BAT AR20-F 2017 5.Governance.Pdf
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Directors’ Report Strategic Report Governance Financial Statements Other Information Introduction Audit Nominations Remuneration Responsibility Chairman’s introduction & Board Committee Committee Committee of Directors on Governance Index to key elements Directors’ Report Chairman’s introduction 55 Board of Directors 56 Management Board 58 Leadership and effectiveness 59 Board activities in 2017 60 Board effectiveness 62 Audit Committee 65 Nominations Committee 71 Remuneration Report Annual Statement on Remuneration 73 Richard Burrows Annual Report on Remuneration 75 Chairman Responsibility of Directors@ 99 Dear Shareholder We have improved our global business conduct governance framework, implementing the Group’s new global compliance A key focus of the Board during 2017 was the oversight of the programme, known as ‘Delivery with Integrity’. Driven by our acquisition of RAI. In addition to our scheduled Board programme, Business Conduct & Compliance (BC&C) department, the during the months leading up to the acquisition, the Board convened programme focuses on driving a globally consistent approach to several additional meetings during which it received detailed briefings compliance, and strengthening our existing processes, across the from senior management and external advisers on the RAI business Group. Further information on the work of the BC&C department and the legal and governance implications of the acquisition. can be found on page 28. As a result of the acquisition, we are subject to additional US It is important that the Board is equipped with the right balance of compliance obligations as a ‘foreign private issuer’, including certain skills and expertise and has a deep understanding of the business. requirements of the NYSE Rules and US Securities laws including the I led the internal evaluation of the Board’s performance during the Exchange Act and SOx. We carried out a full review of our key policies year, which found that the Board continues to perform effectively. and governance frameworks to ensure that they would meet all Market visits and engagement with our senior management remain required governance requirements post acquisition. key to the Board’s understanding of our business, and our meetings Our Audit Committee was instrumental in reviewing our internal held in the US provided an excellent insight into the US business, control processes to ensure alignment with US and SOx requirements, its strategy and future challenges. Further details on the Board particularly in the areas of Audit Committee responsibilities, financial performance evaluation can be found on pages 63 and 64. disclosures, and conflicts of interest. The review resulted in changes Corporate governance requirements continue to evolve, with the to our Audit Committee Terms of Reference and our Auditor possibility of significant UK corporate governance reforms during Independence Policy; the creation of a SOx Steering Committee and 2018. I look forward to continuing the Board’s engagement with Disclosure Committee composed of senior management to provide our shareholders and corporate governance stakeholders on day to day oversight of SOx issues; and the approval of a Code of governance issues. Ethics for the Chief Executive and Senior Financial Officers. Please see our Audit Committee report on pages 65 to 70 for further details. On behalf of the Board, I confirm that we believe that this Annual Report presents a fair, balanced and understandable assessment Our Nominations Committee carried out an externally facilitated of the Company’s position, its performance and prospects, as well review of the composition, independence, diversity and skills set as its business model and strategy. of our Board, and following the acquisition of RAI we made three new appointments to the Board. A full report on the activities of our Richard Burrows Nominations Committee can be found on pages 71 and 72. Chairman We continue to pay close attention to business conduct issues. As previously reported, we are investigating, through external legal advisers, allegations of misconduct and have been liaising with the UK’s Serious Fraud Office (SFO) and other relevant authorities. It was announced in August 2017 that the SFO had opened an investigation in relation to the Company, its subsidiaries and associated persons. We are cooperating with the SFO’s investigation and a sub-Committee of the Board continues to have oversight of these matters. BAT Annual Report and Form 20-F 2017 55 Directors’ Report Board of Directors N A N Richard Burrows Kieran Poynter Nicandro Durante Ben Stevens Chairman (72) Senior Independent Director (67) Chief Executive (61) Finance Director (58) Nationality: Irish Nationality: British Nationality: Brazilian/Italian Nationality: British Position: Chairman since November Position: Senior Independent Director Position: Chief Executive since 2011. Position: Finance Director since 2008. 2009; Non-Executive Director since since October 2016; Non-Executive Other appointments: Non-Executive Other appointments: Non-Executive September 2009; Chairman of the Director since 2010; Chairman of the Director of Reckitt Benckiser Group plc. Director of ISS A/S. Nominations Committee. Audit Committee since October 2016 Skills and experience: Nicandro has Skills and experience: Ben joined Other appointments: Chairman and member of the Nominations Committee. extensive leadership skills developed the Group in 1990 and has broad of the Board and Chair of the in various senior international roles international experience spanning Nomination, Remuneration and Other appointments: NED and Chair within the Group. He joined Souza both senior finance and general Compliance Committees of Craven of the Audit and Compliance Committee Cruz in Brazil in 1981, rising to become management roles. He was Head House Capital plc; Senior Independent of International Consolidated Airlines President of that company. Nicandro of Merger Integration following the Director and Chairman of the Group S.A.; Chairman and Chair of the joined the Management Board in merger with Rothmans and Chairman Remuneration Committee of Rentokil Nominations, Audit and Compliance 2006 as Regional Director for the and Managing Director of both Initial plc; Supervisory Board member and Risk and Remuneration Committees Africa and Middle East region. He Pakistan Tobacco Company and British and Chairman of the Remuneration of F&C Asset Management plc. joined the Board in 2008 as Chief American Tobacco Russia. Ben was Committee at Carlsberg A/S. Skills and experience: Kieran brings Operating Officer, before being appointed to the Management Board Skills and experience: Richard brings a wealth of financial and international appointed as Chief Executive in 2011. in 2001 as Development Director and considerable consumer goods and experience to the Board. He was became Director, Europe, in 2004. international business experience to Chairman and Senior Partner of He joined the Board in 2008 as the Board, having been Chief Executive PricewaterhouseCoopers from 2000 Finance Director. of Irish Distillers and Co-Chief to his retirement in 2008, having Executive of Pernod Ricard. Prior started as a graduate trainee in 1971; to joining the Board, Richard was and is a former Chairman of Nomura Governor of the Bank of Ireland. International PLC. Kieran served on Richard is a Fellow of the Institute of the President’s Committee of the Chartered Accountants of Ireland. Confederation of British Industry and as member of an advisory committee for the Chancellor of the Exchequer. Kieran is a Chartered Accountant. N R N R A N N R Sue Farr Ann Godbehere Dr Marion Helmes Luc Jobin Non-Executive Director (61) Non-Executive Director (62) Non-Executive Director (52) Non-Executive Director (58) Nationality: British Nationality: Canadian/British Nationality: German Nationality: Canadian Position: Non-Executive Director since Position: Non-Executive Director since Position: Non-Executive Director Position: Non-Executive Director 2015; member of the Nominations and 2011; member of the Nominations and since August 2016; member of the since 25 July 2017; member of the Remuneration Committees. Remuneration Committees. Ann will Audit and Nominations Committees. Nominations and Remuneration Other appointments: Special Adviser, retire at the conclusion of the AGM on Other appointments: Supervisory Committees. Chime Group; NED and Chair of the 25 April 2018. Board member and Chair of Audit Other appointments: President and Corporate Responsibility Committee Other appointments: Senior Committee of Bilfinger SE; NED of Chief Executive Officer of Canadian of Dairy Crest Group plc; NED and Independent Director and Chair of the NXP Semiconductors N.V.; National Railway Company. Chair of the Remuneration Committee Audit Committee of Rio Tinto plc and Vice Chairwoman of the Supervisory Skills and experience: Luc brings with of Millennium & Copthorne Hotels plc; Rio Tinto Limited; NED and Chair of Board of ProSiebenSat.1 Media SE; him extensive financial and strategic NED and Chair of the Nominations & the Compensation Committee of Supervisory Board member of experience, including in the US Remuneration Committee of Accsys UBS Group AG and UBS AG. Uniper SE. tobacco sector as an independent Technologies PLC. Skills and experience: Ann has more Skills and experience: Marion brings director of RAI from 2008 until the Skills and experience: Sue brings than 25 years’ experience in the significant financial expertise and acquisition in 2017. Before