Key elements of UK corporate governance captured by the Combined Code on Corporate Governance are:
An effective and balanced board appointed through a transparent appointments procedure
Levels of executive remuneration that attract and retain the people needed to run a company of the size and complexity of BT, set by a remuneration committee made up of independent non-executive directors
Open and meaningful relations with shareholders
A sound system of internal controls to safeguard a company's assets and shareholders' investments and to identify and manage business risks.
BT's commitment to the highest corporate standards means that:
Our Board has a balance of executive and non-executive directors, with the latter outnumbering the executives. The roles of Chairman and Chief Executive are split - Sir Michael Rake is the Chairman and Ian Livingston is Chief Executive. The non-executives are led by Deputy Chairman Maarten van den Bergh and are drawn from a wide range of business and other backgrounds in the UK and abroad. All the non-executive directors are independent of BT.
The whole Board appoints new directors on the recommendation of the Nominating Committee - which is chaired by Sir Michael Rake and also comprises the Deputy Chairman and two other non-executive directors
Executive remuneration is set by the Remuneration Committee - made up solely of non-executive directors and chaired by the Deputy Chairman. The company's executive remuneration policy is in line with the company's overall practice on pay and benefits. This is to reward employees competitively, taking into account individual performance, company performance, market comparisons and the competitive pressures in the information and communications industry. Remuneration packages are reviewed annually and comprise a mix of basic salary and performance-linked elements.
BT holds meetings with its major institutional shareholders to discuss the company's strategy, financial performance, specific major investment activities and its overall remuneration policies and plans. The company's AGM is held in different cities each year to give as many shareholders as possible the opportunity to attend as often as possible without the need to travel long distances. At every AGM shareholders are invited to ask questions on BT's financial and operational performance and activities plus the other topics to be dealt with at each meeting. BT has also asked its shareholders to vote on its remuneration policy or remuneration report at each of the last five AGMs.
The Board is responsible for the group's system of internal controls and risk management and for reviewing the effectiveness of these systems which are designed to manage, rather than eliminate, the risk of failure to achieve business objectives; any system can provide only reasonable and not absolute assurance against material misstatement or loss. Key features are (i) a group risk register identifying the group's key risks and the means to manage and mitigate them, (ii) a well established system of financial and business controls, the operation of which are regularly reported to the Group Finance Director and annually to the Chief Executive, (iii) regular assessments of internal controls by BT's internal audit department and (iv) the review of the effectiveness of the internal control processes by the Audit Committee, on behalf of the board.
