Members
Andy Inglis (Chairman)
Sir Nigel Rudd
Ravi Uppal
Mr Weinberg was a member of the Committee and its Chairman for the period up to 7 May 2008. Mr Inglis was appointed Chairman of the Committee with effect from that date.
Mr Carroll stood down from the Committee on 7 May 2008 and Mr Uppal joined the Committee with effect from that date.
Governance
The Corporate Responsibility Committee was in place throughout 2008 and all its members were independent in accordance with provision A.3.1 of the Combined Code.
During the year, the Nominations Committee reviewed the membership of the Committee and nominated Mr Uppal as a member and nominated Mr Inglis to chair the Committee following Mr Weinberg’s retirement from the Board.
The Committee has asked that the Chief Executive, Group General Counsel, Group Human Resources Director, Managing Director Corporate Responsibility and the Director of Internal Audit normally attend its meetings.
The Committee met five times in 2008.
Activities
During 2008 the Corporate Responsibility Committee evolved further its role in providing oversight and strategic direction to social, ethical and environmental matters within BAE Systems. All members of the Committee are independent non-executive directors and as such are able to exercise independent oversight and provide advice based on the experience and knowledge of its members. The primary focus of the Committee in 2008 was providing review and oversight of the Group’s performance against its Corporate Responsibility objectives.
When the Woolf Committee issued its report following its review of the Company’s ethics policies and processes it recognised the value of the Committee’s governance structure. The Woolf Report recommended that the Corporate Responsibility Committee should have a key role in providing oversight and reporting on standards of ethical business conduct and reputational risk, and in performing this duty its role would be analogous to that of the Group’s Audit Committee. To assist the Committee in undertaking the role recommended by Woolf, we agreed that the Committee should engage an external party to undertake assurance work – similar in some ways to the role of the Group’s Auditors and its relationship with the Audit Committee. The Committee ran the process for the selection of an assurance provider and approved the appointment of Deloitte to undertake this role.
Deloitte will provide assurance over aspects of the programme for the implementation of the recommendations in the Woolf Report and assurance over selected subject matter in the separate 2008 Corporate Responsibility Report to be published by the Group. In managing the relationship with Deloitte we will be introducing similar practices to those adopted by the Audit Committee to manage its relationship with the Group’s Auditors. This will include agreeing on a regular basis the annual assurance strategy, the scope of work and the fee payable for this. In addition, the Committee will agree their terms of engagement and also review their independence and effectiveness.
The Woolf Committee recommended that the Group adopt a Global Code of Conduct. The Corporate Responsibility Committee was closely involved in overseeing the production of the Code. The Global Code of Conduct was launched across the Group at the beginning of 2009 and one of the Committee’s priorities for this year will be to monitor the quality of the roll-out process that is aimed at ensuring that a common language and set of expectations regarding business conduct are embedded throughout the Group.
The Committee met with Ian King, the Group’s Chief Executive, to discuss priorities in this area. We agreed with his view that ethics, health and safety and diversity should be the prime focus for the Group and therefore for the Committee’s activities. However, the Committee will continue to monitor the Group’s performance in other important Corporate Responsibility areas, such as the environment and our social and community responsibilities.
Back to Top
During 2008, the Committee continued its activity in overseeing and monitoring the Group’s performance in protecting the health and safety of our employees, and everyone working at or near our sites. This included looking at how health and safety is managed and led throughout the Group, the development of standards and the indicators used to monitor performance. To assist members of the Committee in their understanding of the management of health and safety, and other Corporate Responsibility matters, the Committee will be holding certain of its future meetings at Group sites. The first such meeting was held in 2008, when the Committee visited the Barrow-in-Furness Submarine Solutions site.
Since its formation four years ago, the Committee has had access to the audit and assurance services provided by the Group’s Internal Audit function, and that function will continue to provide valuable services to the Committee that complement the independent assurance activities that Deloitte will provide.
The Director of Internal Audit attends all of the Committee’s meetings and presents the findings from audits involving areas covered by its terms of reference. He also provides details of the output from the Group’s Operational Assurance Statement process that provides assurance as to compliance with the Group’s core control policies. In his report on the activity of the Audit Committee, Michael Hartnall has reported on the joint meeting held between the Audit and Corporate Responsibility Committees last year at which we agreed the approach we will take in approving the annual programme of work to be undertaken by the Internal Audit function. We have agreed that the committees should hold two joint meetings in 2009 to ensure that audit and assurance work is co-ordinated effectively.
To be effective the Committee needs to be aware of what the key risks are to the value of the Group. Therefore, during the year the Committee regularly reviewed the Non-Financial Risk register that is used by the Executive Committee to identify and manage reputational and non-financial risks and the impact they could have on the Group’s value and reputation. This risk analysis is used to help set the Committee’s priorities.
It is important that executive remuneration reflects not just basic financial performance but performance in areas such as those that are within the remit of the Corporate Responsibility Committee. To achieve this, the Committee has agreed that it will be consulted by the Remuneration Committee when agreeing the non-financial objectives for the executive directors’ bonus scheme. In 2008 the Committee recommended objectives relating to ethics, and health and safety. These were agreed by the Remuneration Committee and the Committee will oversee performance against these during 2009 and, in line with the process adopted with regard to the 2008 objectives, will make a recommendation as to the level of achievement against them.
Summary of work undertaken by the Corporate Responsibility Committee in the last 12 months:
- recommended to the Remuneration Committee corporate responsibility-related leadership objectives for the executive directors’ annual bonus plan;
- reviewed the output from the Non-Financial Risk process that identifies and seeks to mitigate significant non-financial and reputational risks that could impact the Group;
- reviewed the Group’s health and safety performance;
- reviewed the operation of the Ethics Helpline and the nature of the matters reported;
- agreed the corporate responsibility sections in the 2007 and 2008 Annual Reports and the separate Corporate Responsibility Reviews for those years;
- considered the recommendations from the Woolf Committee as they relate to the Committee;
- reviewed the plans for the implementation of the recommendations in the Woolf Report;
- agreed the process for the creation of the Global Code of Conduct and agreed the final draft of the Code;
- received reports on the plans for the roll-out of the Global Code of Conduct across the Group;
- met with the Group’s then two Chief Operating Officers and reviewed with them the management of health and safety across the Group;
- oversaw the search for a third-party provider of corporate responsibility assurance services and approved the appointment of Deloitte to perform this role;
- received reports from the Director of Internal Audit on corporate responsibility-related work undertaken by the Group’s Internal Audit function in 2008;
- held a joint meeting with the Audit Committee to agree the approach to be taken with regard to agreeing the annual programme of work to be undertaken by the Internal Audit function; and
- reviewed the Committee’s terms of reference.