BP 2009 Annual Report Download - page 76

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BP Annual Report and Accounts 2009
Board performance and biographies
I met a number of BP’s largest shareholders in November to hear their
views on the company and the activities of the board and its committees
in advance of becoming chairman in January 2010.
Written and verbal feedback from shareholder meetings is shared
with the wider board. During the year, the investor relations team
engaged an external consultant to undertake an investor audit to solicit
the views of major shareholders. The results of this audit were presented
to the board in July. The board also receives regular reports on the
company’s share register, including explanations for movements in price
and holdings of the company’s ADRs and ordinary shares.
AGM
The AGM is an opportunity for BP’s shareholders to ask questions and
hear the resulting discussion about the company’s performance and the
directors’ stewardship of the company. Given the size and geographical
distribution of the company’s shareholder base BP recognizes that
attendance may not be practical; therefore votes on all matters (except
procedural issues) are taken by a poll at the AGM, meaning that every
vote cast – whether by proxy or in person at the meeting – is counted.
The chairman and chairs of the board committees were present
during the 2009 AGM and met shareholders on an informal basis after
main business of the meeting. In 2009, voting levels at the AGM
decreased slightly to 61%, compared with 63% in 2008. As in previous
years the AGM was webcast, with the number of webcast downloads
increasing over 2008 levels. The webcast, speeches and presentations
given at the AGM are available on the BP website after the event,
together with the outcome of voting on the resolutions.
Combined Code compliance
BP complied throughout 2009 with the provisions of the Combined Code
on Corporate Governance, 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 not set by the remuneration
committee. Instead the chairman’s remuneration is reviewed by
the remuneration committee which makes a recommendation
to the board as a whole for final approval, within the limits set
by shareholders.
Internal control review
In discharging its responsibility for the company’s system of internal
control the board, through its governance principles, requires the group
chief executive to operate with a comprehensive system of controls and
internal audit to identify and manage the risks that are material to BP.
The governance principles are reviewed periodically by the board and are
consistent with the requirements of the Combined Code including
principle C.2.
The board has an established process by which the effectiveness
of this system of internal control is reviewed as required by provision
C.2.1 of the Combined Code. This process enables the board and its
committees to consider the system of internal controls being operated
for managing significant risks, including social, environmental, safety,
ethical and compliance risks, throughout the year. The process does not
extend to joint ventures or associates.
As part of this process, the board and the audit and safety, ethics
and environment assurance committees requested, received and
reviewed reports from executive management, including management
of the business segments and functions, 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.
During the year, the board through its committees regularly reviewed
with the general auditor and executive management processes whereby
risks are identified, evaluated and managed. These processes were in
place for the year under review, remain current at the date of this report
and accord with the guidance on the Combined Code provided by the
Financial Reporting Council. In November, the board considered the
group’s significant risks within the context of the annual plan presented
by the group chief executive.
A joint meeting of the audit and safety, ethics and environment
assurance committees in January 2010 reviewed reports from the
general auditor as part of the board’s annual review of the system of
internal control. The chairman of the board and the chairman of the
remuneration committee also attended the meeting. The reports
described the significant risks identified across the group within the
categories of strategic, operational and compliance and control and
considered the control environment which responds to such risks. The
reports also highlighted the results of audit work conducted during the
year and the remedial actions taken by management in response to
significant failings and weaknesses identified.
During the year, these committees engaged with management,
the general auditor and other monitoring and assurance providers (such
as the group compliance and ethics officer and the external auditor) on a
regular basis to monitor the management of risks. Significant incidents
that occurred and management’s response to them were considered by
the appropriate committee and reported to the board.
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).
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.
On behalf of the board,
Carl-Henric Svanberg
Chairman
26 February 2010
Audit committee report
The report that follows outlines the principal responsibilities and method
of operation of the audit committee, and highlights some of the specific
activities it undertook during 2009.
The committee’s main tasks include:
• Reviewing the effectiveness of BP’s internal financial controls and its
systems of internal control and risk management.
• Monitoring and obtaining assurance that the management and
mitigation of significant risks of a financial nature facing BP are
appropriately addressed.
• Monitoring the integrity of BP’s financial statements and making
recommendations to the board about their adoption and publication.
• Monitoring and reviewing the effectiveness of BP’s internal audit
function.
• Keeping under review the external auditor’s independence and
objectivity, and overseeing the effectiveness of the audit process.
• Making recommendations to the board on the appointment,
re-appointment or removal of the external auditor and regarding
the approval of their remuneration and terms of engagement.
• Monitoring the policy and its application on the engagement of the
external auditor to supply non-audit services to BP.
• Reviewing the systems in place (including OpenTalk) to enable those
who work for BP to raise, in confidence, any concerns about possible
improprieties in matters of financial reporting or other financial issues
and for those matters to be appropriately investigated.