BP 2011 Annual Report Download - page 124

122 BP Annual Report and Form 20-F 2011
Corporate governance
Dame Ann Dowling, BP currently has two female board members,
equating to 12.5% of our directors.
The board has agreed a board diversity policy which will be
included in our board governance principles. The policy states that when
considering the composition of the board, directors will be mindful of
diversity, inclusiveness and meritocracy. As part of its workplan for this
year, the nomination committee will develop and agree a set of measurable
objectives for implementing this policy and report back on these to
shareholders.
Induction and board learning
On joining BP non-executive directors are given a tailored induction
programme. This programme includes one-to-one meetings with senior
management, our auditors and site visits to our operations. The induction
will also cover the board committees that a director will join. An example of
the initial induction programme for one of our recently joined non-executive
directors is set out below.
Director induction programme
Board and governance
• BP’s board governance model, directors’ duties, interests and potential
conflicts.
• Committee induction.
• Strategy and planning.
• Group investor event on governance and board activities.
BP’s business
• History of the integrated oil company and BP.
• Upstream (exploration, development, production, overview of our
operations).
• Refining and Marketing.
• Alternative Energy.
Functional input
• Controls, external auditors and internal audit.
• Finance and corporate reporting.
• HR.
• Legal.
• Ethics and compliance.
• Safety and operational risk (S&OR), BP’s operating management
system (OMS) and environmental performance.
• Research and technology.
• Engineering.
We continue the board’s learning through board and committee events.
At our May 2011 board meeting in Houston, we ran a day-long event
to give our non-executive directors an insight into how BP manages
its learning and capability development, including briefings on seismic
interpretation, the company’s technical education programme and trading.
Non-executive directors are expected to attend at least one site visit per
year. During 2011, such visits included Texas City and Whiting refineries
with the independent expert, L. Duane Wilson, an offshore visit to the Gulf
of Mexico, visits to global wells organization leadership teams in the Gulf
of Mexico and the North America gas business, our business centre in
Budapest and BP’s offices in Houston and Canary Wharf. During the year
our chairman visited BP’s operations in Alaska and our oil sands projects in
Canada.
Board effectiveness
Board evaluation
We undertake an annual review of the board, its committees and individual
directors. The chairman undertakes the evaluation of individual directors,
with the chairman’s own performance evaluated by the chairman’s
committee (led by the senior independent director).
In 2009 and 2010, we undertook an external review of the board’s
performance. In 2011, we decided to continue external facilitation as a
way of building on the past year’s results and providing a robust, third-
party insight into the board’s effectiveness. To enable continuity and
comparability of results over the two year period, we used the same
external facilitator as for the 2010 review.
Evaluation process for 2011
• Each director (with the exception of those appointed in 2012) was sent a
questionnaire and a list of discussion topics.
• The facilitator held one-to-one reviews with each participating director,
using the questionnaire and discussion topics as a starting point.
• Each committee held its own review using online questionnaires that
were developed by us using an externally generated question bank. The
results from these questionnaires were then discussed with the external
facilitator by each committee (these are outlined in the reports of our
committees).
• A paper on the key themes and views from the one-to-one reviews and
the evaluation of the committees were sent to the board to review.
• The board held a discussion with the external facilitator to assess these
views and the issues raised.
• The board agreed on actions for the forthcoming year based on this
discussion.
Key conclusions of the 2011 evaluation
The review concluded the board had operated well in 2011. It had been
an eventful year and the board continues to deal with events from
the Gulf of Mexico. There was a strong view that the board had an
open and transparent style of discussion, with good engagement and
contribution from all members, particularly around strategic planning and
risk management. The board also considered that its focus, discipline
and follow through had strengthened over the year, which was seen as
important given the events of the previous 18 months and the volume of
issues dealt with by the board. It hoped to continue this trend in 2012.
The review also found that there was potential for continuous
improvement in areas such as board materials (including the length of
papers) and agendas, and that as the board endeavours to move back
into a ‘steady state’ of operation, it would need to revisit its collective
expectation around governance processes and style.
Tracking issues from our previous evaluation
Over 2011, the board acted upon the recommendations from the 2010
board evaluation. The board determined to conduct additional site visits
and participate in detailed briefings in order to gain further insight into the
company’s operations and activities – which it achieved through an active
programme over the year attended by individual or groups of directors. The
board set up a working group to review and revise the company’s board
governance principles to ensure that BP’s governance processes were
effective. The board also reviewed BP’s crisis and continuity plan, including
specific focus on the process through which board involvement is triggered
as part of its action to clarify the board’s role in the crisis planning process.
Finally, the board had extensive engagement with executive management
in forward-looking strategy discussions and an overview of BP’s risk
management systems.
Risk management: from operations to the board
One of the board’s tasks is to satisfy itself that the material risks to BP
are identified and understood and that systems of risk management,
compliance and control are in place to mitigate such risks. 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. Authority for the
design and implementation of this system of internal control is delegated
by the board to the group chief executive. Components of our system
of internal control (which includes the risk management system) are
management systems, organizational structures, processes, standards and
behaviours employed to conduct the business of BP.