Vodafone 2006 Annual Report Download - page 55

Vodafone Group Plc Annual Report 2006 53
Corporate Governance
Introduction
Statement of corporate governance policy
The Board of directors of the Company is committed to high standards of corporate
governance, which it considers are critical to business integrity and to maintaining
investors’ trust in the Company. The Group expects all its directors and employees to act
with honesty, integrity and fairness. The Group will strive to act in accordance with the
laws and customs of the countries in which it operates; adopt proper standards of
business practice and procedure; operate with integrity; and observe and respect the
culture of every country in which it does business.
The Combined Code
The Company’s ordinary shares are listed in the United Kingdom on the London Stock
Exchange. As such, the Company is required to make a disclosure statement concerning
its application of the principles of and compliance with the provisions of the revised
Combined Code on corporate governance (the “Combined Code”). For the year ended
31 March 2006, the Board confirms that the Company has been in compliance with the
provisions of section 1 of the Combined Code. The disclosures provided below are
nevertheless intended to provide an explanation of the Company’s corporate
governance policies and practices.
US listing requirements
The Company’s ADSs are listed on the NYSE and the Company is, therefore, subject to
the rules of the NYSE as well as US securities laws and the rules of the SEC. The NYSE
requires US companies listed on the exchange to comply with the NYSE’s corporate
governance rules but foreign private issuers, such as the Company, are exempt from
most of those rules. However, pursuant to NYSE Rule 303A.11, the Company is required
to disclose a summary of any significant ways in which the corporate governance
practices it follows differ from those required by the NYSE for US companies. A summary
of such differences is set out below.
The Company has established a Disclosure Committee with responsibility for reviewing
and approving controls and procedures over the public disclosure of financial and
related information, and other procedures necessary to enable the Chief Executive and
Chief Financial Officer to provide their Certifications of the Annual Report on Form 20-F
that is filed with the SEC.
Section 404 of the Sarbanes-Oxley Act of 2002 (US) requires the Company to annually
assess and make public statements about the quality and effectiveness of its internal
controls over financial reporting. As a non-US company, Vodafone is first required to
report on its compliance with section 404 for the year ended 31 March 2007.
Management’s report must describe conclusions about the effectiveness of the
Company’s internal control over financial reporting based on management’s evaluation
as of the end of the Company’s most recent fiscal year.
The Company has established a Steering Committee to provide strategic direction to the
Company’s section 404 compliance efforts and a Programme Management Office which
monitors progress and provides detailed guidance to the compliance teams that have
been set up in the Group’s subsidiaries and central functions. The Company’s Audit
Committee also plays an active role in monitoring these efforts. The Audit Committee
receives progress updates at each of its meetings as well as a bi-annual status
presentation from the Programme Management Office. The Company’s external auditors
have been consulted throughout the project and will continue to be involved as the
Company finalises its review.
The Company has reviewed the structure and operation of its “entity level” control
environment: the overarching structure of review and monitoring essential to the
management of its business.
Each of the Company’s subsidiaries and central functions has ensured that the relevant
processes and controls are documented to appropriate standards, taking into account
the guidance provided by the US Public Company Accounting Oversight Board’s Auditing
Standard No. 2 and subsequent SEC Staff Questions and Answers related to the
standard. The approach taken has been to identify the key financial reporting processes
so that, in aggregate, the Company has reasonable assurance regarding the reliability of
its financial reporting and the preparation of financial statements.
The Company is making satisfactory progress on the work required to enable it to report
on its compliance with section 404 at 31 March 2007.
The Company has also adopted a corporate Code of Ethics for senior executive, financial
and accounting officers, separate from and additional to its Business Principles,
described below. A copy of this code is available on the Group’s website at
www.vodafone.com.
Differences from New York Stock Exchange corporate
governance practices
Independence
The NYSE rules require that a majority of the Board must be comprised of independent
directors and the rules include detailed tests that US companies must use for
determining independence. The Combined Code requires a company’s board of directors
to assess and make a determination as to the independence of its directors. While the
Board does not explicitly take into consideration the NYSE’s detailed tests, it has carried
out an assessment based on the requirements of the Combined Code and has
determined in its judgement that all of the non-executive directors are independent
within those requirements. As at the date of this Annual Report, the Board comprised
the Chairman, four executive directors and eleven non-executive directors.
Committees
Under NYSE rules, US companies are required to have a nominating and corporate
governance committee and a compensation committee, each composed entirely of
independent directors with a written charter that addresses the Committees’ purpose
and responsibilities. The Company’s Nominations and Governance Committee and
Remuneration Committee have terms of reference and composition that comply with
the Combined Code requirements. The Nominations and Governance Committee is
chaired by the Chairman of the Board, and its other members are non-executive
directors of the Company and the Chief Executive. The Remuneration Committee is
composed entirely of non-executive directors whom the Board has determined to be
independent. The Company’s Audit Committee is composed entirely of non-executive
directors whom the Board has determined to be independent and who meet the
requirements of Rule 10A-3 of the Securities Exchange Act. The Company considers that
the terms of reference of these committees, which are available on its website at
www.vodafone.com, are generally responsive to the relevant NYSE rules but may not
address all aspects of these rules.
Corporate governance guidelines
Under NYSE rules, US companies must adopt and disclose corporate governance
guidelines. Vodafone has posted its statement of compliance with the Combined Code
on its website at www.vodafone.com. The Company also has adopted a Group
Governance Manual which provides the first level of the framework within which its
businesses operate. The manual is a reference for Chief Executives and their teams and
applies to all directors and employees. The Company considers that its corporate
governance guidelines are generally responsive to, but may not address all aspects of,
the relevant NYSE rules.
Governance
Contents
Page
Corporate Governance 53
– Introduction 53
– Directors and Organisation 54
– Executive Management 55
– Committees of the Board 55
– Statement on Internal Control 55
– Control Environment 56
– Review of Effectiveness 56
– Relations with Shareholders 56
– Political Donations 56
– Directors’ Indemnities 56
– Auditors 57
– Report from the Audit Committee 57
Employees 58
– Employee Involvement 58
– Employment Policies 58
– Equal Opportunities 58
– The Disabled 58
– Health, Safety and Wellbeing 58
Corporate Responsibility and Environmental Issues 59
– Corporate Responsibility 59
– Environmental Issues 60
– Environmental Performance Indicators 60
Board’s Report to Shareholders on Directors’ Remuneration 61
– Remuneration Committee 61
– Remuneration Policy 61
– Report on Executive Directors’ Remuneration for the 2006
Financial Year and Subsequent Periods 62
– Audited Information 65
Directors’ Statement of Responsibility 70
– Disclosure of Information to Auditors 70
– Going Concern 70