Corporate Governance
Board operation
The Board of National Grid considers the overall direction and effective control of the Company and its businesses to be of utmost importance and, to that end, it reserves a number of matters for its sole consideration. A description of the Matters Reserved to the Board is available on our website. The key areas included are:
corporate governance;
strategy and finance, such as the proposal to acquire KeySpan, and approval of the budget and business plan;
Director and employee issues such as Director succession planning (with input and recommendations from the Nominations Committee); and
listing requirements such as dividend approval and recommendation and approval of results announcements and the Annual Report and Accounts.
Certain items are considered at every scheduled meeting of the Board, covering the following:
safety, health and the environment;
financial status of the Company;
operational headlines from the Company's businesses plus a detailed update from one of the lines of business on a rotating basis;
update on business development and strategy implementation;
update on external matters affecting the Company; and
report from the Company Secretary & General Counsel including an update on the administration and governance of the Company and its businesses.
The Chairman and Non-executive Directors meet at least once a year without any management present and at least once a year with the Chief Executive present. These meetings provide an opportunity for the Non-executive Directors to consider issues relating to the overall governance and management of the Company including succession planning and other issues within their remit as independent directors. Additionally, the Chairman regularly communicates with the Non-executive Directors on an informal basis.
The Board has delegated authority to its Committees to carry out certain tasks as defined in the Committees' terms of reference, which have been agreed by the Board and are available on our website. These comprise the Audit, Executive, Finance, Nominations, Remuneration and Risk & Responsibility Committees. By delegating authority for the consideration of policy and oversight of specific items to these Committees, the Board ensures these items are given appropriate attention in terms of both time and priority. To keep the Board appraised of Committee activities, Committee chairmen provide a summary of the issues discussed and decisions taken at the Board meeting immediately following a Committee meeting. Draft minutes of Committee meetings are circulated to Directors once available.
Audit Committee
The Audit Committee membership and attendance at meetings was as follows during 2006/07 from a total of four meetings:
| Name | Attendance* |
|---|---|
| George Rose (chairman) | 4 of 4 |
| Linda Adamany (from 1 November 2006) | 2 of 2 |
| John Allan | 3 of 4 |
| John Grant (to 31 July 2006) | 1 of 1 |
| Ken Harvey (1 August to 31 October 2006) | 1 of 1 |
| Maria Richter | 4 of 4 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
The Board has determined that George Rose has recent and relevant financial experience and deems him to be a suitably qualified financial expert as required by the Audit Committee's terms of reference. His biographical details are under Board of Directors.
Others invited to attend Audit Committee meetings on a regular basis include the Chairman, Chief Executive, Finance Director, Corporate Director of Audit, Company Secretary & General Counsel and the external auditors. Additionally, the Executive Directors, Risk & Compliance Manager and Financial Controller are invited to attend Audit Committee meetings as necessary to provide updates and background information.
The key items for which the Audit Committee has responsibility and that it has discussed during the year include:
monitoring and reviewing the effectiveness of internal audit activities and the appointment of the Corporate Director of Audit;
making recommendations to the Board regarding the appointment of the external auditors and oversight of the external auditors;
reviewing the effectiveness of the Company's financial reporting and internal control policies;
monitoring Sarbanes-Oxley compliance;
whistleblowing and complaints procedures;
monitoring risk and compliance management and reviewing specific risks such as those associated with the acquisition of KeySpan;
receiving reports from the Business Separation Compliance Officer, as required under National Grid Gas plc's gas transporter licences; and
reviewing results statements and the Company's Annual Report and Accounts before publication and making appropriate recommendations to the Board following review.
All non-audit work carried out by the external auditors is subject to Audit Committee pre-approval to ensure the objectivity and independence of the external auditors is maintained. Details of the fees paid to the external auditors for both audit and non-audit work carried out during the year can be found in note 4 to the accounts.
Executive Committee
The Executive Committee membership and attendance at meetings was as follows during 2006/07 from a total of 11 meetings:
| Name | Attendance* |
|---|---|
| Steve Holliday (chairman from 1 September 2006) | 11 of 11 |
| Edward Astle | 11 of 11 |
| Mark Fairbairn (from 19 October 2006) | 5 of 5 |
| Steve Lucas | 11 of 11 |
| Nick Winser | 10 of 11 |
| Roger Urwin (to 31 December 2006, chairman to 31 August 2006**) | 5 of 8 |
| Mike Jesanis (to 31 December 2006) | 6 of 8 |
| Helen Mahy, Company Secretary & General Counsel | 11 of 11 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
** In accordance with the handover of responsibilities plan
Senior management personnel are invited to attend meetings of the Executive Committee as necessary to keep it fully appraised of the Company's businesses. Attendance of management personnel at Executive Committee and other Board and Committee meetings is monitored by the Executive Committee as part of the Board's succession planning and development programmes. This monitoring was implemented as a result of the 2005/06 performance evaluation process.
The Executive Committee is responsible for the day-to-day management of the Company and its businesses. The key items for which the Executive Committee has responsibility and that it has discussed during the year include:
reviewing reports of the financial, operational, safety and environmental performance of the Company and its businesses;
developing and implementing strategy, subject to Board approval;
monitoring the Company's businesses through the receipt and consideration of regular reports;
approving expenditure under the specific authority delegated to it by the Board; and
approving changes to the Non-executive Directors' remuneration after taking appropriate external advice.
Finance Committee
The Finance Committee membership and attendance at meetings was as follows during 2006/07 from a total of six meetings:
| Name | Attendance* |
|---|---|
| Paul Joskow (chairman) | 6 of 6 |
| Steve Holliday (from 1 January 2007) | 1 of 2 |
| Steve Lucas | 6 of 6 |
| Stephen Pettit | 6 of 6 |
| Maria Richter | 6 of 6 |
| Roger Urwin (to 31 December 2006) | 4 of 4 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
The Tax & Treasury Director is invited to attend Finance Committee meetings on a regular basis to provide updates and background information.
The key items for which the Finance Committee has responsibility and that it has discussed during the year include:
granting authority for investment and funding decisions, including the funding of the planned acquisition of KeySpan;
setting and reviewing treasury management guidelines and policy;
granting authority for parent and subsidiary companies to enter into guarantees and indemnities under the specific authority delegated to it by the Board;
receiving updates on taxation;
insurance renewal strategy; and
receiving updates on pension schemes and recommending action to the Board as appropriate.
Nominations Committee
The Nominations Committee membership and attendance at meetings was as follows during 2006/07 from a total of six meetings:
| Name | Attendance* |
|---|---|
| Sir John Parker (chairman) | 6 of 6 |
| John Grant (to 31 July 2006) | 1 of 1 |
| Ken Harvey | 6 of 6 |
| Paul Joskow | 5 of 6 |
| George Rose | 5 of 6 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
The Chief Executive is invited to attend Nominations Committee meetings on a regular basis. Additionally, the Group Human Resources Director is invited to attend Nominations Committee meetings as necessary to provide updates and background information.
The key items for which the Nominations Committee has responsibility and that it has discussed during the year include:
-
recommending individuals for appointment to the Board following the procedures laid down by the Board in conjunction with the Nominations Committee, including the appointments during the year of Linda Adamany (Non-executive Director) and Mark Fairbairn (Executive Director);
reviewing the size of the Board, its structure and composition, including considering Board members' independence (where appropriate), skills and experience to ensure these remain relevant to National Grid;
considering the external commitments of all Directors, to ensure it is satisfied that these do not conflict or interfere with their duties as Directors of the Company;
reviewing and refreshing the membership of Board Committees, particularly following the appointment of new Directors to the Board;
considering succession planning for Board members, noting that during the year this focused on the smooth transition of responsibilities to the new Chief Executive;
development and succession plans for senior management, as developed by the Chief Executive and the Group Human Resources Director; and
Board and Committee performance evaluation.
During the year the Nominations Committee received external support and advice on the appointments of Linda Adamany and Mark Fairbairn.
Remuneration Committee
The Remuneration Committee membership and attendance at meetings was as follows during 2006/07 from a total of nine meetings:
| Name | Attendance* |
|---|---|
| John Allan (chairman) | 8 of 9** |
| John Grant (to 31 July 2006) | 3 of 3 |
| Ken Harvey | 9 of 9 |
| Stephen Pettit | 9 of 9 |
| George Rose | 6 of 9 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
** John Grant acted as chairman for the meeting that John Allan was unable to attend
The Chairman and the Chief Executive are invited to attend Remuneration Committee meetings on a regular basis. Additionally, the Group Human Resources Director and the Group Head of Compensation & Benefits are invited to attend Remuneration Committee meetings as necessary to provide advice.
The key items for which the Remuneration Committee has responsibility and that it has discussed during the year include:
development of policy on Executive Director remuneration;
determination of remuneration, including bonuses and personal targets, for Executive Directors and certain senior management personnel; and
establishment of employee share schemes, including the introduction of the Deferred Share Plan.
Further details on these responsibilities and the external advice received by the Committee in respect of these items can be found in the Directors' Remuneration Report.
No Remuneration Committee member or attendee participates in any discussion regarding his or her own remuneration.
Risk & Responsibility Committee
The Risk & Responsibility Committee membership and attendance at meetings was as follows during 2006/07 from a total of four meetings:
| Name | Attendance* |
|---|---|
| Stephen Pettit (chairman) | 3 of 4** |
| Linda Adamany (from 1 November 2006) | 2 of 2 |
| Ken Harvey | 4 of 4 |
| Maria Richter | 4 of 4 |
* Attendance is expressed as number of meetings attended out of number eligible to attend
** Ken Harvey acted as chairman for the meeting that Stephen Pettit was unable to attend
The Chief Executive, the Corporate Responsibility Director and the Company Secretary & General Counsel are invited to attend Risk & Responsibility Committee meetings on a regular basis. Executive Directors and others, including the Risk & Compliance Manager and business representatives are invited to attend as necessary to provide updates.
The key items for which the Risk & Responsibility Committee has responsibility and that it has discussed during the year include consideration of:
the environmental impact of the Company, including climate change;
non-financial risks to the Company, including pandemic planning;
regular updates on the safety, health and environmental performance of the Company and its businesses;
inclusion and diversity initiative updates;
reviewing safety, health and environmental audit plans and the outcome of such audits; and
regular updates on business conduct issues raised in the businesses and the outcome of any subsequent investigations.
The Committee members made site visits during the year to:
an investment recovery facility in Syracuse; and
a gas repair site in London.