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Principles
The Board is committed to the highest standards of corporate governance.
Throughout the year, Invensys has been in full compliance with the provisions
of the Combined Code appended to the Listing Rules of the UK Listing Authority
(‘the Code’). The following describes how the Principles set out in the
Code have been applied.
The Board
The Board currently has ten members, comprising eight non-executive directors,
including the Chairman, and two executive directors. There is a clear
division of responsibility between the Chairman and the Chief Executive,
which ensures that there is a balance of power and authority. All the
non-executive directors are regarded as independent. Mr Rolf Börjesson
is the Senior Independent Director. Biographies of all the directors are
presented on page 17. As can be seen, they have a wide range of international
business and financial experience relevant to the direction of a global
company.
Although all the directors have an equal responsibility for the operations
of Invensys, the role of the non-executive directors is particularly important
in ensuring that the strategies proposed by the executive management team
are fully discussed and examined to ensure that they meet the long-term
interests of shareholders and also take account of issues affecting employees,
customers, suppliers and the many communities in which Invensys conducts
its business.
The Board meets at least eight times during the course of a year with
additional meetings convened as necessary; in the financial year under
review, the Board met on nine occasions. It is exceptional for any director
to be absent from any meeting. There is a formal schedule of matters reserved
for the decision of the Board that includes all major strategic and financial
decisions; other decision-making is delegated through structured procedures
to committees and senior management. To enable the Board to perform its
duties, all directors have full and timely access to all relevant information.
Each director is required to retire by rotation no later than the third
annual general meeting following their appointment or re-appointment.
The Board Committees
The Board has three standing committees:
The Nominating Committee
is responsible for monitoring the performance of directors, reviewing
induction and training requirements for individual directors and/or the
Board as a whole and making recommendations to the Board for the appointment
or re-appointment and removal of directors. Its current members are: Lord
Marshall (who chairs the Committee), Sir Philip Beck and Mr Martin Jay.
Mr Robert Bauman (until 24 July 2002) and Sir Graham Hearne (14 June 2002
to 31 March 2003) also served on the Committee during the year.
The Audit Committee
is composed of three independent non-executive directors: Mr Andrew Macfarlane
(Chairman of the Committee from 1 April 2003), Mr Rolf Börjesson and Mr
Larry Farmer. Sir Graham Hearne was Chairman of the Committee from 1 April
2002 until his retirement on 31 March 2003. It meets at least three times
a year to review the published financial information and the effectiveness
of both external and internal audit and of the Group’s internal controls
and risk management procedures. The external auditors normally attend
all the meetings and there is a meeting at least once a year between the
Committee and the external auditors at which management is not present.
At the invitation of the Committee, the Chief Executive and Chief Financial
Officer regularly attend meetings of the Committee. On occasions, the
other non-executive directors attend meetings of the Committee to obtain
a fuller briefing on significant issues and this forum is particularly
valuable in providing a direct line of communication between the external
auditors and the non-executive directors.
The Audit Committee reviews the work undertaken by the external auditors
going beyond the scope of the audit itself in order to ensure that the
independence of the auditors is not impaired. This review covers the nature
of the work, the method of appointment and the fees paid. This work generally
falls into two categories as follows:
– Audit and assurance: this includes work that in their role as auditor
they are best placed to undertake. This comprises formal reporting and
other work related to borrowings, shareholder and other circulars, various
regulatory reports and work in respect of acquisitions and disposals;
and
– Taxation: the auditors are used in cases where they are best suited,
such as tax provision and statutory work. Other significant tax advisory
projects are put out to competitive tender.
In 2000, Ernst & Young disposed of its management consulting business
and as a result the auditors do not carry out such work for the Group.
The payments made to Ernst & Young LLP are detailed in note 4 on page
41.
The Audit Committee also reviews the work undertaken by the Risk Committee
and by Group Internal Audit as described in more detail in the section
of this report dealing with internal control.
The Remuneration Committee’s
constitution and role are described in the Board’s Remuneration report
on page 22.
Communication with shareholders
Communication with all shareholders is given a high priority and a number
of means are used to promote greater understanding and dialogue with investment
audiences.
The summary financial statement provides shareholders with the material
information concerning Invensys in a form more readily assimilated than
the full annual report and accounts. Shareholders can also request the
full report. At the half year an interim report is published. All of these
documents are available online through the Invensys website (www.invensys.com),
together with details of all announcements, investor presentations and
share price information.
During the year, shareholders are kept informed of the progress of the
Company through trading statements and other announcements of significant
developments that are released through the London Stock Exchange and other
news services. There is regular dialogue with institutional shareholders
and participation in sector conferences. Shareholders can also raise questions
directly with the Company at any time of the year through a facility on
the website.
Additionally, there is an opportunity at the annual general meeting for
individual shareholders to question the Chairman and the chairmen of the
Audit, Remuneration and Nominating Committees. The report and accounts
are sent to shareholders at least 20 working days prior to the annual
general meeting. The results of all polls held at general meetings are
announced to the London Stock Exchange.