“I embrace the new Code – it is directionally right and in many ways reflects what we already do. I am pleased to say that we are able to report against it a year early.”
At British American Tobacco, we are committed to sustained high performance, supported by good governance. We want to run our business in a manner which is responsible and consistent with our belief in honesty, transparency and accountability. For us, good governance means managing our business well and engaging effectively with our stakeholders. It is never simply an exercise in compliance, but a key element underpinning the long-term growth of our business. As such, it is of key importance in these challenging times, as much as it is in the good times.
As a UK-listed company our principal reporting obligation arises under the Combined Code, now updated by the Financial Reporting Council and renamed the UK Corporate Governance Code. I embrace the new Code – it is directionally right and in many ways reflects what we already do. It applies to accounting periods beginning on or after 29 June 2010. Strictly speaking, we need not follow it until 2011, reporting in 2012, but I was keen that we report against it a year early. This Corporate governance statement, therefore, is intended both to meet our formal obligations under the Combined Code and to demonstrate our alignment with the new Corporate Governance Code.
The new Code emphasises the Board’s responsibility for providing the leadership necessary to promote the long-term success of the Company within the context of an effective framework of controls which encourage talent, innovation and best practice, while managing and mitigating risk. As Chairman, I am conscious that it is my responsibility to provide leadership to the Board in order to ensure its effectiveness and to oversee the delivery of the Group’s strategy. I am mindful in this regard of the importance of encouraging the productive engagement of all Board members so as to enable all Directors to work in unison within a culture of openness and debate. In this Statement, we identify how we apply the Code’s principles relating to the role and effectiveness of the Board.
I am aware too of the need to have the keenest eye on risk management at the highest level, and the very real need for the Board to play a leadership role in ensuring the effectiveness of controls and the evaluation of risk. The renewed emphasis in the Code on risk management is consistent with our approach over the past two years, both in satisfying ourselves that our risk management processes are effective, and in extending our disclosure to assist investors and other stakeholders in understanding our principal risks and how we look to manage them. In addition, in the last year the Board has reviewed its overall approach to risk and agreed that it will continue to assess risks on a case-by-case basis.
The new Code has prompted some changes to our procedures. For example, our Board evaluation in 2010 benefited from an external facilitator, which provided a fresh perspective and produced some highly valuable learnings, as I hope this Statement will show. Similarly, I have felt it important this year to focus on ensuring that our Board members continue to update and refresh their skills and knowledge and so, in addition to scheduling additional briefing sessions, for example on the new Code, I met with each of of the Directors individually to discuss and agree their training and development needs in 2011. In another change to our previous practice, we will be submitting all of the eligible Directors for re-election at this year’s Annual General Meeting.
I continue to follow with interest developments in the field of corporate governance, for example the government’s recent consultation paper on the future of narrative reporting and its wider review of corporate governance, focusing on key issues such as the problems of short-termism, investor engagement and directors’ remuneration. I was also present at the launch of the government’s initiative, spearheaded by Lord Davies of Abersoch, aimed at increasing the presence of women on the boards of UK-listed companies. It is an initiative that I support and, while we have a better balance than many at Board level, we cannot be complacent and I am conscious that we need to continue to strive towards a better balance at the senior management level.
I am confident that British American Tobacco will continue to demonstrate resilience in these challenging times through its effective mix of good governance, a clear and consistent corporate strategy and excellent management. Our aim as a Board is simply to ensure that this effective combination continues to return enhanced value to our shareholders.