5. The board’s committees and the executive committee
5.1 The executive committee
The board delegates responsibility for determining and implementing the group’s strategy and for managing the group to the Chief Executive, Mr Graham Mackay, who is supported by the executive committee (excom), which he chairs. Excom members are appointed by Mr Mackay. The other members of excom are the Chief Financial Officer, Mr Wyman; the divisional managing directors responsible for managing the group’s regional hubs (Latin America, Europe, Africa and Asia); the Managing Director of The South African Breweries Limited; the directors of key group functions (marketing; corporate affairs; and supply chain and human resources); and the General Counsel and Group Company Secretary. Excom’s purpose is to support the Chief Executive in carrying out the duties delegated to him by the board and, in that context, excom co-ordinates brand and operational execution, delivers strategic plans, budgets and financial reports for the board’s consideration and, through the Chief Executive, reports on these matters to the board.
Excom also ensures that effective internal controls are in place and functioning, and that there is an effective risk management process in operation throughout the group.
5.2 The disclosure committee
The disclosure committee consists of the Chairman, the Chief Executive, the Chief Financial Officer, a designated non-executive director (Lord Fellowes), and the Company Secretary or the Deputy Company Secretary. The function of the disclosure committee, in accordance with the group’s inside information policy, is to assure compliance with the Disclosure and Transparency Rules and the Listing Rules, and to ensure that the routes of communication between excom members, the disclosure committee, the General Counsel’s office, the company secretarial office and investor relations are clear and provide for rapid escalation to the disclosure committee and key advisers of any decision regarding potential inside information, so that the company is able to comply fully with its continuing obligations under the Disclosure and Transparency Rules and the Listing Rules.
5.3 The audit committee
During the year under review, the audit committee was chaired by Mr Manser, who has been chairman of the committee since May 2002. Mr Manser qualified as a chartered accountant in 1964 and was made a Fellow of the Institute of Chartered Accountants in 1976. Further biographical information concerning Mr Manser is set out in Board of directors.
Lord Fellowes, Mr Morland, Mr Devitre and Ms Doherty served on the committee throughout the year. Mr Morland has been a member of the committee from its first meeting on 13 April 1999. Lord Fellowes was appointed to the committee on 1 June 2001, Ms Doherty on 1 April 2006 and Mr Devitre on 16 May 2007. Ms Ramos was appointed to the committee with effect from 31 July 2008 and served until her resignation on 26 February 2009. The Chairman has recent and relevant financial experience, as does Ms Doherty, who is Chief Financial Officer of Brambles Limited and was previously Group International Finance Director of Tesco PLC, and Mr Devitre, having until 31 March 2008 held the position of Chief Financial Officer of Altria. The committee met four times during the year. The external auditors, the Chief Executive, the Chief Financial Officer and the Chief Internal Auditor attended each meeting by invitation. Other members of the management team attended as required.
The work of the committee during the year included consideration of the following matters:
- in respect of the 2008 year end: the annual financial statements and the preliminary announcement before their submission to the board for approval, including consideration of the group on a going concern basis, with particular reference to balance sheet and treasury considerations;
- the interim financial statements and interim announcement;
- reports from the external auditors on the annual and interim financial statements; approval of the audit plan and fee proposal for the 2009 year end;
- developments in accounting standards and the group’s responses;
- the progress of the year’s internal audit programme and matters arising;
- the effectiveness of the internal audit function;
- progress achieved during the year to position the group to achieve substantive compliance with section 404 of the US Sarbanes- Oxley Act (although the company is not an SEC registrant and is not required to comply with Sarbanes-Oxley standards);
- the results of the group’s bi-annual letters of representation and management’s investigation and follow-up of any instances of non-compliance;
- the internal control environment and risk management systems and the group’s statement on internal control systems, prior to endorsement by the board;
- material litigation affecting the group;
- the recommendation to the board of the reappointment of PricewaterhouseCoopers LLP as the external auditors; and
- the terms of reference and the effectiveness of the committee.
The audit committee reports its activities and makes recommendations to the board. During the year, the audit committee discharged its responsibilities as they are defined in the committee’s terms of reference, and has been engaged in ensuring that appropriate standards of governance, reporting and compliance are being met. The committee has advised the board on issues relating to the application of accounting standards as they relate to published financial information. During the year the Chief Internal Auditor left the company to pursue other career opportunities. While a permanent replacement is being recruited, an Interim Chief Internal Auditor has been appointed. The committee has been fully involved in this process.
The Chief Internal Auditor (including the Interim Chief Internal Auditor), has direct access to the committee, primarily through its chairman. The committee has access to subsidiary company internal audit leadership. The reports of the divisional audit committees are also available to the audit committee.
During the year, the committee met with the external auditors and with the Chief Internal Auditor without management being present.
5.4 The nomination committee
During the year, the nomination committee was chaired by Mr Kahn. Lord Fellowes, Mr Bible, Mr Manser, Mr Morland, Mr Ramaphosa and Mr Santo Domingo were members of this committee throughout the year. The committee is empowered to consider the composition of the board and its committees. It is asked to consider the retirement, appointment and replacement of directors, and is required to make appropriate recommendations to the board.
The nomination committee has continued to evaluate the balance of skills, knowledge and experience of the board and is committed to the progressive renewal of the board through orderly succession. Appropriate succession plans for the non-executive directors, for the executive directors and for senior management were also kept under review.
Where non-executive vacancies arise, the committee may use the services of external consultants in order to identify suitable candidates for the board to consider. Candidates are shortlisted for consideration by the nomination committee on the basis of their relevant corporate or professional skills and experience. In accordance with the terms of the relationship agreement with Altria, the only executive directors appointed to the board are the Chief Executive and the Chief Financial Officer.
5.5 The remuneration committee
The committee consists entirely of independent directors: Mr Morland (Chairman), Lord Fellowes, Mr Manzoni and Mr Manser.
The committee is empowered by the board to set short-term and long-term remuneration for the executive directors. More generally, the committee is responsible for the assessment and approval of a broad remuneration strategy for the group and for the operation of the company’s share-based incentive plans. This includes determination of short-term and long-term incentives for executives across the group.
The remuneration committee has implemented its strategy of ensuring that employees and executives are rewarded for their contribution to the group’s operating and financial performance at levels which take account of industry, market and country benchmarks. To ensure that the executives’ goals are aligned to those of the company, share incentives are considered to be critical elements of executive incentive pay. During the year, the committee engaged the services of consultants, Kepler Associates. These consultants have no other connection with the company. At levels below the company’s executive committee, the company’s management consults, among others, Hay Consulting and Towers Perrin, on a project basis.
Specifically, during the year the work of the remuneration committee included:
- reviewing trends in UK executive remuneration and governance;
- reviewing the key elements of the group’s long-term incentive schemes (including peer comparator group composition);
- considering and approving for submission to the company’s shareholders new share option plans (to replace the then existing plans which had been due to expire);
- reviewing benchmarking methodologies and outcomes;
- reviewing and approving performance hurdles for short and long-term incentive awards;
- reviewing and approving long-term incentive awards for executive committee members;
- reviewing and approving total remuneration for the executive directors; and
- reviewing and approving the draft remuneration report.
More details of the company’s remuneration policy can be found in the remuneration report.
5.6 The corporate accountability and risk assurance committee (CARAC)
Lord Fellowes chaired the committee throughout the year. Mr Kahn, Mr Mackay, Mr Manser, Mr Manzoni, Mr Ramaphosa and Mr Wyman served as members for the entire period. Mr Pieterse joined the committee on 31 July 2008. Additionally, the Director of Corporate Affairs, Ms Clark, met regularly with the chairman of CARAC to discuss implementation and planning issues, and attended all meetings of the committee.
The objective of CARAC is to assist the board in the discharge of its responsibilities in relation to corporate accountability, including sustainable development, corporate social responsibility, corporate social investment and ethical commercial behaviour. More details of the committee’s activities can be found in the sustainable development review section of this report and in the company’s separate Sustainable Development Report which is available on the company’s website and, upon request, in hard copy.
During the year, the CARAC focused on company-specific and industry issues which are critical to protecting the company’s licence to operate.