Corporate Goverance in the UK

16 May 2008 |

Corporate governance is the process by which companies are controlled and directed - a company's board is ultimately responsible for this. The key to good corporate governance is having the right strategy, leadership and control structures in place to produce and sustain the delivery of value to shareholders.

Good corporate governance, and its visibility, gives confidence to all associated with a company that it is being managed well and that value is being created. Our objective in this report is to summarise the key elements of the Company's governance structure and relate this to the principles in the UK 's Combined Code on Corporate Governance – a code of good practice for listed companies.

THE BOARD

"Every company should be headed by an effective board, which is collectively responsible for the success of the company." Combined Code – Main Principle A.1

CHAIRMAN AND CHIEF EXECUTIVE

"There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company's business. No one individual should have unfettered powers of decision." Combined Code – Main Principle A.2

BOARD BALANCE AND INDEPENDENCE

"The Board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such not no individual or small group of individuals can dominate the board's decision making." Combined Code – Main Principle A.3

APPOINTMENTS TO THE BOARD

"There should be a formal rigorous and transparent procedure for the appointment of new directors to the board." Combined Code - Main Principle A.4

INFORMATION AND PROFESSIONAL DEVELOPMENT

"The Board should be supplied in a timely manner with information in a form and of a quality to enable it to discharge its duties. All Directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge." Combined Code - Main Principle A.5

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PERFORMANCE EVALUATION

"The Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors." Combined Code - Main Principle A.6

RE-ELECTION

"All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. The board should ensure planned and progressive refreshing of the board." Combined Code - Main Principle A.7

FINANCIAL REPORTING

"The board should present a balanced and understandable assessment of the company's position and prospects." Combined Code - Main Principle C.1

INTERNAL CONTROL

" The board should maintain a sound system of internal controls to safeguard shareholders' investments and the company's assets." Combined Code - Main Principle C.2

RELATIONS WITH SHAREHOLDERS

"There should be a dialogue with shareholders based on the mutual understanding of objectives. The Board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. Combined Code" – Main Principle D.1

AUDIT COMMITTEE AND AUDITORS

The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company's auditors. Combined Code Main principle C.3




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Sources:
  1. Corporate Governance - BAE website
  2. Corporate Governance - Invensys website
  3. Corporate Governance - Wikipedia

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