Good corporate governance is about more than compliance with rules and regulations. It is an integral part of how the Group chooses to do business.
While our internal control, risk management and Group audit procedures ensure that proper controls are in place, we also encourage our employees to review their own and each other's activities and outputs. This helps them make sure they have acted correctly – and to confirm that correct decisions are made – and to challenge each other if they think something is the matter, if something appears unusual or they think there is a better way of doing things.
The Board is committed to maintaining high standards of corporate governance and believes that a solid corporate governance framework enables efficient and effective decision making with clear responsibilities, leading to achieving the Company’s objectives and delivering long-term value to shareholders. Key areas of focus for the Board include developing the Group’s strategy, monitoring financial performance, and ensuring standards of conduct and accountability across the Group.
The Board is responsible for organising and directing the affairs of the Company in a manner that is most likely to promote our success for the benefit of the members as a whole benefit. It provides entrepreneurial leadership of the Company within a framework of prudent and effective controls.
There is a Schedule of Matters Reserved for the Board, which includes:
The Board sets annual objectives for the business in line with the current Group strategy and monitors achievement of the Company’s objectives through regular reports which include updates from the Chief Executive and Chief Financial Officer on all material business matters. The Board has a standing agenda of items that are regularly considered which is continually refreshed to include any topical matters that arise.
The number of meetings held each year and attendance at those meetings is set out within the Annual Report and Accounts.
The roles of the Chairman and the Chief Executive are separate and complementary, with responsibilities clearly divided and set out in role statements.
The Non-Executive Directors challenge and agree the Group’s strategy with Executive management and assess their performance against it. Baroness Hogg is the Senior Independent Director.
The Board has several committees, which support the discharge of its duties. The structure of these committees is set out below.
Financial controls and systems are assessed through the Audit Committee and the Board. The Remuneration Committee sets levels of remuneration for the Executive Directors and senior management. The Nominations Committee is responsible for reviewing the balance of skills, experience, independence and knowledge required by the Board and the senior leadership needs of the Group, and makes recommendations to the Board on matters relating to the Board’s membership.
The Committee supports the Board in fulfilling its responsibilities in respect of: overseeing BG Group’s financial reporting processes; the way in which management ensures and monitors the adequacy of financial and compliance controls and business risk management processes; the appointment, remuneration, independence and performance of the Group’s external auditors; and the independence and performance of Group Audit.
Details of the work carried out by the Committee in accordance with its terms of reference and in addressing significant issues are reported to the Board as a matter of course by the Chairman of the Committee and are described in the Annual Report and Accounts.
The Committee formulates management’s approach to risk and risk management. This includes consideration of risk appetite and strategic risks and oversight of the risk management function and the Enterprise Risk Management Framework. The key responsibilities of the Energy Trading and Credit Risk Committee (ETCRC) have been subsumed into the Committee. The ETCRC was disbanded during the year.
The purpose of the Committee is to monitor the effectiveness of the Speak Up Policy; to oversee material investigations into allegations of breaches of the Business Principles, Group policies, and any laws or regulations; to provide advice to the business on remedial actions; and to share lessons learnt across the business.
The role of the Chairman’s Committee is to advise and assist the Chairman in the preparation for Board meetings. The Committee also acts on behalf of the Board between scheduled meetings, within clearly defined delegated authority.
The Committee is responsible for funding and treasury policy decisions. During the year, the Committee considered reports on treasury activity, the Group’s funding plans, cash management, hedging, and forward gas sales. In July 2012, the Committee approved the increase and extension of the Group’s committed bank credit facilities to $5.2 billion. The Committee also oversaw the work streams regarding the issuance of a hybrid bond in June 2012 which resulted in just over $2 billion being raised across three currencies in a period of three days. The Committee will continue to monitor the Group’s funding requirements and debt market conditions during 2013.
The Board’s policy on diversity is set out in the Chairman’s statement of the Annual Report and Accounts. The Board’s external evaluation during 2012 noted the importance of securing sufficient industry and sector knowledge and global experience as part of the continued refreshment of the Board, and that diversity (including, but not limited to, gender) of backgrounds and professional experience would become an important future consideration.
The Committee’s principal responsibility is for setting, reviewing and recommending to the Board for approval BG Group’s overall remuneration policy and strategy, and setting remuneration arrangements for Executive Directors, members of the GEC and Company Secretary. Full details of the Committee’s responsibilities, and a report of its activities during the year, are set out in the Remuneration report of the Annual Report and Accounts.
The Committee reviews and scrutinises BG Group’s work in engaging with its stakeholders in government, the political world, civil society, the media and the communities in areas where the Group already operates, or may operate in the future. In this work, the Committee supports the establishment and maintenance of the Group’s Business Principles and its Licence to Operate strategy.
The GEC has primary authority for the day-to-day management of the Group’s operations, within the agreed limits set by the Board. The GEC is responsible for monitoring strategic risk, operational management of the Group and health, safety, security and environment (HSSE) strategy. The GEC has also assumed the key performance management responsibilities of the Group, previously delegated to the Group Performance Committee, which was disbanded during the year.
* Committee chairman
The Committee formulates the Group’s exploration and appraisal strategy, and is responsible for planning and setting objectives and priorities to deliver that strategy. In addition, the Committee approves funding for exploration and appraisal.
The main purpose of the Committee is to oversee the effectiveness of BG Group’s governance, business risk and assurance processes; to approve Group Standards; to oversee the implementation of all other parts of the Internal Control Framework; and to ensure that there is an effective process for the identification, management and escalation of risk.
The Committee considers and, where appropriate, approves merger, acquisition and disposal transactions, and other investment decisions, with the exception of exploration and appraisal business development transactions.