BP 2012 Annual Report Download - page 114

Corporate governance
BP Annual Report and Form 20-F 2012
112
How the board works
BP’s governance framework
BP’s system of governance begins with the board and is reflected in the
governance of our subsidiaries. The governance framework is outlined in
the BP board governance principles which sets out the role of the board,
its processes and its relationship with executive management. These can
be found on bp.com/governance.
The board’s core activities are:
The active consideration of long-term strategy.
The monitoring of executive action and the performance of BP.
Obtaining assurance that the material risks to BP are identified
and that systems of risk management and control are in place
to mitigate such risks.
Ongoing board and executive management succession
planning.
The board seeks to set the ‘tone from the top’ for the organization by
considering specific issues, including health, safety, the environment and
BP’s reputation and works with management to set the values of the
company, which are then reflected in more detail in the company’s code
of conduct.
Who’s on the board?
As at 31 December 2012 the board had 15 directors – a chairman, four
executive directors and 10 non-executive directors (see page 104).
The nomination committee keeps the composition of the board under
review from the perspective of the mix of skills and experience of existing
members and the likely tenure of each director. Details of the current
skillset of the board and the skills/competencies that the nomination
committee has prioritized for future non-executive director appointments
is outlined in the report of the nomination committee on pages 125-126.
Role of the chairman
The board is chaired by Carl-Henric Svanberg. The chairman provides
leadership of the board and is the main point of contact between the
board and management. The chairman speaks on behalf of the board to
shareholders and other parties and ensures that systems are in place to
provide directors with accurate, timely and clear information to enable the
board to consider matters before it and is also responsible for the integrity
and effectiveness of the BP board governance principles.
Role of the group chief executive
Bob Dudley is the group chief executive. Through delegation from the
board he is responsible for executive management of the group and is
supported by the executive team, which he chairs. Membership of the
executive team is set out on pages 109-111.
Role of the senior independent director
The senior independent director (SID) is Andrew Shilston, who is available
to shareholders if they have concerns that cannot be addressed through
normal channels.
In view of the relatively short service of Andrew Shilston, Antony
Burgmans, the longest serving non-executive director acts as an internal
sounding board for the chairman and serves as intermediary for the other
directors with the chairman when necessary.
Neither the chairman nor the SID are employed as executives of the
group. The board maintains a succession plan for the chairman and SID,
in addition to the group chief executive and senior management.
Director independence
The governance principles require the non-executive directors 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 those non-executive
directors who served during 2012 were and continued to be independent.
The board also satisfied itself that there is no compromise to the
independence of, or existence of conflicts of interest for 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 each board meeting. The nomination committee
keeps under review the nature of non-executive directors’ other interests
to ensure that the effectiveness of the board is not compromised.
Succession: board and committee membership
The following changes took place to the composition of the board in 2012:
t Dr Brian Gilvary joined the board as an executive director and
chief financial officer on 1 January 2012.
t Andrew Shilston joined the board as a non-executive director on
1 January 2012, and became senior independent director from April
2012.
t Professor Dame Ann Dowling joined the board as a non-executive
director on 3 February 2012.
t Sir William Castell retired from the board at the AGM in April 2012.
Dr Byron Grote, executive director with responsibility for BP’s integrated
supply and trading operations, Alternative Energy, shipping, technology
and remediation activities will retire from the board at the AGM in April
2013.
Changes to committee membership during 2012 included Ian Davis
stepping down as a member of the audit committee on 3 February 2012
and Admiral Frank Bowman joining the Gulf of Mexico committee on the
same date. Upon their appointment to the board, Andrew Shilston joined
the audit committee and Professor Dame Ann Dowling joined the safety,
ethics and environment assurance committee (SEEAC). Professor
Dowling later joined the remuneration committee on 25 July 2012.
Following the retirement of Sir William Castell in April, Brendan Nelson
and Paul Anderson joined the nomination committee. Andrew Shilston,
who succeeded Sir William as senior independent director, attends the
committee in this capacity.
Ad-hoc board committee – Russia
An ad-hoc board committee was established in June 2012 to oversee
issues relating to the sale of BP’s share in TNK-BP. This committee,
known as the Russia committee, is chaired by Antony Burgmans and
membership includes Andrew Shilston and Paul Anderson. Carl-Henric
Svanberg and Bob Dudley attend the committee meetings. The
committee received regular and detailed reports on the process for the
sale of the company’s stake in TNK-BP and supported the proposal to the
board of the binding sale and purchase agreements that were eventually
executed with Rosneft. The committee will continue to receive updates
through to closing of the agreements with Rosneft (currently anticipated
to occur in the first half of 2013).