Chairman's Introduction

Governance statement Chairman’s introduction the independence of Sir David Omand, who joined the Board in 2009. The Board remains satisfied that Sir David continues to be independent. The Board also noted that Ian Duncan, our Chair of the Audit and Risk Committee, will have served nine years in November 2019. In its discussions, the Nominations Committee was keen to maintain continuity during the handover to a new Chair. However, it is not expected that either will wish to seek reappointment at the Company’s 2020 AGM. The required governance and regulatory assurances are provided throughout this Governance statement and in some cases in other parts of the Annual Report. The Additional statutory information section on page 133 provides further cross references to Mike Turner CBE, Chairman where in this Annual Report disclosures under the Disclosure and Transparency Rules and Listing Rules can be found. The Board is committed to working in an effective, Company values transparent and ethical manner so that it can set A key role of the Board is to reinforce and implement strategy in a way it believes will the values of the Company. The values of the Company are clearly set out in our benefit Shareholders by promoting and maintaining Code of Business Conduct and require us the long-term success of the Company while having as a company, amongst other things, to respect our fellow employees, to ensure regard to other stakeholders. the safety of each other at work, to minimise our impact on the environment, Introduction Compliance with the UK and to abide by our ethics policy in our As I have said in my Chairman’s review, Corporate Governance Code business dealings. The Board seeks to this is my last year as Chairman of This year the Company is reporting ensure that these values are embedded Babcock. I am convinced that part of under the UK Corporate Governance within all parts of the Company’s the extraordinary growth of the Company Code published in June 2016 (the Code). business, by ensuring that our ethics over the time that I have been Chairman The Code contains broad principles policy is available to all on our website is due to the Company’s commitment and specific provisions which set out and appropriate training is given to our to corporate governance and doing standards of good governance practice employees as to the standards that we business in an effective, transparent and in relation to leadership, effectiveness, expect from them under the policy. As ethical manner. I believe that this will remuneration, accountability and described on page 98, the Audit and be as true in the future as in the past. relations with Shareholders. The Board Risk Committee reviews and monitors all considers that the Company complied reports to our whistleblowing line, which The Board welcomed the introduction with all the provisions of the Code encourages all employees to report any of the new UK Corporate Governance throughout the year to 31 March 2019. breach of our Code of Conduct or our Code by the Financial Reporting Council We are satisfied as a Board that all our ethics policy. in July 2018 (the revised Code) and Non-Executive Directors are independent believes that its approach will provide a for UK Corporate Governance Code constructive guide to good governance purposes and have the necessary time in the UK. to devote to their duties. As it did last year, the Board, in particular, considered 84 Babcock International Group PLC Annual Report and Accounts 2019 Strategic report Stakeholders • Employees – we have spoken about • Governing bodies and regulators – Governance The revised Code emphasises the our engagement with our workforce we manage complex assets in highly requirement for Directors to consider and the efforts we make to maintain regulated environments. This means their statutory duty to the Company’s an open dialogue with our workforce that we must maintain positive and many stakeholders. As a Board, we on page 59. In order to meet constructive relationships with a understand that stakeholder engagement the guidance in the revised Code number of regulators across the globe. is vital to building a sustainable business concerning our engagement with These relationships are usually held at and that stakeholders have an interest the workforce, we host the Babcock the sector or contract level. We aim in how we interact with them. The list International Group Employee Forum. to keep the dialogue between our below identifies some of our stakeholders The Forum meets twice a year business and the relevant regulators and how we, as a Board and a Company, and is attended by representatives as open as possible. from across our European business engage with them: Mike Turner CBE operations. Senior management Financial statements Chairman • Customers – a key focus for the attend the Forum and update it about Company is that we are “trusted developments in the management to deliver” by our customers. The of the Group. In addition, the Company engages with its customers remuneration policy for Executive at all levels from the shop floor, as Directors is presented to the Forum we deliver our services alongside our and any feedback from the Forum customer, to the Board. In respect of is taken back to the Remuneration the Board, its engagement is mainly Committee for its consideration. through the Executive Directors, but I • Business partners – our partners, both also meet with our principal customer. in our external supply chains and in our This year, the Board was particularly joint ventures, are an important part of pleased that the Company formalised our performance. We engage with our further its ongoing relationship with joint venture partners at multiple levels the UK MOD by signing a “Joint Ways – working alongside them in the joint of Working Charter” as part of the UK ventures themselves and also at a Government/MOD Strategic Partner more general relationship level. With Programme/Strategic Supplier our supply chain, we are always looking Management Programme. For to deliver the optimal solution for more detail, please see page 24. our customers which means working • Investors – the support of our closely with our suppliers, both at a Shareholders is vital to the long- central level and at a contract level. term performance of the Company. More information about our supply The Board works to ensure that our chain can be found on page 56. investors and the wider investment • Communities – where we have major community understand our strategy operations, such as at Devonport, and our performance. The Executive Faslane or Rosyth, we are often one Directors meet regularly with our of the largest employers in the local investors as described on page 132. area and, therefore, we are aware The Board also receives a regular report of the impact that we have on those from the Head of Investor Relations, communities. We aim to build positive which details his engagement with relationships with those communities investors, together with their feedback. and support local groups that we This year, there will also be a capital believe are relevant to our operations. markets day on 5 June, more detail about which can be found on page 7. Babcock International Group PLC Annual Report and Accounts 2019 85 Leadership Creating the right culture through our governance framework Babcock’s culture is Board Chairman defined through ‘being The Board of Directors The Chairman is responsible for the babcock’ and our Code of Babcock International leadership and overall effectiveness of Group PLC (the Board) the Board. In particular, his role is to: of Conduct. Together, is collectively responsible • With the Chief Executive, to the Company’s these set out what our demonstrate ethical leadership Shareholders for the and promote the highest standards Company stands for, long-term success of of integrity throughout the business what we expect from the Company. This responsibility includes • Ensure effective operation of our workforce and how matters of strategy, the Board, and its Committees we expect our business performance, resources, • Set the agenda, style and tone standards of conduct of Board discussions in order to to deliver our strategy. and accountability. The promote constructive debate Board also has ultimate and effective decision-making The Board recognises responsibility for corporate • Foster effective working governance, which it relationships between the that strong governance discharges either directly Executive and Non-Executive underpins a healthy or through its Committees, Directors, support the Chief as well as the structures Executive in his development culture and it is described in this of strategy and, more broadly, important that the Board Governance statement. support and advise the Chief Executive leads by example, setting • Ensure effective communication the tone from the top with Shareholders and other key stakeholders and make the Board and championing the aware of their views. behaviours we expect to see. Executive Chief Executive Responsible for The Chief Executive is responsible implementing the strategy, for the day to day leadership of the led by the Chief Executive. business. In particular, his role is to: • Develop strategic proposals for recommendation to the Board and implement the agreed strategies • Develop an organisational structure, establishing processes and systems to ensure that the Company has the capabilities and resources required to achieve its plans • Be responsible to the Board for the performance of the business consistent with agreed plans, strategies and policies • Oversee the application of Group policies and governance procedures • Develop and promote effective communication with Shareholders and other key stakeholders. 86 Babcock International Group PLC Annual Report and Accounts 2019 Strategic report Senior Independent Director Non-Executive Directors Remuneration Committee Sir David Omand is currently and has The Non-Executive Directors bring Oversees the remuneration throughout the year been the Senior external perspectives and insight to arrangements for Babcock’s Directors Governance Independent Director.

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