The Board is assisted by its committees. Details of their membership and principal terms of reference are set out below. Their full terms of reference are available on the Group’s website at www.rolls-royce.com.
|Helen Alexander CBE||8||7||5||5||2||2||2||2|
|Prof Peter Gregson||8||6||5||4||2||1|
|Dr John McAdam||7||6||4||4||2||2|
|John Neill CBE||2||1||1||0||0||0|
|Sir John Rose||8||7||2||2|
* The number of meetings held during the period a director was in office or a member of a committee.
The committee has responsibility for making recommendations to the Board on the Group’s policy regarding executive remuneration. The committee determines, on the Board’s behalf, the specific remuneration packages of the Chairman, the executive directors and a number of senior executives. The committee met five times during the year. The committee’s membership and principal terms of reference are set out in the Director’s remuneration report.
In 2008, the nominations committee was chaired by Simon Robertson. Its other Members were Helen Alexander CBE, Peter Byrom, Iain Conn, Professor Peter Gregson, Dr John McAdam (from February 19, 2008), John Neill CBE (from November 13, 2008), John Rishton, Sir John Rose, Ian Strachan and Carl Symon (until May 7, 2008). The committee met twice during the year.
The committee makes recommendations to the Board on the appointment of executive and non-executive directors and on the membership of Board committees. It is assisted in the former task by external recruitment consultants. It reviews succession planning generally and also reviews specific appointments to the Board and to other senior positions within the Group. The committee also oversees the annual review of Board effectiveness.
In carrying out these tasks, the committee gives careful consideration to the balance of skills required on the Board, including the need to reflect diversity, international experience and strong managerial and business skills. Before recommending the appointment of a non-executive director to the Board, the committee satisfies itself that the candidate will have sufficient time available to discharge his or her responsibilities effectively.
The audit committee consists exclusively of independent, non-executive directors. During 2008, the committee was chaired by John Rishton who has recent and relevant financial experience. In 2008, its other members were Iain Conn, Ian Strachan and John Neill CBE (from November 13, 2008). The committee met five times during the year. The Director of Risk, Head of Business Assurance and a representative of the external auditors normally attend the meetings. Additionally, the Head of Business Assurance has direct access to the committee. The Chairman of the Board, the Chief Executive, the Finance Director and any other Board member or senior executive may attend the meetings as necessary, at the invitation of the audit committee chairman.
The committee has responsibility for recommending to the Board the published accounts and for reviewing the Group’s financial reporting and accounting policies, including major announcements made to a regulatory information service. It is also responsible for the relationship with the external auditors and for assessing the role and effectiveness of the internal audit function, which in Rolls-Royce is termed Business Assurance. In addition, the committee reviews the Group’s procedures for detecting, monitoring and managing the risk of fraud.
The committee has responsibility for recommending to the Board the appointment of the external auditors and for reviewing the nature, scope and results of the annual external audit. It also approves the audit fee and, on an annual basis, assesses the effectiveness and independence of the external auditors. A resolution to reappoint the auditors, KPMG Audit Plc, and to authorise the directors to determine the auditors’ remuneration, will be proposed at the 2009 AGM.
It keeps under review the Group’s internal controls and systems for assessing and mitigating financial and non-financial risk. It also reviews and approves the Business Assurance work programmes and ensures that this function is adequately resourced and co-ordinated with the work of the external auditors. Twice a year the committee receives a written report on the reviews conducted throughout the Group by Business Assurance, and a report from senior executives on the key business risks and risk systems in selected sectors.
In order to safeguard auditor independence and objectivity, the following policy is applied in relation to services provided by the auditors :
Audit related services – these services are undertaken by the auditors as it is work that they must, or are best suited to, perform. It includes formalities relating to borrowings, shareholder and other circulars, risk management services, various regulatory reports and work in respect of acquisitions and disposals;
Tax, accounting and mergers and acquisitions – the auditors are used for this work where they are best suited to undertake it. All other significant consulting work in these areas is put out to tender; and
All other advisory services/consulting – the auditors are generally prohibited from providing these services.
Throughout the year the committee monitors the cost of non-audit work undertaken by the auditors and is, therefore, in a position to take action if at any time it believes that there is a risk of the auditors' independence being undermined through the award of this work.
In September 2008, the Board approved the formation of an ethics committee. The ethics committee consists exclusively of independent non-executive directors. Ian Strachan chairs the committee and its other members during 2008 were Helen Alexander CBE, Peter Byrom and John Rishton. The committee met twice during 2008. The Director of Risk, who has executive responsibility for ethics, attends the meetings. The Chairman of the Board, the Chief Executive and other executives of the Company may be invited to attend meetings of the committee.
The committee is responsible for reviewing compliance with the Group’s Global Code of Business Ethics (the Global Code) and will make recommendations to the Board as appropriate for changes to the Global Code. The Global Code sets out the principles to be followed by employees when conducting business.
The committee will review recommendations on ethical matters made by external regulatory authorities or other bodies, such as the Woolf Committee, and will make recommendations to the Board about whether, and if so, to what extent, these should be applied to the Company. It also has responsibility for receiving reports on issues raised through the Group’s confidential reporting lines and for reviewing the results of subsequent investigations.
The committee will ensure that ethical policies and practice are subject to an appropriate level of independent internal audit and, where necessary, will appoint auditors to conduct an external review.
The Board has a risk committee, chaired by the Chief Executive, with specific accountability for the system of risk management and for reporting key risks and their associated mitigating actions to the Board. In 2008, its other members were James Guyette, Andrew Shilston, Colin Smith and Mike Terrett.