BP 2009 Annual Report Download - page 74

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BP Annual Report and Accounts 2009
Board performance and biographies
Appointments to the board
The board is actively involved in succession planning for both executive
and non-executive directors. It is assisted in this task of the progressive
refreshing of the board by the nomination committee. The nomination
committee keeps under review the composition, skills, independence,
knowledge and diversity of directors to ensure that the board and its
committees remains effective and appropriate to the work they
undertake. This review is undertaken at regular intervals and forms
the basis of criteria to evaluate potential board candidates.
Due to the size of the BP board and the wish to achieve a steady
refreshment of board appointments the nomination committee is
developing a longer-term pipeline of potential non-executive talent on
which it hopes to draw as new appointments arise. The committee
believes that given BP’s scale and breadth of operations, a broad mix of
skills, experience and knowledge is required for its board members. The
committee has identified deep operational and industry experience, as
well as insight into key technologies, health and safety, emerging
markets and financial knowledge as particularly relevant to future
board appointments. An understanding of geopolitical influence is also a
key skill.
A report on the work of the nomination committee is set
out below.
Terms of appointment
The chairman and non-executive directors of BP serve on the basis of
letters of appointment. Non-executive directors ordinarily retire at the
AGM following their 70th birthday. Executive directors have service
contracts with the company, which are expressed to retire at a normal
retirement age of 60 (subject to age discrimination).
Details of all payments to directors appear in the directors’
remuneration report.
In accordance with BP’s Articles of Association, directors are
granted an indemnity from the company in respect of liabilities incurred
as a result of their office, to the extent permitted by law. In respect of
those liabilities for which directors may not be indemnified, the company
maintained a directors’ and officers’ liability insurance policy throughout
2009. During the year, a review of the terms and scope of the policy
was undertaken. The policy has been renewed for 2010. Although their
defence costs may be met, neither the company’s indemnity nor
insurance provides cover in the event that the director is proved to have
acted fraudulently or dishonestly. UK company law permits the company
to advance costs to directors for their defence in investigations or legal
actions.
Tenure and director elections
BP does not place a term limit on a director’s service as the board
considers this unnecessary in light of the company’s long-established
practice of proposing all directors for annual re-election by shareholders.
The chairman and the nomination committee keep the tenure of the
directors under review as part of the wider consideration of board skills
and balance.
New board members are subject to election by shareholders
at the first AGM following their appointment, with all existing directors
standing for re-election each year. The notice of meeting contains a
biography of each of the directors and a description of the skills and
experience which the company feels is relevant to shareholders in
taking an informed decision on their election.
Board independence
Non-executive directors are required to be independent in character and
judgement and free from any business or other relationship which could
materially interfere with the exercise of their judgement. The board has
determined that non-executive directors who served during 2009 fulfilled
this requirement and were independent. Upon appointment as chairman,
the board was satisfied that I met the criteria of independence outlined
above in the principles and in the UK Combined Code.
The board is also satisfied that there is no compromise to the
independence or conflicts of interest of those directors who serve
together as directors on the boards of outside entities or who have
other appointments in outside entities. These issues are considered
on a regular basis at board meetings.
Serving as a director
Induction and board learning
All directors receive a full induction programme when they join the board,
including a core element covering BP’s system of governance, the legal
duties of directors of a listed company and the regulatory systems in the
UK and US. The programme for non-executive directors has wider
content which covers the business of the group and is tailored according
to a director’s own interests and needs and takes into account the tasks
of the committees on which they will serve. Non-executive directors will
receive presentations from senior management, have in-depth briefings
on the company’s strategy, plan and financial performance and be given
the opportunity to visit BP’s operations and meet employees at BP sites.
Prior to assuming the role of chairman, I received an extensive
induction programme which covered:
• Board matters, including directors’ duties, board issues and board
committees.
• The business environment for BP.
• BP’s core businesses: Exploration and Production, and Refining and
Marketing.
• Reviews of Alternative Energy and Group Technology.
• Overviews of BP’s functions – including Finance, Safety and
Operations, HR, Internal Audit, Legal, and Information Technology
and Services.
• BP’s regional presence and key markets.
• BP’s strategic approach and financial framework.
• BP’s approach to risk management.
• A review with the company’s external auditor.
I had one-to-one meetings with each member of the board and
undertook site visits to the Thunder Horse platform in the Gulf of Mexico
and BP’s fuels value chain in the western US. I attended meetings of the
audit, remuneration, nomination and chairman’s committees. I also met
with a number of BP’s largest shareholders. It was a lot of ground to
cover and the process is still continuing.
As the chairman, I am responsible for ensuring that induction
and training programmes are provided to all directors, and look at this
provision on an individual basis. The company secretary assists in this
and ensures that the programme to familiarize board members with BP’s
business is developed and updated in response to the needs of directors.
During 2009, the board received briefings on biosciences, carbon policy
and the economic outlook for the US, in addition to training at separate
committees. Written updates were given on legal and regulatory issues.
All non-executive directors are required to participate in at least
one site visit per year. During the year, site visits were made to the
Projects and Operations Academies at the Massachusetts Institute of
Technology, and to BP’s fuels value chain in California, involving visits
to a marine terminal, Carson Refinery, an inland distribution facility and
a retail service station.
The effectiveness and relevance of the board’s induction and
training programmes are tested through their inclusion in the annual
board evaluation. Feedback from the evaluation indicated that directors
would welcome more deep-dive coverage of BP’s business and more
learning content on risk and the context for evaluating risk.