BP 2007 Annual Report Download - page 82

Combined Code compliance
BP complied throughout 2007 with the provisions of the Combined Code
Principles of Good Governance and Code of Best Practice, except in the
following aspects:
A.4.4 Letters of appointment do not set out fixed time commitments
since the schedule of board and committee meetings is subject
to change according to the exigencies of the business. All directors
are expected to demonstrate their commitment to the work of the
board on an ongoing basis. This is reviewed by the nomination
committee in recommending candidates for annual re-election.
B.2.2 The remuneration of the chairman is fixed by the board as a whole
(rather than the remuneration committee) within the limits set by
shareholders, since the chairman’s performance is a matter for the
whole board.
Internal control review
The board, through its governance principles, has established a process
by which the effectiveness of the system of internal control can be
regularly reviewed as required by provision C.2.1 of the Combined Code.
The process enables the board and its committees to assess the
system of internal controls being operated for managing significant risks,
including social, environmental, safety and ethical risks, throughout the
year. The process did not extend to joint ventures or associates.
As part of this process, the board and the audit and the safety, ethics
and environment assurance committees requested, received and
reviewed reports from executive management, including management
of the business segments, at their regular meetings.
In considering the system, the board noted that such a system 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.
A joint meeting of the committees in January 2008 reviewed reports
from BP’s general auditor to support the board in its annual assessment
of internal control. The reports described the significant enduring and
inherent risks identified across the group, the effectiveness of executive
controls that respond to such risks and the continuing development of
the systems in place to identify and manage risks. The reports also
highlighted future risks of potential significance. These had been
reviewed by the board as part of the company’s planning process.
The committees engage with executive management during the year
on a regular basis to monitor the management of risks. Significant
incidents that occurred and management’s response to them were
considered by the committees during the year.
The board is satisfied that, where significant failings or weaknesses
in internal controls were identified during the year, appropriate remedial
actions were taken or are being taken.
In the board’s view, the information it received was sufficient to
enable it to review the effectiveness of the company’s system of internal
control in accordance with the Internal Control Revised Guidance for
Directors in the Combined Code (Turnbull).
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