS
Our board is accountable in a variety of ways. It is required to be
proactive in obtaining an understanding of shareholder preferences
and to evaluate systematically the economic, social, environmental
and ethical matters that may influence or affect the interests of
our shareholders.
Reporting A number of formal communication channels are used
to account to shareholders for the performance of the company.
These include the Annual Report and Accounts, the Annual Review,
the Annual Report on Form 20-F, quarterly Forms 6-K and
announcements made through stock exchanges on which BP
shares are listed, as well as through the annual general meeting
Governance: board performance report