Corporate governance

British American Tobacco is committed to maintaining high standards of corporate governance. Our corporate governance framework is directed towards achieving our business objectives in a manner which is responsible and in accordance with high standards of honesty, transparency and accountability. These principles are reflected in our Standards of Business Conduct, which have been in place for many years and are kept under continual review in order to ensure that they remain at the forefront of best business practice. Every Group company and every employee worldwide is expected to live up to them. In addition, the principles set out within our Statement of Business Principles are designed to help meet the expectations placed on us by our various stakeholders. Both documents are available from the Company Secretary and through our bat.com website.

The principal governance rules applying to UK companies listed on the London Stock Exchange are contained in the Combined Code on Corporate Governance adopted by the Financial Reporting Council in July 2003 (the Code). The Company has either complied with the Provisions of the Code throughout the year or else a full explanation (in the case of the continuing appointment of Rupert Pennant-Rea) has been provided in the Corporate Governance Statement of the Annual Report and Accounts where it has not. The Board therefore considers that the Company has satisfied its obligations under the Code.

The Board and its Committees
The Board is responsible to the Company’s shareholders for the success of the Group and for its overall strategic direction, its values and its governance. Among the key matters on which the Board alone may make decisions are the Group’s business strategy, its annual budget, dividends and major corporate activities. It is also responsible for reviewing the Company’s internal control and governance system and for approving our Standards of Business Conduct. It held seven scheduled meetings in 2006. Responsibility for implementing the Group’s strategy and for creating the conditions for the Group’s successful day-to-day operation is delegated to the Management Board, which met nine times in 2006.

The Board is also responsible for the overall system of internal control for the Company and its subsidiaries and for reviewing the effectiveness of the system. It carries out such a review at least annually, covering all material controls including financial, operational and compliance controls and risk management systems, and reports to shareholders that it has done so. The system is designed to manage risk that may impede the achievement of the Company’s business objectives rather than to eliminate these risks. The internal control system can therefore only provide reasonable, not absolute, assurance against material misstatement or loss.

The Audit Committee is chaired by Robert Lerwill. Its role is to monitor the integrity of the financial statements of the Company, review and, where appropriate, make representations to the Board on business risks, internal control and compliance.

The Corporate Social Responsibility Committee is chaired by Kenneth Clarke and its 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 Nominations Committee is chaired by Jan du Plessis. Its role is to make recommendations to the Board on suitable candidates for appointment to the Board and Management Board, ensuring that both boards have an appropriate balance of expertise and ability. In addition, it is responsible for reviewing the succession plans for the Executive Directors and members of the Management Board.

The Remuneration Committee is chaired by Kenneth Clarke and the summary remuneration report below sets out its role, responsibilities and policies during 2006.