The board applied all of the principles and provisions of the Code throughout the year ended 31 March 2014, except in four respects:
1. Between 1 April 2013 and 23 April 2013 Graham Mackay was our Executive Chairman, and as such he held the roles of Chairman and Chief Executive. As we announced in April 2012, we originally intended that as part of the board’s succession planning Mr Mackay would remain as Executive Chairman until July 2013, and this was overwhelmingly approved by shareholders at our annual general meeting in July 2012. However, when Mr Mackay was diagnosed with a brain tumour in April 2013, the board accelerated the planned promotion of Alan Clark from Chief Operating Officer to Chief Executive, with Mr Mackay becoming our non-executive Chairman until his death in December 2013.
2. Our audit committee did not consist solely of independent directors. Under our relationship agreement with Altria Group, Inc. (Altria), as approved by shareholders in 2002 and in 2005, Altria has the right to nominate a director to the audit committee, and has nominated Mr Devitre, whom the board does not consider to be an independent director for the purposes of the Code. The board nevertheless considers that the composition of the audit committee remains appropriate, given Altria’s interest as the company’s largest shareholder, and is satisfied that, having regard to the experience and background in financial matters of Mr Devitre, is a former chief financial officer of Altria, the independence from management and the effectiveness of our audit committee in discharging its functions continue to be considerably enhanced and not in the least compromised.
3. Two directors, Mr Mackay, who was on medical leave of absence, and Mr Ramaphosa, who was at short notice called to a meeting convened by the President of South Africa, were unable to attend our 2013 annual general meeting.
4. The Code recommends that the performance evaluation of the boards of FTSE 350 companies should be externally facilitated at least every three years. Given the director changes first announced in April 2012 and the subsequent period of transition into new roles, the board did not consider it beneficial to conduct an externally facilitated evaluation during the year ended 31 March 2013. Following the diagnosis of Mr Mackay’s illness and consequential changes to responsibilities, including the appointment of Mr Manser as acting Chairman and his subsequent appointment as Chairman, the board concluded that there would be no benefit in carrying out an externally facilitated evaluation during the year ended 31 March 2014. As described in the Chairman’s statement and detailed later in this report, the board carried out a formal and rigorous evaluation of
the performance and effectiveness of the board, its principal committees and its individual directors. The board will keep under review the benefit of carrying out an externally facilitated performance evaluation in future years.
With regard to the Code provision stating that external audit contracts should be put out to tender at least every 10 years, the company has not tendered within that period. The audit committee keeps under review the ongoing legislative proposals on audit tendering and rotation from the EU and the Competition and Markets Authority. Further details are provided on page 61 of our 2014 consolidated financial statements.