The company has complied with all the provisions of the Cadbury Committee's Code of Best Practice ("the Code").
The Board is committed to proper standards of corporate governance and will continue to keep procedures under review
should the Code develop.
Board and Board committees
The company has an Audit Committee, which meets a minimum of three times a year, whose terms of reference cover the points recommended by the Code. Its duties include monitoring internal control throughout the group, approving the group's accounting policies and reviewing the interim and annual financial statements before submission to the Board. The Committee is chaired by John Gardiner and consists entirely of non-executive directors. The Remuneration Committee, also composed entirely of non-executive directors, is chaired by Baroness O'Cathain, and meets a minimum of three times a year. The report of the Remuneration Committee is given below.
The Nominations Committee, chaired by Lord MacLaurin, is responsible for selecting and appointing the company's executive and non-executive directors and meets as required.
Internal financial control
The company has an established framework of internal financial controls, the key features of which are as follows:
Organisational structure The responsibilities of the Board set out above are designed to ensure effective control over strategic, financial and compliance issues.
Financial framework The company operates a comprehensive system of financial reporting to the Board and senior management, based upon an annual budget and regular forecasts. Weekly and periodic reports of actual results together with key performance indicators are produced.
Policies and procedures The group employs 153,000 people including over 1,200 senior managers. Management control is formalised at all levels and is regulated by cascading limits of authority. Formal policies and procedures also exist for areas which are identified, by their nature, as being significant risk areas. Policies and procedures are regularly subject to compliance audits.
Quality and integrity of personnel The company attaches high importance to the values of trust, honesty and integrity of personnel in responsible positions and operates a policy of recruiting and promoting suitably experienced personnel with clearly defined accountabilities.
Investment appraisal The capital investment programme is subject to formalised review procedures with key criteria requiring to be met. All major initiatives require business cases to be prepared, normally covering a minimum period of five years. Post investment appraisals are also carried out.
Control monitoring The group maintains an internal audit function whose work is focused on areas of perceived highest risk, as identified by risk analysis and who regularly provide reports to the Audit Committee. Our external auditors, Price Waterhouse, also contribute an independent perspective on certain aspects of the internal financial control system arising from their audit work and annually report their findings to the Audit Committee. Price Waterhouse have confirmed that, in their opinion, the group are complying with the Companies Act 1985 requirement to keep proper books and records.