The Board and its Committees
The Board reserves a number of matters for its sole consideration where these matters impact the strategic direction and effective oversight of the Company and its businesses. Examples include:
- corporate governance;
- strategy, finance and approval of the budget and business plan;
- Director/employee issues such as Director succession planning (with input and recommendations from the Nominations Committee); and
- stock exchange and listing requirements such as dividend approval/recommendation and approval of results announcements, interim management statements and the Annual Report and Accounts.
In addition to the Matters Reserved for the Board, a full description of which is available on our website at www.nationalgrid.com, certain items of strategic or governance importance are considered at every scheduled Board meeting including:
- safety, health and the environment;
- the financial status of the Company;
- operational headlines from the Company’s businesses together with a detailed update from one of the lines of business on a rotating basis;
- updates on business development and strategy implementation;
- updates on external matters affecting the Company; and
- reports from the Company Secretary & General Counsel including an update on the governance of the Company and its businesses, and any legal or new risk issues that the Board ought to be aware of.
In order to have the opportunity to discuss matters, for example relating to governance, independently of management, the Chairman and Non-executive Directors meet formally at least once a year without any management present and formally at least once a year with the Chief Executive. Ad hoc meetings may be held as required. In order to operate effectively and to give appropriate attention and consideration, the Board has delegated authority to its Committees to carry out certain tasks as defined in, and regulated by, the Committees’ terms of reference, which are available on our website at www.nationalgrid.com.
These Committees comprise the Audit, Executive, Finance, Nominations, Remuneration and Risk & Responsibility Committees. The Board is kept appraised by the Committee chairmen through the provision of a summary of the issues discussed and decisions taken by the Committee. Minutes of Committee meetings are circulated to other Directors once available.
The following sections explain the areas that each Board Committee has responsibility for and the areas that they covered during the year.
Audit Committee
Key functions of the Audit Committee, whose members are all independent Non-executive Directors, include: review of the effectiveness of the Company’s financial reporting and internal controls; the procedures for the identification, assessment and reporting of risks; the appropriateness of the auditors in carrying out certain non-audit work; and the level of audit and non-audit fees payable to the auditors.
The Committee considers that both management and the external auditors should attend meetings where possible in order to provide the members of the Committee with the information that they require, to answer questions and to challenge them as appropriate.
Accordingly, others invited to attend meetings include the Chairman, Chief Executive, Finance Director, head of internal audit, financial controller, Company Secretary & General Counsel and external auditors. Additionally, the Executive Directors, director of tax and treasury and risk & compliance manager are invited to attend Audit Committee meetings, as necessary, to provide updates and background information.
Meetings are held at least four times a year and membership and attendance at meetings was as follows during 2008/09 from a total of six meetings:
| Name | Attendance* |
|---|---|
| George Rose (chairman) | 6 of 6 |
| Linda Adamany | 6 of 6 |
| John Allan | 1 of 1 |
| Maria Richter | 5 of 5 |
| Philip Aiken | 4 of 5 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
Due to the technical nature of some of the financial and accounting issues that come before it, all of the Committee’s members are required to have an understanding of financial matters and experience of dealing with such issues at a senior executive level. In addition, the Board has determined that George Rose, Finance Director of BAE Systems plc, has recent and relevant financial experience in accordance with the Combined Code and deems him to be a suitably qualified financial expert as required by the Audit Committee’s terms of reference and US requirements.
In accordance with its terms of reference and business and accounting developments during the year, matters considered by the Committee included:
In respect of auditors:-
- the level and constitution of external audit and non-audit fees;
- the independence and objectivity of the external auditors;
- an evaluation of the external audit process globally including the expertise of the audit firm;
- monitoring and reviewing the effectiveness of internal audit activities including discussions with the head of internal audit without management present; and
- reviewing Financial Reporting Council Guidance on Audit Committees.
In respect of internal controls and risk management:-
- reviewing the effectiveness of the Company’s financial reporting, internal controls and compliance with applicable legal requirements;
- monitoring risk and compliance management procedures across the Company and reviewing specific risks (details of such risks can be found under risk factors);
- receiving reports from the business separation compliance officer, as required under National Grid Gas plc’s gas transporter licences; and
- receiving reports and technical updates including from the director of tax and treasury.
In respect of financial matters:-
- reviewing the Company’s results statements, interim management statements and Annual Report and Accounts before publication and making appropriate recommendations to the Board following review;
- reviewing accounting policies in light of international accounting developments;
- receiving reports where appropriate in accordance with its terms of reference on business conduct issues, including any instances of alleged fraud and actions taken as a result of investigations; and
- receiving reports from the Company’s cross functional steering group that has been established to ensure appropriate awareness of and actions in relation to risks arising from the current economic climate.
The Committee works closely with both the internal and external auditors. In relation to internal audit, it receives, reviews and approves the internal audit plan and ensures that the internal audit function has sufficient resources to carry out its work. The appointment and removal of the head of internal audit is subject to the approval of the Committee.
In relation to the external auditors, the Committee is solely and directly responsible for and approves the appointment, reappointment, fees and oversight of the external auditors, subject to the requirement for shareholder approval each year at the AGM. The Committee receives the external audit plan so that the external auditors have the opportunity to raise any matters in confidence, and meetings are held with the Committee at least annually without management present.
In order to ensure the external auditors remain objective and independent, in accordance with best practice, all non-audit work carried out by the external auditors is subject to Audit Committee pre-approval. The engagement of the external auditors for non-audit services is restricted by the Sarbanes-Oxley Act which prohibits them from providing certain services. Where a service is permissible, the Company’s policy is that the external auditors will not be used for non-statutory audit work unless it can be demonstrated as part of the approval process that the engagement is a natural extension of their audit work or there are other overriding reasons that make them the most suitably qualified to undertake it. The non-audit services related primarily to tax and audit-related work. Details of the fees paid to the external auditors for non-audit work carried out during the year can be found in note 3e to the accounts.
A review is carried out annually of the service provided by the external auditors and, if it is determined that the audit might be provided more efficiently or effectively by an alternative audit firm, the Company may put the audit out to tender. Following the latest review, the service was considered satisfactory and the auditors will be recommended for reappointment to shareholders at the AGM. No auditor liability agreement has been entered into by the Company.
Executive Committee
The Committee oversees the financial, operational and safety performance of the Company and implements the strategy approved by the Board. The Committee comprises the Chief Executive, who is its chairman, the Executive Directors and the Company Secretary & General Counsel. In addition, the global directors of human resources, strategy, corporate affairs and IS are regular attendees of meetings. Senior management personnel are invited to attend meetings of the Executive Committee as necessary to keep it fully appraised of the Company’s businesses.
Executive Committee membership and attendance at meetings was as follows during 2008/09 from a total of 11 meetings:
| Name | Attendance* |
|---|---|
| Steve Holliday (chairman) | 11 of 11 |
| Bob Catell | 11 of 11 |
| Mark Fairbairn | 10 of 11 |
| Steve Lucas | 11 of 11 |
| Tom King | 11 of 11 |
| Nick Winser | 11 of 11 |
| Edward Astle (to 30 April 2008) | 1 of 1 |
| Helen Mahy, Company Secretary & General Counsel | 11 of 11 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
Particular examples of matters that the Committee considered during the year included:
- the financial, operational and safety performance of the Company and its businesses;
- strategic business development and implementation including updates on the integration of the KeySpan businesses;
- approving capital and operational expenditure under the specific authorities delegated to it by the Board;
- global outsourcing;
- global human resource leadership; and
- global IS strategic issues.
At each meeting there are in depth review sessions on key business areas for the Company.
Finance Committee
The Finance Committee is responsible for setting policy and granting authority for short- and long-term financing decisions and for recommending for consideration by the Board the treasury, tax, pensions and insurance management policies of the Company. The Finance Committee is made up of three Non-executive Directors, one of whom is chairman of the Committee, and the Chief Executive and Finance Director. The director of tax and treasury is invited to attend Committee meetings on a regular basis.
Membership and attendance at meetings was as follows during 2008/09 from a total of four meetings:
| Name | Attendance* |
|---|---|
| Maria Richter (chairman) | 4 of 4 |
| Steve Holliday | 3 of 4 |
| Steve Lucas | 4 of 4 |
| Stephen Pettit | 4 of 4 |
| John Allan | 2 of 4 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
Examples of matters that the Committee considered during the year included:
- long-term funding requirements including consideration of matters affecting the Company arising out of the global economic downturn;
- setting and reviewing treasury management guidelines and policy in light of market conditions;
- taxation issues for the Company;
- treasury performance updates;
- insurance updates; and
- pensions updates.
Nominations Committee
The Nominations Committee, consisting of the Chairman and Non-executive Directors, is responsible for considering the structure, size and composition of the Board and for identifying and proposing individuals to be Directors and senior management. A key consideration is succession planning for the Board and senior management and the Committee considered this in detail during the year. External recruitment consultants are generally used as part of any appointments process. Changes to the Board require Board approval following recommendation from the Committee.
The Nominations Committee membership and attendance at meetings was as follows during 2008/09 from a total of five meetings:
| Name | Attendance* |
|---|---|
| Sir John Parker (chairman) | 5 of 5 |
| Ken Harvey | 5 of 5 |
| Maria Richter | 5 of 5 |
| George Rose | 3 of 5 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The Chief Executive is invited to attend Nominations Committee meetings on a regular basis. Advice is sought from the global human resources director and external advice is sought as appropriate.
Matters that the Committee considered during the year included:
- the size of the Board, its structure and composition;
- changes to the composition of Board Committees;
- succession planning for Board members; and
- development and succession plans for senior management, as developed by the Chief Executive and global human resources director.
Remuneration Committee
The Remuneration Committee, consisting of Non-executive Directors, is responsible for developing executive remuneration policy, including the composition and balance between salary and short- and long-term incentives and for determining the remuneration of the Executive Directors and executives below Board level who report directly to the Chief Executive. It also monitors the remuneration of other senior employees of the Company and provides direction over the Company’s share plans.
Further details of the policy on remuneration and details of individual remuneration are available in the Directors’ Remuneration Report.
The Remuneration Committee membership and attendance at meetings was as follows during 2008/09 from a total of six meetings:
| Name | Attendance* |
|---|---|
| John Allan (chairman) | 4 of 6 |
| Ken Harvey | 6 of 6 |
| Stephen Pettit | 6 of 6 |
| George Rose | 3 of 6 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The global human resources director and global head of compensation & benefits provide advice on remuneration policies and practices in the markets in which the Company operates and are usually invited to attend meetings, along with the Chairman and the Chief Executive. External independent advisors are also utilised by the Committee.
Risk & Responsibility Committee
The Risk & Responsibility Committee, consisting of Non-executive Directors plus Bob Catell, is responsible for reviewing the strategies, policies, targets and performance of the Company within its Framework for Responsible Business (a copy of which is available on the National Grid website). The Committee reviews the Company’s risks for which it has oversight and in this regard the Committee interfaces with and works closely with the Audit Committee.
Accordingly it reviews matters such as: safety – including public and process safety; the environment; employee occupational health; inclusion and diversity; security and human rights issues; and business ethics and conduct.
The Risk & Responsibility Committee membership and attendance at meetings was as follows during 2008/09 from a total of four meetings:
| Name | Attendance* |
|---|---|
| Stephen Pettit (chairman) | 4 of 4 |
| Linda Adamany | 4 of 4 |
| Philip Aiken | 3 of 4 |
| Ken Harvey | 3 of 4 |
| Bob Catell | 4 of 4 |
- *
- Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The Chief Executive, Company Secretary & General Counsel, director of UK safety, health and environment & corporate security and US senior VP safety, health and environment are invited to attend Risk & Responsibility Committee meetings. Executive Directors and others, including business representatives, are invited to attend as necessary.
During the year, the Committee:
- considered the current and projected environmental impact of the Company, including climate change;
- considered specific identified future risks and plans for minimising such risks;
- reviewed safety, health and environment audit plans and the outcome of such audits;
- reviewed serious incident reports;
- reviewed reports on business conduct issues;
- reviewed progress in embedding a process safety culture; and
- considered reports and updates from external advisors.
Disclosure Committee
National Grid has established disclosure committees that are tasked with various duties relating to the material disclosures made to the market by the Company and relevant subsidiaries. The Disclosure Committee of the Company is chaired by the Finance Director and its members are the Company Secretary & General Counsel, director of tax and treasury, financial controller, director of investor relations, head of internal audit and corporate counsel and head of company secretariat and such other members and/or attendees as the Committee from time to time considers appropriate.
The Committee’s role is to assist the Chief Executive and Finance Director in fulfilling their responsibility for oversight of the accuracy and timeliness of the disclosures made by the Company. Accordingly, during the year the Committee reviewed the process and controls over external disclosures and key documents before release including the Annual Report and Accounts, preliminary and half year results statements, interim management statements and other material stock exchange announcements and presentations to analysts.