00:04 21 Dec 2014

1,055.00p

-0.75%

Governance

Babcock International Group is committed to achieving the highest standards of corporate governance. Today, it is more important than ever to demonstrate excellence in our approach to business ethics and internal control.

Please see the Governance section of our latest Annual Report.

Board Diversity

We recognise the value to the effectiveness of boards and board committees of their being able to draw upon a diverse range of skills, experience and outlook from amongst their members so as to bring a wide range of perspectives to the oversight of company strategy, risk mitigation and management performance.  In order to achieve long-term success in a competitive international environment, companies need to draw upon a diverse range of perspectives and competences that are relevant in that environment. As Babcock grows in size and complexity and increases its activities around the world this is likely to become even more important.  Diversity in this respect is very much about the personal approach, qualities and experience of individual directors and not about simply who or what they are. 

We note the views of Lord Davies in his Review into Women on Boards as to increasing gender diversity on boards and in senior management roles.  We recognise that gender, like other attributes and experience, can contribute to the diversity of perspective that we seek and that in selecting for board appointments this is something of which we need to be, and are, conscious.  That said, our overriding criterion for appointment must always be merit and the best candidate for the role.

We, like others, are sceptical of quotas for the numbers of women (or any other persons based on group characteristics) on boards or in other senior management roles as they do not necessarily deliver the individuals with the best skill set or experience and can lead to tokenism.  We note that Lord Davies' review does not set quotas as such, but encourages companies to state their aspirations as to the numbers of women on their boards and that his report (and others) recommend specific targets to be aspired to by certain dates.  We understand the good intent and motivation behind this, but believe that stated aspirations as to targets of this kind can easily become self-imposed quotas.  They also inadequately allow for the fact that companies in different sectors have different challenges in this respect. The traditional engineering sector in which Babcock primarily operates is inevitably going to find  that it is more challenging and will take longer to find women candidates with the right experience and background to move into senior management roles and board positions than those operating in some other sectors. 

When making future board appointments we will, nonetheless, of course be aware of and have in mind the views expressed in the Davies Review.

Ethical conduct

The Board insists that our business is carried out to the highest standards of honesty and integrity. We have a Code of Conduct as well as a strict anti-bribery and corruption policy in place giving guidance on business dealings. This policy defines expected behaviours and is formally re-emphasised to senior management each year who formally confirm compliance. All employees are expected to avoid conflicts of interest, to act lawfully and ethically and report any non-compliance issues of which they become aware.

Babcock also subscribes to the Common Industry Standards for European Aerospace and Defence.

Conflicts of interest

Babcock has adopted a formal procedure for the disclosure, review, authorisation and management of Directors' actual and potential conflicts of interest in accordance with the Companies Act 2006. The procedure requires Directors formally to notify the Board (via the Company Secretary) as soon as they become aware of any new actual or potential conflict of interest or when there is a material change in any of the conflicts of interest they have already disclosed. Any potential conflicts of interest notified by a Director are reviewed by the Board as soon as possible. The Board considers whether a conflict or potential conflict does, in fact, exist. If a conflict does, or could, exist, the Board will decide whether it is in the interest of the Company to authorise it and, if so, on what terms. In making their judgment on this, the other Directors have regard to their general duties to the Company. A register is maintained of all the disclosures made and the terms of any authorisations granted. Authorisations can be revoked, or the terms on which they were given varied, at any time if judged appropriate. Possible conflicts of interest authorised by the Board are reviewed annually. In the event of any actual conflict arising in respect of a particular matter, mitigating action would be taken (for example, non-attendance of the Director concerned at all or part of Board meetings and non-circulation to him of relevant papers).

Appointment and powers of Directors; Roles of Chairman, Chief Executive Officer and Senior Independent Director

A Director is appointed by ordinary resolution (i.e. a simple majority of votes cast) at a general meeting of ordinary shareholders. The Board also has the power to appoint a Director, but any person so appointed must be stand for reappointment by shareholders at the first Annual General Meeting following his or her appointment by the Board.

Subject to the Company's Articles of Association, relevant statutory law and any directions given by shareholders in general meeting, the business of the Company is managed by the Directors, who may exercise all powers of the Company that are not required to be exercised by the Company in general meeting. In addition to this collective responsibility, the Chairman, Chief Executive and Senior Independent Director have clearly defined roles and a formal statement of these can be found here.

Board procedure

The Board holds a number of regular meetings each year, typically nine. In addition, the Board holds ad hoc meetings from time to time for specific purposes, for example in connection with specific acquisitions. There are also Board Committees, details of which can be found on the Board Committees page.

Each year, the Board reviews its performance, the performance of its committees and individual Directors. This is done annually, with the support either of an independent facilitator or the Company Secretary in alternate years. The process involves individual confidential interviews with each Board member and other senior employees. The results of these interviews are reported to the Chairman and made available to the Board for discussion. Most recently, it has been agreed that strategy and succession planning should continue to be areas of particular Board focus.

Information and training for Directors

The Company arranges for new Non-Executive Directors to receive detailed business briefings as regards the Group's operations and to make induction visits to the Group's principal sites. Director training for new directors, when appropriate, is arranged with external providers.

Non-Executive Directors may at any time make visits to Group businesses or operational sites, which are coordinated by the Group Company Secretary's office. The whole Board also visits at least one operational site each year. In addition, presentations on the Group's businesses and specialist functions are made regularly to the Board.

Board members receive copies of all minutes of meetings of the Group Executive Committee (which comprises the Group Chief Executive, Finance Director and Business Development Director as well as Divisional Managing Directors) and copies of the Divisions' monthly operating reports.

General director training is available to all Directors. The Group Company Secretary briefs Board members on significant changes in the law affecting their duties as directors.

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