3. Board of directors: composition and independence
Since the year end, a further independent non-executive director, Dr Dambisa Moyo, has been appointed to the board. This appointment enhances the independence and balance of the board, and continues the process of progressive renewal. Biographical details of Dr Moyo are included in the Board of directors.
The board currently consists of the Chairman (Mr Kahn); eight independent non-executive directors (including Lord Fellowes, the Senior Independent Director); four non-executive directors who are not considered to be independent; and two executive directors (Mr Mackay, the Chief Executive, and Mr Wyman, the Chief Financial Officer). Biographical information concerning each of the directors is set out in the Board of directors.
The size and certain aspects of the composition of the board and of the audit, nomination and corporate accountability and risk assurance committees are determined primarily by the terms of our relationship agreement with Altria, which was originally approved by shareholders in 2002 as part of the Miller transaction, and was amended, with shareholders’ approval, in 2005 as part of the Bavaria transaction, and by the terms of our relationship agreement with BevCo Ltd (‘BevCo’), a holding company of the Santo Domingo Group, which was approved by shareholders in 2005 as part of the Bavaria transaction.
The agreement with Altria limits the size of the board to a maximum of 15 directors, of whom no more than two are to be executive directors, up to three are to be non-executive directors nominated by Altria, up to two are to be non-executive directors nominated by BevCo, and up to eight are to be non-executive directors appointed by the board.
The agreement with BevCo allows BevCo to nominate up to two non-executive directors for appointment to the board. The board is grateful to Altria for its indulgence in permitting for the time being the maximum number of directors allowed under the relationship agreement to be exceeded, in order to assist the company to meet the requirements of the Combined Code. Altria has also for the time being elected not to exercise its right to nominate a third director for appointment to the board.
Altria and BevCo have each exercised their right under their respective agreements to nominate one director for appointment to the nomination committee. BevCo has the right to nominate one director for appointment to the corporate accountability and risk assurance committee (CARAC) (although it has not exercised this right), and Altria has the right to nominate one director for appointment to the audit committee (which it has exercised).
The board considers eight directors – Ms Doherty, Lord Fellowes, Mr Manser, Mr Manzoni, Mr Morland, Dr Moyo, Mr Pieterse and Mr Ramaphosa – to be independent for the purposes of the Combined Code. The board considers four non-executive directors not to be independent for the purposes of the Combined Code: Mr Bible and Mr Devitre, as they are nominees of Altria, the company’s largest shareholder; and Mr Santo Domingo and Mr Pérez, as they are nominees of the Santo Domingo Group, the company’s second largest shareholder. The Chairman, Mr Kahn, who is a former chief executive of the company and has served continuously on the board, or on the board of the company’s predecessor, since 1981 (although he has been a director of the company only since 1999) and, as Chairman, is deemed not to be independent under the Combined Code.
For ease of reference, directors’ independence status for Combined Code purposes is indicated in the directors’ attendance table.
Lord Renwick of Clifton retired from the board on 31 July 2008 after nine years of distinguished service as a non-executive director. Ms Maria Ramos and Mr Rob Pieterse were appointed to the board on 15 May 2008 as independent non-executive directors, but in consequence of her subsequent appointment as Group Chief Executive of ABSA Group Limited in South Africa, Ms Ramos was most regrettably unable to continue to act as a director of the company and was obliged to resign from the board on 26 February 2009. With effect from 1 June 2009, the board has appointed Dr Moyo as an additional independent non-executive director, to replace Ms Ramos.
The board continues to believe that its overall composition remains appropriate, having regard in particular to the independence of character and integrity of all of its directors, and the experience and skills which they bring to their duties.
It is now 10 years since the company listed on the London Stock Exchange. SABMiller has been fortunate to retain the services of several distinguished non-executive directors – the Chairman, Lord Fellowes, Mr Morland and Mr Ramaphosa – for the entire period. They have provided considerable stability to the board since the listing in 1999 and the board has benefited greatly from the presence of individuals who have over time gained valuable insight into the group, its markets and the industry. The provisions of the Combined Code require the board to consider, where a director has served for a period of more than nine years, whether that director continues to be independent. In respect of each of the three independent directors (Lord Fellowes, Mr Morland and Mr Ramaphosa) the board has considered specifically whether their length of service has compromised their independence. In each case the board has determined that the director concerned remained independent of character and judgment and that there were no relationships or circumstances which were likely to affect, or could appear to affect, the director’s judgment, and that the independence of character and judgment of each of the directors concerned was not in any way affected or impaired by length of service. The board has also conducted a rigorous review of the performance of the Chairman, Lord Fellowes, Mr Morland and Mr Ramaphosa and considers that each of these directors brings invaluable integrity, wisdom and experience to the board and that they continue to contribute positively to board and committee deliberations. Therefore, the board is entirely satisfied as to the performance and continued independence of judgement of each of these directors.
Under the Combined Code, directors who have served for more than nine years are required to stand for annual re-election and, in line with the board’s prior determination that they should do so, each of the Chairman and Lord Fellowes, Mr Morland and Mr Ramaphosa will again offer himself for re-election for a term of one year. The board does not consider it to be in the interests of the company or shareholders to require all directors who have served for nine years or longer to retire at the same time and strongly favours ensuring continuity and stability through orderly succession. As noted, Lord Renwick retired from the board on 31 July 2008 following nine year’s service to the board. With the recent and unexpected resignation of Ms Ramos and her replacement having been recruited very recently, the board considered that the retirement of another experienced long-serving director this year would be undesirable and would not be in the interests of the company or its shareholders.
While recognising the benefits of the experience and stability brought by its long-standing directors, the board remains committed to the progressive renewal of board membership, having acted during the year to bring about the appointment of Ms Ramos, Mr Pieterse and Dr Moyo.
The board 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 terms of the relationship agreement between the company and Altria, and the experience and background in financial matters of Mr Devitre, the independence and effectiveness of the audit committee in discharging its functions in terms of the Combined Code continue to be considerably enhanced and not compromised.