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BT’s policy is to achieve best practice in our standards of business integrity in all our operations. This includes a commitment to maintaining the highest standards of corporate governance and ethics throughout the group. The directors consider that BT has, throughout the year, complied with the provisions of the June 1998 Combined Code on Corporate Governance. This section also reports on BT’s
position in respect of the new Combined Code published in July 2003, which
will apply to the company from the 2005 financial year.
Board and committee structure
The Board operates as a single
team, currently made up of the part-time Chairman, the Chief Executive, four
other
executive directors and seven non-executive directors. All of the non-executive
directors are considered by the Board to be independent, meeting the criteria
in the new Combined Code. The Board’s principal focus is the overall strategic direction, development and control of the group. It meets every month, except in August. A formal statement of its role and responsibilities is available on the company’s
website.
The non-executive directors provide a strong, independent element on the Board, bringing experience and independent judgement gained at the most senior levels, of international business operations and strategy, marketing, technology, communications and political and international affairs. The Chairman and the non-executive directors regularly meet without the executive directors. At least annually, the non-executive directors meet, without the Chairman, to review his performance.
During summer
2003 the Board evaluated its performance and board processes, and agreed a number
of actions as a result of this exercise. A further evaluation, including on the
performance of
directors and the Board’s
committees, will be carried out during 2004.
To
meet best corporate governance practice, Audit, Remuneration and Nominating
Committees have long been established by BT. Written terms of reference for
each committee are available on the company’s website. The Audit and Remuneration Committees are made up entirely of independent, non-executive directors. The Audit Committee recommends the appointment, reappointment and remuneration of the company’s external auditors. As a result of regulatory or similar requirements, it is necessary to employ the company’s external auditors for certain non-audit work. The Board has policies determining what non-audit services the company’s
external auditors can provide in order to safeguard their independence and
objectivity. Under those policies, consultancy work will not be offered to
the external auditors unless there are clear efficiencies and value added benefits
to the company.
The Chief Executive, Ben Verwaayen, chairs the Operating Committee, which meets weekly.
Internal control and risk management
The Board is responsible for the
group’s systems of internal control and risk management and for reviewing
the effectiveness of those systems. Such systems 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.
BT has processes for identifying, evaluating and managing the significant risks faced by the group. These processes have been in place for the whole of the 2004 financial year and have continued up to the date on which this document was approved.
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