Application of the UK Corporate Governance Code
The board applied all of the principles and provisions of the Code throughout the year ended 31 March 2012, except that the audit committee did not consist solely of independent directors. Under our relationship agreement, as approved by shareholders in 2002 and in 2005, Altria Group, Inc. (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, as a former chief financial officer of Altria, the independence and effectiveness of the audit committee in discharging its functions in terms of the Code continue to be considerably enhanced and not in the least compromised.
At the AGM held on 26 July 2012 shareholders approved the appointment of Mr Mackay as Executive Chairman for an interim period of one year and the appointment of Dr Clark as an executive director and as Chief Operating Officer, with the intention that he will succeed Mr Mackay as Chief Executive at the end of that interim period, when Mr Mackay will become non-executive Chairman.
The Code recommends that a chief executive should not go on to be chairman of the same company and that when, exceptionally, a board decides that a chief executive should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders. The Code also recommends that the roles of chairman and chief executive should not be exercised by the same individual and that the division of responsibilities between the chairman and chief executive should be clearly established, set out in writing and agreed by the board. Upon announcement of the proposed changes, the board wrote to all shareholders explaining the process that had been followed and setting out the reasons for these appointments.
Before concluding that these appointments were in the best interests of the company and would promote the success of SABMiller for the benefit of shareholders as a whole, the board considered carefully the requirements of the position of chairman in the context of the group's size and geographical spread. The board recognised the need for a chairman who would be able to commit himself fully to the role and provide stability and continuity for a number of years, and that the candidate would need a wide range of skills and expertise. The nomination committee came to the unanimous conclusion that Mr Mackay was the outstanding candidate for the position and the decision to nominate him received the unanimous support of the directors and the strong backing of our two major shareholders, Altria and BevCo Ltd (a holding company of the Santo Domingo Group) and was made after discussion with representatives of major institutional shareholders. The decision to appoint Dr Clark as Chief Operating Officer to facilitate a staged handover of responsibilities recognises the complexities of our global business and our many significant external relationships and partnerships.
The board also considered carefully whether it would be appropriate to appoint an interim chairman for 12 months before Mr Mackay becomes non-executive chairman but concluded this would not be in the best interests of the company or its shareholders as it would not provide the appropriate continuity of strategic direction and oversight that the group requires.
Any risk of an over-concentration of decision making powers in one person will be mitigated by the formal appointment of Mr Manser as Deputy Chairman, the fact that Mr Mackay's appointment as Executive Chairman is for a pre-determined and limited period of one year, and the proposed appointment of Dr Clark as a third executive director. It is also the board's intention now to begin the process of recruiting a new independent non-executive director, with the expectation that in due course he or she could become the senior independent director in succession to Mr Manser.