Relations with shareholders
The Board maintains a dialogue with shareholders directed towards ensuring a mutual understanding of objectives. Its primary contact with shareholders is through the Chief Executive and Finance Director, but the Chairman and Chief Operating Officer also maintain contact with major shareholders in order to understand their issues and concerns. Where appropriate, major institutional shareholders are consulted on significant changes to the structure of the Directors’ remuneration.
At least twice a year, the Head of Investor Relations presents a report to the Board on the issues considered at meetings between the Company and institutional shareholders. In addition, the Board receives regular reports on developments concerning the holdings of the Company’s main institutional shareholders.
The Annual General Meeting is the principal opportunity for the Board to meet a wide range of investors and for the Chairman to explain the Company’s progress and receive questions from its owners, the shareholders. At the Annual General Meeting on 30 April 2008, the Company will provide for the vote on each resolution to be by poll, using its Registrar’s electronic voting system, rather than by show of hands. This provides for greater transparency and allows the votes of all shareholders to be counted, including those cast by proxy. The Chairman announces the provisional voting results at the Meeting, and the final results are announced on the same day through the Regulatory News Service and on bat.com.
Corporate Social Responsibility
The Corporate Social Responsibility (CSR) Committee supports the Company’s commitment to social and environmental issues. It is chaired by Kenneth Clarke, its other members being all of the Non-Executive Directors, and Karen de Segundo will chair the Committee following Kenneth Clarke’s retirement from the Board. The Chairman, the Executive Directors and the Management Board Director responsible for Corporate and Regulatory Affairs regularly attend meetings by invitation but are not members. The Committee’s role is to help identify and assess, with management, those significant social, environmental and reputational risks that might impair the Company’s strategic objective to be recognised as a responsible company in a controversial industry. The Committee also evaluates the adequacy of the Company’s policies in this area and makes recommendations for change.
The Company’s Social Reports have detailed the Company’s social, ethical and environmental performance and performance against commitments each year since the first Social Report in 2002. In 2006, the Company issued a performance summary (Social Reporting: 2006 progress and review), rather than publishing a full Social Report, in anticipation of the transition to a Sustainability Report later this year. Details of the Company’s performance on social, ethical and environmental issues can be found on bat.com.
Group companies in 32 countries are engaged in social reporting and others covering 10 countries are holding dialogue and reporting on a key issue. British American Tobacco’s first EU Social Report was published in 2007 and reflects dialogues with senior EU-level stakeholders in 2006/7. All of the Group’s Social Reports continue to be measured, through rigorous independent review, against the AA1000 Standard and the latest AA1000 Assurance Standard is being applied. Engagement with key stakeholders is a major requirement of the AA1000 Standard, and Group companies continue to be very active in this area.
The principles of CSR continue to be strongly embedded in the Group, with the governance dimension being provided by local and regional CSR committees, overseen by the CSR Committee. The focus for CSR governance this year will be to review and improve the governance process, including a review of the CSR key control checklist, first used in 2006.
The Company has been included in both the Dow Jones Sustainability World Index (DJSI World) and the Dow Jones STOXX Sustainability Index for the sixth year running. British American Tobacco (Malaysia) Berhad was also included in the 2007 DJSI World. British American Tobacco was placed in the second highest (Gold) Band in the Corporate Responsibility Index 2006 run by Business in the Community, the 700 member organisation established in the UK to help business improve its positive impact on society. The Company was rated first in its sector and included in the highest (Platinum) Band for environmental performance in the Business in the Environment Index for 2006.
American Depositary Receipts
The Company has unlisted trading privileges for its American Depositary Receipts (ADRs) on the American Stock Exchange. None of its securities are listed on any United States securities exchange or registered pursuant to the securities laws of the United States. As a result, the Company is subject to neither the American Stock Exchange listing standards nor the corporate governance rules under the Sarbanes-Oxley Act of 2002. Nevertheless, the Board has chosen, in the interests of good governance, to make a voluntary statement explaining the principal differences and common areas between the Company’s corporate governance practices (as explained above) and those that would be required if the Company were subject to those rules. The updated statement will be available on the corporate governance section of bat.com from the date of publication of the Directors’ Report and Accounts.
The Board considers that this Statement on governance provides the information necessary to enable shareholders to evaluate how the Principles of the Code have been applied. The Board considers that the Company has complied with the Provisions of the Code throughout the year and that it has therefore satisfied its obligations under the Code.
In the interests of further transparency, we have again prepared a report which summarises the matters addressed in this Statement, as appropriate, by reference to each Principle and Provision of the Code. The updated report will be available on the corporate governance section of bat.com from the date of publication of the Directors’ Report and Accounts.