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The Nomination Committee met six times during the year to review
the composition of, and succession to, the Board and makes recommendations
to the Board on the appointment of Non-Executive and Executive Directors.
The Committee comprises seven of the independent Non-Executive Directors
and is chaired by Mr J Fr Odfjell, the Deputy Chairman of the Board.
The Nomination Committee reviews the composition of the Board in
light of corporate governance regulation and best practice, both
current and proposed.
Members of the Committee abstain when matters affecting their own
appointments are discussed. The Committee has available to it the
services of external advisers as it deems necessary and at the company's
expense. The Chief Executive attends the meetings of the Nomination
Committee.
The Remuneration Committee met four times during the year. The Remuneration
Committee is responsible for determining the remuneration policy
and the terms and conditions of service of the Executive Directors.
The Remuneration Committee also determines group policy relating
to share option plans and the level at which share options are granted
to senior executives within the group. The Committee has available
to it the services of independent advisers. The Committee comprises
six of the independent Non-Executive Directors including the Chairman
and Deputy Chairman of the Board and is chaired by Mr R D Lapthorne,
the Chairman of the Board. Following the retirement of Mr R D Lapthorne
at the Annual General Meeting to be held on 7 May 2003, the Remuneration
Committee will be chaired by Dr J S Patterson. The principal terms
of reference of the Remuneration Committee appear in the Remuneration
report. The Chief Executive and the Human Resources Director
attend the meetings of the Committee to discuss the performance
of the other Executive Directors and to make proposals as necessary
but they are not present when their own remuneration is being considered.
The Audit Committee met four times during the year. The Audit Committee
monitors and reviews the internal controls and accounts of the group.
It also considers the group's compliance with the Combined Code.
The Committee is chaired by Mr D H Brydon. The Committee comprises
four further independent Non-Executive Directors: Mr R D Lapthorne,
Mr J Fr Odfijell, Dr J S Patterson and Mr J F Rejeange. The Committee
can request the external auditors, who are normally present, Executive
Directors and other officers of the group to attend its meetings.
The Audit Committee receives regular reports from the Risk and Operational
Review department on all aspects of the group's system of internal
control. The Audit Committee recommends the appointment of the external
auditors, reviews the external audit fee and audit plan and pre-approves
all non-audit work in respect of the external auditors prior to
commitment.
As recommended in the provisions of the US Sarbanes-Oxley Act, a
Disclosure Committee, chaired by Mr G F B Kerr and comprising relevant
senior managers, has been established to ensure a robust verification
and disclosure control process throughout the group. This will enable
the Chief Executive and the Finance Director (CFO) to make the certifications
as required by the legislation. The Disclosure Committee reports
directly into the Chief Executive.
Any Director appointed during the year is required, under the provisions
of the company's Articles of Association, to retire and seek re-appointment
by shareholders at the next Annual General Meeting. The Articles
also require that one-third of the Directors retire by rotation
each year and seek re-appointment at the Annual General Meeting.
The Directors required to retire will be those in office longest
since their previous appointment or re-appointment and this will
usually mean that each Director retires at least every three years.
The Board has resolved that each Director will retire at least every
three years, even if this is not strictly required by the application
of the provisions of the Articles of Association.
In addition to the Principles of Good Governance, the Combined Code
also contains a Code of Best Practice detailing some forty-five
provisions. The Board has carried out a full internal review of
compliance with its provisions. The Board confirms that the company
has complied with these provisions throughout the financial year.
The company also complies to the extent applicable for foreign registrants
with the US Sarbanes-Oxley Act.
The Board is responsible for the group's system of internal control
and for reviewing its effectiveness. Any system of internal control
can only be designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can provide only reasonable
and not absolute assurance against material misstatement or loss.
The Board confirms that it has applied Principle D.2 of the Combined
Code in that there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the group, which has
been in place for the year 2002 and up to the date of approval of
the Annual Report & Accounts. The Board also confirms that this
process is regularly reviewed by the Board and is in accord with
Internal Control: Guidance for Directors on the Combined Code published
in September 1999.
In accordance with provision D.2.1 the Board, including the appropriate
subcommittees, regularly reviews the effectiveness of the group's
internal control processes. Key elements of the group's system of
internal controls are set out below:
The group is committed to high standards of business conduct and
seeks to maintain these standards across all of its operations throughout
the world. The group has in place group finance policies, a code
of business conduct and employee procedures.
The group has an appropriate organisational structure for planning,
executing, controlling and monitoring business operations in order
to achieve objectives. Lines of responsibility and delegations of
authority are documented.
The identification and evaluation of risk in the business is approached
at different levels. This encompasses both:
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senior management's assessment of the group's risk profile
in terms of the achievement of strategic objectives; and |
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a structured assessment of risks operating within entities
and functions. |
This process also involves assessing the probability, impact and
the required actions for appropriately managing risks as identified.
The group seeks to understand the risks that it faces across the
following broad categories:
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external risks arising from, for example, market, competitor
or regulatory issues |
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informational risks concerning the integrity and availability
of management information |
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operational risks arising from, for instance, the management
of our supply chain or our manufacturing processes |
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financial risks associated with our budget and planning,
liquidity position or the management of our credit |
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strategic risks relating to our product portfolio or our planning.
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Operational management is responsible for the identification and
evaluation of key risks applicable to their areas of business. The
group has a formal risk identification and review process facilitated
by a dedicated function, which assists management in the process.
This function reports these risks to both the Audit Committee and
the Board on a regular basis.
Group businesses participate in periodic strategic reviews, which
include the consideration of long term financial projections and
the evaluation of business alternatives. Operating units prepare
annual budgets and five-year strategic plans; performance against
plan is actively monitored at the Board and business unit level
supported by regular forecasts. Forecasts and results are consolidated
and presented to the Board on a regular basis.
The group and its operating units have implemented control procedures
designed to ensure complete and accurate accounting for financial
transactions and to limit the potential exposure to loss of assets
or fraud. Measures taken include physical controls, segregation
of duties, reviews by management and operational review, and external
audit to the extent necessary to arrive at their audit opinion.
A process of control, self-assessment and hierarchical reporting
has been established which provides for a documented audit trail
of accountability. These procedures are relevant across group operations
and provide for successive assurances to be given at increasingly
higher levels of management and, finally, to the Board. These documents
are reviewed by the Risk and Operational Review department for completeness
and accuracy. Planned corrective actions are independently monitored
for timely completion. These processes have been reviewed and where
necessary revised in light of the US Sarbanes-Oxley Act.
After making enquiries the Directors have reasonable expectation
that the company and the group have adequate resources to continue
in operational existence for the foreseeable future, and that it
is therefore appropriate to adopt the going concern basis in preparing
the financial statements. In forming this view the Directors have
reviewed the Annual Profit Plan for the year ending 31 December
2003 and strategic plan projections for subsequent years. The Directors
have satisfied themselves that the group is in a sound financial
position and that sufficient borrowing facilities will be available
to meet the group's foreseeable cash requirements.
On behalf of the Board
R D Lapthorne, Chairman
26 February 2003
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