4. How the board operates
4.1 Board meetings and attendance
During the year there were six scheduled board meetings. Two additional board meetings were held to consider particular projects. Individual directors’ attendance at board and committee meetings and at the annual general meeting is set out in the table below. The directors nominated by Altria waived their fees during the period under review.
In the few instances where a director has not been able to attend a board or committee meeting, any comments which he or she has had arising out of the papers to be considered at that meeting have been relayed in advance to the relevant chairman.
4.2 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 activities through monthly and quarterly performance reporting and budget updates. In addition, the board receives regular presentations, on a rotational basis, from the divisional managing directors as well as from directors of key group functions (marketing, corporate affairs, human resources and legal) enabling it to explore specific issues and developments in greater detail.
Board and committee meetings are held in an atmosphere of intellectual honesty of purpose, integrity and mutual respect, requiring reporting of the highest standard by management and direct, robust and constructive debate among board and committee members.
4.3 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.
The board governs through clearly mandated board committees, accompanied by monitoring and reporting systems. Each standing board committee has specific written terms of reference issued by the board and adopted in committee. The terms of reference of the audit, remuneration and nomination committees 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, and the minutes of the meetings of all board committees are included in the papers distributed to board members in advance of the next board meeting.
4.4 The roles of executive and non-executive directors
The executive directors are responsible for proposing strategy and for making and implementing operational decisions. Non-executive directors complement the skills and experience of the executive directors, bring an independent judgement and contribute to the formulation of strategy, policy and decision making through their knowledge and experience of other businesses and sectors.
4.5 Information and training
The board and its committees are supplied with full and timely information, including detailed financial information, to enable 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. None of the directors has sought independent external advice through the company. The Company Secretary is responsible for advising the board, through the Chairman, on matters of corporate governance.
Following the appointment of new directors to the board, tailored induction programmes are arranged which involve industry-specific training and include visits to the group’s businesses and meetings with senior management, as appropriate. New directors are briefed on internal controls at business unit level and are advised of the legal and other duties they have as directors of a listed company as well as on relevant company policies and governance-related matters. The company arranges for major shareholders to have the opportunity to meet new appointees. The company is also committed to the continuing development of directors 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 board committees are encouraged to attend internal and external briefings and courses on aspects of their respective committee specialities and regular updates on relevant legal, regulatory, corporate governance and technical developments are presented to committee members and, as appropriate, to the board.
4.6 Outside appointments
Non-executive directors may serve on a number of outside boards provided that 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. The board is satisfied that the Chairman and each of the non-executive directors commit sufficient time to the fulfilment of their duties as Chairman and directors of the company, respectively.
The board believes, in principle, in the benefit of executive directors and members of the executive committee accepting non-executive directorships of other companies in order to widen their experience and knowledge for the benefit of the company. Accordingly, executive directors and members of the executive committee are permitted to accept external non-executive board appointments, subject to the agreement of the board, and are allowed to retain any fees received from such appointments.
Mr Mackay is a non-executive director of Reckitt Benckiser Group plc and is the Senior Independent Director and a member of the remuneration committee of that company. Fees earned by Mr Mackay from this appointment are set out in the Directors’ Remuneration Report. Later in 2008 Mr Mackay will join the board of Philip Morris International Inc. The board is satisfied that these duties will not impinge on Mr Mackay’s commitment and ability to discharge fully his duties to the company.
4.7 Chairman, Chief Executive and Senior Independent Director
The roles of Chairman and Chief Executive are separate with responsibilities divided between them. This separation of responsibilities is formalised in their respective letters of appointment, approved by the board. There were no significant 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 annual general meeting, he also invites major shareholders to meet with him to deal with any issues. The board is kept informed of the views of shareholders through regular updates from the Chairman, the Company Secretary and the executive directors, as well as through the inclusion in the board papers of relevant reports and commentaries of, and exchanges with, shareholders and investor bodies.
The Senior Independent Director is Lord Fellowes. Lord Fellowes is chairman of CARAC, and also serves on the audit, remuneration and nomination committees. He is therefore well placed to influence the governance of the company and to meet his responsibilities as Senior Independent Director. 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 also available to fellow non-executive directors, either individually or collectively, to discuss any 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 a meeting of the non-executive directors without the executive directors present. Lord Fellowes has, in addition, held a meeting of non-executive directors without the presence of the Chairman at which, among other things, the performance of the Chairman was discussed.
4.8 Board, committee and director performance evaluation
A formal evaluation of the performance and effectiveness of the board and of the audit, remuneration, nomination and corporate accountability and risk assurance committees is carried out each year, led by the Chairman, with input from the Senior Independent Director and in consultation with other directors and the Company Secretary. The performance of the Chief Executive is reviewed by the remuneration committee and this review is shared with and considered by the board. The performance of the Chief Financial Officer is reviewed by the Chief Executive and the remuneration committee, and reported to the board by the remuneration committee. Each non-executive director’s performance is evaluated by the Chairman, in consultation with the Senior Independent Director, who in turn consults with the executive directors and the Company Secretary. The Chairman’s performance is evaluated against the same criteria by the Senior Independent Director, the non-executive directors and the Company Secretary, taking into account the views of the executive directors.
In considering the contribution of individual directors for the year under review, performance was assessed against the company’s selected criteria of strategy, expertise in their field, governance factors, commitment, profile, knowledge of the industry and team contribution, culminating in an overall contribution rating. The importance of the different roles played by individual directors in bringing a balanced overall view to the board was recognised. For the year under review, the Chairman has assessed that all directors continue to make an effective contribution to the board.
In reviewing the performance of the board and its committees, the Chairman and the Senior Independent Director were aligned in their conclusion that measured against the principal duties expected of it, the board (including by extension its standing and ad hoc sub-committees) continued to operate effectively and to meet in full its obligations to support management, to monitor performance across a wide area, and to maintain its strategic oversight.
In a meeting of the Chairman, the Senior Independent Director, the committee chairmen and the Company Secretary, the results of the performance and effectiveness evaluations conducted in respect of the board, each of the directors, the Chairman, the Senior Independent Director and each of the board’s four standing committees were reviewed. Regarding the board committees, each of the committee chairmen expressed their views regarding the operation of his committee against its terms of reference and the performance and effectiveness of that committee. These views were discussed in an open and constructive manner with recommendations arising from the discussions being brought forward to the board and the respective committees.
The results of the performance and effectiveness evaluation process were also 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.
At the forthcoming annual general meeting, Ms Ramos and Mr Pieterse, having been initially appointed by the board of directors will, pursuant to the company’s articles of association, stand for election. Three directors, Mr Mackay, Mr Manzoni and Mr Ramaphosa are required to seek re-election in accordance with the company’s articles of association, having served for three years since their last election. As previously mentioned, the Chairman, Lord Fellowes, Mr Morland and Mr Ramaphosa will by the time of the AGM each have served continuously on the board for nine years and, under the Combined Code, are obliged to offer themselves for re-election annually.
The Chairman confirms that each of the directors offering themselves for re-election continues to perform effectively and to demonstrate commitment to his role. In addition, the Chairman confirms that in relation to each of the directors who will have served for nine years, the board is satisfied with his performance and has determined that nine years’ service does not compromise his independence. Lord Fellowes, as senior independent director, confirms that the Chairman continues to perform effectively and to demonstrate commitment to his role. Biographical details of directors standing for election and re-election are included in the Board of directors of this report.
4.9 Retirement of directors
New directors are subject to election at the first annual general meeting following their appointment, and directors are subject to retirement and re-election by shareholders every three years. The reappointment of non-executive directors is not automatic. The board has determined that non-executive directors who have served for nine years will be asked to stand for re-election annually, provided that the board remains satisfied both with the director’s performance and that nine years’ continuous service does not compromise the director’s continuing independence.
4.10 The Company Secretary
The Company Secretary acts as secretary to the board and its committees and he attended all meetings during the year under review.