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The Company is committed to high standards of corporate governance. The Board is accountable to the Company's shareholders for good corporate governance. The code of best practice, set out in Section 1 of the Combined Code as amended from time to time and appended to the Listing Rules of the Financial Services Authority (the 'Combined Code'), has been adopted as the Company's corporate governance statement.
The Board provides entrepreneurial leadership of the Company within a framework of prudent and effective controls, which enables risk to be assessed and managed. The Board sets the Company's strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives and reviews management performance. The Board sets the Company's values and standards and ensures that its obligations to its shareholders and others are understood and met.
As a unitary Board, all directors are involved in, and responsible for, the development of the Company's strategy. The non-executive directors review the performance of the Company with the executive directors on a regular basis. The Board delegates certain of its functions to committees consisting of non-executive directors as detailed within this section. The Board of the Company routinely meets seven times a year. The Board meets additionally when necessary to consider all matters relating to the overall control, business performance and strategy of the Company, and for these purposes the Board has drawn up a schedule of matters reserved for Board decision. Broadly, the Board has reserved to itself major strategic and financial decisions, including investment and divestment decisions, approval of business and financial plans, approval of significant alliance or codeshare partnerships, significant contracts and capital commitments of greater than '10 million. The Board has also drawn up a schedule of matters which must be reported to it. These schedules are reviewed at least annually.
The Board is led by the Chairman and the executive management of the Company is led by the Chief Executive. Their respective roles are more fully described below. The Chairman is responsible for the setting of the Board agenda and ensuring that it works effectively. Working with the Secretary, he ensures that Board Members receive accurate, timely and clear information. For the purposes of the Combined Code, the Chairman was independent at the time of his appointment in July 2003. Of the ten members serving at the year-end, excluding the Chairman, two were executive directors and seven were non-executive directors. The seven non-executive directors are drawn from a diversity of business and other backgrounds, bringing a broad range of views and experiences to Board deliberations. This diversity of background and experience is identified by the Board Members as one of the strengths of the Board of British Airways. Maarten van den Bergh is the Board's senior independent director. In this role he is available to the shareholders should they have any concerns that they have been unable to resolve through normal channels, or when such channels would be inappropriate. He is also responsible for leading the Board's discussions on the Chairman's performance and would lead the process leading to the appointment of a new Chairman, when appropriate.
The Board currently includes six fully independent non-executive directors. Although they are eligible for non-contractual travel concessions in addition to their fees, this is not considered to affect their independence.
All Directors have the same general legal responsibilities to the Company and are individually briefed, on appointment as to the duties they owe as Directors to the Company. The Board as a whole is collectively responsible for promoting the success of the Company by directing and supervising the Company's affairs. All Directors must take decisions objectively in the interests of the Company. The non-executive directors provide a varied range of skills and experience to the Group and in addition to these requirements of all Directors the role of the non-executive has the following key elements:
Strategy: Non-executive directors should constructively challenge and contribute to the development of strategy;
Performance: Non-executive directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance;
Risk: Non-executive directors should satisfy themselves as to the integrity of financial information, that financial controls are sound and that the systems of risk management are robust and defensible; and
People: Non-executive directors, through the Remuneration Committee, are responsible for determining appropriate levels of remuneration of Executive Directors and have a prime role in appointing, and where necessary removing, senior management and in succession planning.
All directors receive regular information about the Company so that they are equipped to play as full a part as possible in Board meetings. Papers for Board and Committee Meetings are typically distributed in the week prior to the relevant meeting. All Board members have access to the Company Secretary for any further information they require. If any of the non-executive directors has any concerns with the running of the Company they would first discuss these concerns with one of the Executive Directors, the Secretary or the Chairman, if these concerns cannot be resolved in that way then their concerns are recorded in the Board Minutes. No such concerns arose during the year.
The Secretary ensures that the Board members receive an appropriate induction and further training as necessary. The Board receives briefings on changes in regulation or law, as circumstances require. In recent years, this has included training in relation to the implications of the Companies Act 2006 as various sections of it came into force. The appointment and removal of the Secretary is a matter for the Board as a whole. Non-executive directors are encouraged to visit the Company's operations and to speak to customers and employees. They are also encouraged to attend the annual investor day to meet major shareholders. Independent professional advice would be available to directors in appropriate circumstances, at the Company's expense. All directors are required to submit themselves for re-election every three years. New directors are appointed to the Board on the recommendation of the Nominations Committee.
The Board carries out detailed scrutiny of certain key areas through its four standing committees. Through the Audit Committee (which consists of independent non-executive directors), the Board must be satisfied with the integrity of the Company's financial information and that the financial controls and systems of risk management are robust and defensible. The Remuneration Committee of the Board (which consists of independent non-executive directors) is responsible for determining appropriate levels of remuneration for the executive directors. The Company's remuneration policy, which has been approved by shareholders in general meeting, is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate managers. The remuneration packages offered by the Company are comparable with other international businesses of similar size and nature to British Airways. The latest report of the Remuneration Committee can be found in the most recent Report and Accounts, a copy of which can be found on the home page of this website. The Nominations Committee of the Board, which is chaired by the Chairman of the Company, has the prime role in recommending the appointment of, and where necessary the removal of, directors, in reviewing their performance and in succession planning. The operational safety and security of the airline and its subsidiary airlines, as well as issues of health and safety, are considered by the Board's Safety Review Committee. The terms of reference of the four committees are available on this website.
The Board has conducted a self-evaluation each financial year since 2002/03 and intends to continue to do so. The purpose of these reviews is to determine whether the Board and its Committees are functioning effectively. The performance of individual directors is also evaluated to ensure that each director continues to contribute effectively and demonstrates commitment to the role.
The role of the Chairman is pivotal in creating the conditions for overall Board and individual board member effectiveness, both inside and outside the boardroom. The Chairman has a key role in the development of the Company's strategy and, through his chairmanship of the Nominations Committee, in ensuring management succession. It is the responsibility of the Chairman to:
run the Board and set its agenda, taking full account of the issues and the concerns of all Board Members;
ensure that the members of the Board receive accurate, timely and clear information, in particular about the Company's performance, to enable the Board to take sound decisions, monitor effectively and provide advice to promote the success of the Company;
ensure effective communication with shareholders and ensure that the members of the Board develop an understanding of the views of the major investors;
manage the Board to ensure that sufficient time is allowed for discussion of complex or contentious issues, where appropriate arranging for informal meetings beforehand to enable thorough preparation for the Board discussion;
take the lead in providing a properly constructed induction programme for new board members that is comprehensive, formal and tailored, facilitated by the Secretary;
take the lead in identifying and meeting the development needs of individual board members, with the Secretary having a key role in facilitating provision. It is the responsibility of the Chairman to address the development needs of the Board as a whole with a view to enhancing its overall effectiveness as a team;
ensure that the performance of individuals and of the Board as a whole and its Committees is evaluated at least once a year; and
encourage active engagement by all the members of the Board.
The Chief Executive
The role of the Chief Executive is to take overall responsibility for the supervision and safe conduct of the Company's business and its profitable operation in accordance with the policies, strategies and objectives established by the Board. Specifically, it is the responsibility of the Chief Executive to:
be responsible and accountable to the Chairman and the Board for the management and profitable operation of the Company;
formulate, with the executive management, clear business and financial strategies and policies which will bring about profitable growth and increase the value of the Company;
oversee the preparation of operational and commercial plans with the executive management which will ensure the highest standards of operational safety and security and which will underpin the business strategies and policies;
develop an effective management structure and put in place effective controls so that proper business, safety, security and financial practices exist and that the Company remains competent to secure the safe operation of aircraft of which it is the operator;
formulate, with the executive management, clear social and environmental policies and develop an effective management structure and put in place effective controls to ensure that the Company is aware of and discharges its social and environmental responsibilities;
lead the management of the Company by monitoring performance against agreed targets and ensuring through remedial action, as appropriate, that the goals, strategies and policies of the Company are achieved;
provide leadership advice and counsel to senior managers and supervise development programmes so as to achieve a superior performing Company;
co-ordinate the activities of all elements of the business so that together they achieve corporate objectives;
recommend and seek approval of the Remuneration Committee of the Board for executive management remuneration and incentive programmes;
report regularly to the Board on the performance of the business so that the Board can measure performance against the policies, strategies and objectives established by the Board;
keep the Chairman informed on all matters of importance; and
respond effectively to Board requests for assistance in matters relating to the Company's business.
The executive management team is led by the Chief Executive supported by nine departmental directors who report to him, and the Company Secretary. They meet in two groups ' the management board and the customer service and operations executive:
The management board is responsible for the vision and strategic direction of the company. Its weekly meeting are attended by:
Finance and performance director
People and organisational effectiveness director
Sales and marketing director
Strategy and business units director
The customer service and operations executive is accountable for day-to-day customer service, operations performance and the highest standards of safety. Its weekly meetings are attended by:
Flight operations director
Social and Environmental
In relation to social and environmental policy, the Chief Executive is supported by a Corporate Responsibility Board, which is chaired by him. Its members include Baroness Kingsmill (non-executive director),the Secretary and other members of the Management Board. The Corporate Responsibility Board is the guardian of the Company's commitment to being a responsible company and it oversees the Company's performance in this area. Corporate responsibility covers every area of the Company's work from the environment, to the community, employee, customers and suppliers. Further details on the Company's activities in these areas can be found by following the one destination link on this website which also gives access to the Company's Corporate Responsibility reports.
Relations with Shareholders
The Company maintains regular contact with its larger institutional shareholders through its investor relations team, through meetings with the executive directors and the Chairman and through annual institutional investor events. The presentations from these events are also available to private shareholders on this website by clicking on the financial information link. The Company endeavours to ensure that the annual investor day is attended by non-executive directors and major invests are given the opportunity to discuss corporate governance matters with them in one-to-one meetings.
Private shareholders receive the Company's shareholder magazine twice a year and are encouraged to express their views and concerns either in person at the annual general meeting or by e-mail. The main themes are reported to the Board and responded to by the Chairman in his address at the annual general meeting. Since 2000, all voting at the annual general meeting has been by way of a poll to ensure that the views of all shareholders are taken into account. All 12 resolutions put to shareholders at the 2009 annual general meeting were passed, with a minimum vote of 98 per cent in favour. The Chairman's and Chief Executive's speeches are available on the website after the meeting.
With effect from October 1, 2008, the new Companies Act 2006 provisions regarding directors' conflicts of interest came into force. These place directors under an obligation to avoid situations arising on or after October 1, in which they have, or can have, a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the Company (Section 175(1)). This duty is not infringed if the matter has been authorised in advance by the Directors pursuant to provisions of the articles permitting them to do so. This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the relevant company directly (such as a contract of employment).
At the 2008 annual general meeting, shareholders approved a new set of Articles including provisions allowing the directors to authorise conflicts. Pursuant to this, a register of authorised interests is maintained by the Secretary and updated by the Board as needed from time to time.
Directors' and officers' liability insurance
The Company has purchased insurance against directors' and officers' liability for the benefit of the directors and officers of the Company and its subsidiaries.
The Company has granted rolling indemnities to the directors and the Secretary, uncapped in amount but subject to applicable law, in relation to certain losses and liabilities which they may incur in the course of acting as officers of companies within the Group. These indemnities also set out the terms on which the Company may, in its discretion, advance defence costs. A specimen indemnity is available for view by clicking on the link from the Governance homepage.