Composition and independence
The board consists of two executive directors (chief executive and chief financial officer), and 10 non-executive directors, of which one, Mr Kahn, is chairman. The number of non-executive directors was reduced from eleven to 10 with effect from the AGM in 2004. Directors’ biographies are set out on the Board of directors page. The board has determined that, from 1 August 2004 (the date on which Mr Manzoni joined the board, following shortly after the retirement at the 2004 AGM of Mr Levett and Mr Camilleri), five out of the ten non-executive directors were independent. Prior to that date four out of 11 were independent.
Mr Ning has decided that, in the light of his commitments with China National Cereals, Oils and Foodstuffs Corporation, and COFCO International Ltd, he will not be offering himself for re-election at the AGM in 2005.
It is not the board’s intention to replace Mr Ning in the foreseeable future. From the end of the upcoming AGM, a majority of non-executive directors will be independent.
The board regards the independence of character and integrity of all of its directors to be beyond question and all directors to be independent in judgement. For the determination of independence for Combined Code purposes for the period under review, the board considered the following directors not to be independent: Mr Bible and Ms De Lisi, as they are nominees of Altria, the company’s largest shareholder; Lord Renwick of Clifton, because of his position with JP Morgan, an investment bank which has in the past three years had a material relationship with the company; and Mr Ning, who was chairman of China Resources Enterprise, Ltd, which has a 51% stake in China Resources Snow Breweries Ltd, a joint venture company in which the company indirectly holds the remaining 49%; and Mr Kahn, who is a former chief executive of the company and has served continuously on the board, and the board of the company’s predecessor, since 1981 (although technically he has only been a director of the company since 1999). For the first four months of the year under review (until the AGM in July 2004), Mr Camilleri, a nominee of Altria, and Mr Levett, the representative of a major shareholder, served on the board. Neither of them was regarded as independent for the purpose of the Combined Code.
The board considers Mr Morland, Lord Fellowes, Mr Manser, Mr Manzoni and Mr Ramaphosa as being independent. Mr Ramaphosa is chairman of Johnnic Holdings Ltd, which has a 9.5% equity interest in Tsogo Investment Holdings Limited and is the principal shareholder of Durban Add-ventures (Pty) Ltd, which in turn owns 40% of Tsogo Sun KwaZulu Natal (Pty) Ltd. The other 60% of Tsogo Sun KwaZulu Natal (Pty) Ltd is owned by Tsogo Sun Holdings (Pty) Ltd, in which the group has a 49% shareholding. However, the board regards Mr Ramaphosa as being independent as it is the opinion of the board that this minor relationship does not affect Mr Ramaphosa’s independence in the context of his work on the board.
Board meetings and attendance
In addition to the AGM, which was attended by all the directors with the exception of Mr Ning, Mr Morland, and Mr Camilleri, the board met seven times during the year. The year under review saw an increased number of committee meetings, with no signs that this trend will reverse. Directors’ attendance at board and committee meetings is set out in the table on the previous page. It should be noted that prior to his resignation Mr Camilleri had been granted a leave of absence from formal board meetings in view of pressures of business at Altria, where he is chairman and chief executive officer. As a result of the pressure of his new responsibilities, Mr Ning has decided not to stand for re-election.
All three of the Altria nominees waived their fees during the period under review. The company secretary acts as secretary to the board and its committees and attends all meetings, unless he is unable to, in which case his deputy stands in for him.
Operation of the board
The board sets the strategic objectives of the group, determines investment policies, agrees on performance criteria and delegates to management the detailed planning and implementation of those objectives and policies in accordance with appropriate risk parameters. The board monitors compliance with policies and achievement against objectives by holding management accountable for its activity through monthly and quarterly performance reporting and budget updates.
Matters reserved for the board
There is a schedule of matters which are dealt with exclusively by the board. These include approval of financial statements; the group’s business strategy; the annual capital expenditure plan; major capital projects; major changes to the group’s management and control structure; material investments or disposals; risk management strategy; social and environmental policy; and treasury policies.
Appropriate structures for those authorities delegated to management and board committees are in place, accompanied by monitoring and reporting systems. Each standing board committee has specific written terms of reference issued by the board and adopted in committee. These are available on the company’s website or, on request, from the company secretary. All committee chairmen report orally on the proceedings of their committees at the next meeting of the board.
The roles of executive and non-executive directors
The executive directors have responsibility for proposing strategy and for making and implementing operational decisions concerning the group’s businesses. Non-executive directors complement the skills and experience of the executive directors, contributing to the formulation of strategy, policy and decisionmaking through their knowledge and experience of other businesses and sectors. All directors bring an independent judgement to the issues of strategy, performance, and resources, including key appointments and standards of conduct.
Information and training
The board and its committees are supplied with full and timely information, including detailed financial information. This enables directors to discharge their responsibilities. All directors have access to the advice of the company secretary. Independent professional advice is also available to directors in appropriate circumstances, at the company’s expense, and the committees have been provided with sufficient resources to undertake their duties. The company secretary is responsible for advising the chairman on matters of corporate governance.
Following the appointment of new directors to the board, an induction programme is arranged which involves industry-specific training including visits to the group’s businesses and meetings with senior management, as appropriate. In addition to exposure to operations, new directors are given exposure to internal controls at business unit level and are advised of the legal and other duties they have as directors of a listed company. The company arranges for major shareholders to have the opportunity to meet new appointees. The company is also committed to continuing director development in order that they may build on their expertise and develop an ever more detailed understanding of the business and the markets in which group companies operate.
Members of committees are encouraged to attend internal and external briefings and courses on aspects of the respective committee specialities. Information regarding technical development and proposals is distributed to them.
As part of ongoing development, executive directors are permitted to take up an external board appointment, subject to the agreement of the board. Executive directors retain any fees received in respect of such appointments. Generally, such appointments for executive directors are limited to one outside company.
Mr Mackay took up an invitation to join the board of Reckitt Benckiser plc as a nonexecutive director from 25 February 2005.
Non-executive directors may serve on a number of outside boards, provided they continue to demonstrate the requisite commitment to discharge effectively their duties to SABMiller plc. The nomination committee keeps the extent of directors’ other interests under review to ensure that the effectiveness of the board is not compromised.
Chairman and senior independent director
The roles of chairman and chief executive are separate with responsibilities divided between them. This separation of responsibilities has been formalised in their respective letters of appointment, approved by the board. There were no changes to the chairman’s external commitments during the year.
The chairman is available to consult with shareholders throughout the year, and in the month prior to the AGM he also invites major shareholders to meet with him to deal with any issues.
The senior independent director is Lord Fellowes. Lord Fellowes serves as an additional contact point for shareholders should they feel that their concerns are not being addressed through the normal channels. Lord Fellowes is, furthermore, available to fellow non-executive directors, either individually or collectively, should they wish to discuss matters of concern in a forum that does not include executive directors or the management of the company. In the year under review the chairman hosted two meetings of nonexecutive directors, without the executive directors present. Lord Fellowes, has in addition, held a meeting of non-executive directors without the presence of the chairman. Lord Fellowes is chairman of the corporate accountability and risk assurance committee (CARAC). He also serves on the audit, remuneration, and nomination committees and as such is well placed to influence the governance of the company and meet the expectations attaching to the role of senior independent director.
Board, committee, and director performance evaluation
A formal evaluation of the board’s performance and effectiveness was carried out. This was led by the chairman, with input from the senior independent director and in consultation with other directors. Each non-executive director’s performance was evaluated by the chairman, in consultation with the senior independent director, who in turn consulted with the executive directors and the company secretary. These assessments were conducted against eight key performance criteria using a variable rating system.
The chairman’s performance was evaluated against the same criteria by the senior independent director, the executive directors and the company secretary.
All outputs from the evaluation process were reviewed by the chairman, the senior independent director, the chief executive and the company secretary, all of whom concluded that the board and its committees were operating effectively.
The chairman confirms that Mr Ramaphosa, standing for re-election at this year’s AGM, continues to perform effectively and demonstrate commitment to his role. As Mr Manzoni was only recently appointed to the board, his performance was not subject to formal review for the part of the year in which he served.
Retirement of directors
New directors are subject to election at the first opportunity following their appointment. All directors are subject to retirement and re-election by shareholders every three years. The names of directors submitted for election or re-election are accompanied by brief biographical details to enable shareholders to make an informed decision in respect of their election or re-election. The re-appointment of nonexecutive directors is not automatic. In general, the board will ask a director reaching the age of 70 years to stand for re-election annually or to retire.
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