Corporate Governance
Board Effectiveness
Induction and training
All new Directors and Committee members receive a full and tailored induction plan. For Non-executive Directors this commonly includes meetings with the heads of the divisions, key business units and other functions. Induction for Executive Directors tends to be arranged in the course of their activities within the Group. Background reading, including the Memorandum and Articles of Association, the Board Control Manual and Model Code arrangements, is routinely provided to new Board and Committee members.
Case Study – Induction – John E Mack
John E Mack joined the Board as a Non-executive Director on 1 May 2007. With extensive experience in the banking sector both in America and Japan, John’s induction programme was targeted at building his Company-specific knowledge. An initial series of private meetings with the Chairman, the Chief Executive, other Executive Directors, the Company Secretary and other business heads was arranged in the months immediately following John’s appointment. This enabled John to develop his understanding of the Company’s strategy, its financial and operational performance and the key drivers in each of the divisions. This phase also included meeting key executives from Investor Relations, Risk and HR, as well as branch visits.
The second phase of John’s induction focused on his membership of the Audit Committee and chairmanship of the Treasury & Asset Management Risk Control Committee. It included meetings with members of the Treasury and Insight teams as well as representatives of the external auditors, KPMG. More recently, John has spent time with the Corporate and Retail teams as well as holding meetings with the new Executive Directors appointed in September 2007. John continues to meet with executives from the IT function to enhance his understanding of the Company’s IT strategy and to share his expertise in this field.
The Company believes that training is essential to enable Directors and Board Committee members to update their skills and to ensure they have the necessary knowledge and familiarity to perform effectively. During the year, the Board received training and updates in relation to the capital treatment of Basel II and the implications for the Group of this revised approach, as well as other topics including the Companies Act 2006.
In addition to ongoing training, a formal programme of re-induction is currently being introduced. This will be targeted at Non-executive Directors and will allow them to consider in a structured way developments since their initial appointment, both in the Group’s operations and in the economic, corporate and regulatory environment applicable to the Group’s businesses.
Board and Director evaluation
The performance and effectiveness of the Board and each of its Committees is evaluated annually. In the past year this exercise was undertaken internally. The Chairman met privately with each of the Directors (and where appropriate, other Committee attendees) to discuss their own performance, the functioning of the Board and their role on the Board’s principal Committees.
Additionally, the Non-executive Directors met privately without the Chairman or the Executive Directors present. This meeting was chaired by the Senior Independent Director and included a review of the performance of the Chairman, the relationship between the Chairman and Chief Executive and the functioning of the Board as a whole.
The Chairman and Directors are satisfied that the Board operates effectively and that it receives valuable support from its Committees. The evaluation identified no material failings or weaknesses.
Company Secretary and independent advice
Harry Baines
Company Secretary & Group Counsel
Age 50. Harry became Company Secretary of HBOS in 2001, having joined Halifax in that capacity in 1999. Since March 2006 he has also been Group Counsel and a member of the HBOS Executive Committee. He originally qualified as a Solicitor and then held positions in local government and private practice before moving into industry in 1985.
The Company Secretary & Group Counsel, Harry Baines, is responsible for advising the Board on corporate governance matters and, in conjunction with the Chairman, for ensuring good information flows between the Board, its Committees, Non-executive Directors and senior executives.
The Company Secretary & Group Counsel is an HBOS employee (but not a Director) and the Non-executive Directors have access to his advice. Additionally, if required in the furtherance of their duties, Non-executive Directors (along with any other members of the Board’s main Committees) are entitled to seek independent, professional advice at the Company’s expense.