Corporate Governance
The Board
Composition
At the year end, the Board comprised the Chairman, eight Executive Directors and eight independent Non-executive Directors. The Board considers that it is of an appropriate size to oversee the Group’s businesses, with a suitable diversity of backgrounds and mix of experience and expertise to maximise its effectiveness. These matters are kept under continuous review by the Nomination Committee.
Balance of Executive and Non-executive Directors as at 31 December 2007
Independence
All of the Non-executive Directors are considered by the Board to be independent and throughout the year at least half of the Board comprised independent Non-executive Directors. To be ‘independent’, the Board requires a Director to be inependent in character and judgement and to be free of relationships or circumstances which could affect their judgement.
Division of responsibilities
The Chairman leads the Board while the Chief Executive manages the Group’s businesses – these are distinct functions. The responsibilities and specific accountabilities of the Chairman, the Deputy Chairman/Senior Independent Director, the Non-executive Directors, the Chief Executive, the remaining Executive Directors and other senior executives are set out in the Group’s Board Control Manual (which is explained further on the following page).
Chairman – Dennis Stevenson
The Chairman is responsible for leading the Board and for ensuring its effectiveness. This includes responsibility for the clarity and timeliness of information provided to the Board and for facilitating the effective contribution of all Directors. The Chairman ensures that new Directors receive comprehensive tailored induction training and that regular training is incorporated within the Board programme.
The Chairman has a key role in the development (jointly with the Chief Executive) of the Group’s strategy, as well as oversight of strategy implementation and performance delivery. He ensures that there is a constructive and close working relationship with the Chief Executive. An in-depth review of the Company’s strategy, hosted by the Chairman, was held in early 2007. This took the form of a dedicated discursive session looking at value generation over a longer time frame. Issues considered included growth opportunities in each of the divisions as well as investor views, risk appetite and the international landscape.
During the year, the Chairman (frequently along with the Deputy Chairman) has continued his practice of meeting executive teams across the business outwith formal Board meetings. The purpose of the meetings is to understand in more detail each team’s key deliverables and motivations, to inform the Chairman’s contributions to debate and support his leadership of the Board. All Non-executive Directors are encouraged similarly to engage directly with executive management across the business.
The Chairman meets with the Non-executive Directors individually, without any Executive Directors present, on a rolling basis throughout the year.
Deputy Chairman/Senior Independent Director – Sir Ron Garrick
The Senior Independent Director attended the Company’s results presentations to analysts during the year, giving him the opportunity to hear analysts’ questions and understand their views. In addition, the Senior Independent Director is available to meet shareholders on request. Should any shareholder have a concern which they feel cannot be resolved through the routine mechanisms for investor communication, or through the Chairman or Chief Executive (as appropriate), they are encouraged to contact the Senior Independent Director, initially via the Company Secretary at the Registered Office.
Election and re-election of Directors
All Directors are subject to election by shareholders at the first Annual General Meeting (‘AGM’) following their appointment, and accordingly John E Mack, Dan Watkins, Philip Gore-Randall and Mike Ellis, all appointed Directors since the last AGM, will present themselves for election at the 2008 AGM.
In addition, the Company requires all Directors to stand for re-election at intervals of no more than three years, hence Dennis Stevenson, Karen Jones and Colin Matthew will retire at the forthcoming AGM and will seek re-election by shareholders.
Having completed two three-year terms as a Non-executive Director of HBOS, Charles Dunstone will retire at the forthcoming AGM and will not offer himself for re-election.
The Chairman has endorsed the effectiveness and commitment of all Directors standing for election or re-election at the AGM, and the Senior Independent Director has given a similar endorsement in respect of the Chairman’s re-election.