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 and the Annual Report and Accounts.
In addition to the matters reserved to the Board, a full description of which is available on our website at www.nationalgrid.com, certain items 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 administration and governance of the Company and its businesses.
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. These meetings provide an opportunity for the Non-executive Directors to consider issues relating to the overall governance and management of the Company. In addition, there are ad hoc meetings as required.
The Board has delegated authority to its Committees to carry out certain tasks as defined in the Committees’ terms of reference, which are available on our website at www.nationalgrid.com. 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.
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. Draft minutes of Committee meetings are circulated to other Directors once available.
The following sections explain the areas that each Committee has responsibility for and the items that they covered during the year.
Audit Committee
A key function of the Audit Committee is to review the effectiveness of the Company’s financial reporting and internal control policies and the procedures for the identification, assessment and reporting of risks.
As a consequence of the oversight role of the Committee and in order to maintain independence from management, the members of the Committee, including its chairman, are all independent Non-executive Directors. The Committee does however consider 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 and to answer questions on areas that are within the Committee’s remit.
Accordingly, others invited to attend meetings include the Chairman, the Chief Executive, the Finance Director, the Head of Internal Audit, the Financial Controller, the Company Secretary & General Counsel and the external auditor. Additionally, the Executive Directors, the Director of Tax and Treasury and the Risk & Compliance Manager are invited to attend Audit Committee meetings as necessary to provide updates and background information.
In order that the Committee is kept informed of developments, meetings are held at least four times a year. Membership and attendance at meetings was as follows during 2007/08 from a total of 6 meetings:
| Name | Attendance* |
|---|---|
| George Rose (chairman) | 6 of 6 |
| Linda Adamany | 6 of 6 |
| John Allan | 4 of 6 |
| Maria Richter | 6 of 6 |
* Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
In order that the Committee can fulfil its obligations, and as a consequence of the technical nature of some of the financial and accounting issues that come before it, the Committee regards it as important that all of its members have an understanding of financial matters and experience of dealing with financial 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 and deems him to be a suitably qualified financial expert as required by the Audit Committee’s terms of reference.
During the year, the Committee considered the following items:
Auditors
- non-audit fees and consultancy spend undertaken by the external auditor, with the auditor not present;
- the independence and objectivity of the external auditor;
- an evaluation of the external audit process;
- reviewing audit related matters following the KeySpan acquisition; and
- monitoring and reviewing the effectiveness of internal audit activities.
Financial
- reviewing the effectiveness of the Company’s financial reporting, internal controls and compliance with Sarbanes- Oxley Act requirements;
- monitoring risk and compliance management procedures across the Company and reviewing specific risks;
- receiving reports from the Business Separation Compliance Officer, as required under National Grid Gas plc’s gas transporter licences;
- receiving reports from the Director of Tax and Treasury;
- reviewing the Company’s results statements and Annual Report and Accounts before publication and making appropriate recommendations to the Board following review;
- reviewing the content of Interim Management Statements;
- receiving reports on business conduct issues; and
- reviewing accounting policies.
Governance
- reviewing the Committee’s own performance and constitution following the annual performance evaluation; and
- reviewing the Committee’s forward business schedule.
The Committee works closely with both the internal and external auditors. It receives and reviews 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.
Subject to annual shareholder approval at the AGM, the Committee is solely and directly responsible for and approves the appointment, reappointment, fees and oversight of the external auditor. Meetings are held at least annually with the external auditor without management present.
In order to ensure objectivity and independence of the external auditor, all non-audit work carried out by the external auditor is subject to Audit Committee pre-approval. Details of the fees paid to the external auditor for both audit and 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 auditor, and subject to the outcome of this review, the Company may put the audit out to tender. Following the latest review, the service was considered satisfactory.
Executive Committee
Within the authorities delegated to the Committee by the Board, the key tasks of the Committee are to oversee the financial, operational and safety performance of the Company. The Committee is tasked with implementing 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.
Executive Committee membership and attendance at meetings was as follows during 2007/08 from a total of 12 meetings:
| Name | Attendance* |
|---|---|
| Steve Holliday (chairman) | 12 of 12 |
| Bob Catell (from 25 September 2007) | 6 of 6 |
| Edward Astle | 11 of 12 |
| Mark Fairbairn | 12 of 12 |
| Steve Lucas | 10 of 12 |
| Tom King (from 13 August 2007) | 8 of 8 |
| Nick Winser | 11 of 12 |
| Helen Mahy, Company Secretary & General Counsel | 12 of 12 |
* Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
In addition, the Global Director of Human Resources and Global Head of 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. Attendance of key 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.
In accordance with its remit, the Executive Committee is responsible for the day-to-day management of the Company and its businesses. During the year, items that the Committee considered included:
- the financial, operational and safety performance of the Company and its businesses;
- strategic business development and implementation including the integration of the KeySpan businesses acquired during the year and the retention of the UK property business;
- approving capital and operational expenditure under the specific authorities delegated to it by the Board;
- reviewing governance issues;
- 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-term 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 two Non-executive Directors, one of whom is chairman of the Committee, and the Chief Executive and Finance Director.
Finance Committee membership and attendance at meetings was as follows during 2007/08 from a total of 4 meetings:
| Name | Attendance* |
|---|---|
| Maria Richter (chairman from 31 July 2007) | 4 of 4 |
| Steve Holliday | 4 of 4 |
| Steve Lucas | 4 of 4 |
| Stephen Pettit | 4 of 4 |
| Paul Joskow (chairman to 31 July 2007) | 2 of 2 |
* Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The Director of Tax and Treasury is invited to attend Committee meetings on a regular basis.
Items that the Committee considered during the year included:
- long-term funding requirements;
- setting and reviewing treasury management guidelines and policy in light of market conditions;
- funding the acquisition of KeySpan;
- the progress of the ordinary share buyback programme;
- taxation issues for the Company;
- treasury performance updates;
- the repurchase and cancellation of the ‘B’ shares;
- insurance updates;
- effects on the Company of the ‘credit crunch’ in the banking sector;
- pensions updates; and
- granting authority for parent and subsidiary companies to enter into guarantees and indemnities under the Committee’s delegated authority.
Nominations Committee
The Nominations Committee is responsible for regularly reviewing the structure, size and composition of the Board and for identifying and nominating individuals to be Directors and senior management. Such appointments and changes to the Board require Board approval following recommendations from the Committee. External recruitment consultants are used and this procedure was followed for the appointment of Philip Aiken as a Non-executive Director in May 2008.
In order to ensure objectivity and independence, the chairman and members are all Non-executive Directors.
Nominations Committee membership and attendance at meetings was as follows during 2007/08 from a total of 9 meetings:
| Name | Attendance* |
|---|---|
| Sir John Parker (chairman) | 9 of 9 |
| Ken Harvey | 9 of 9 |
| Maria Richter (from 31 July 2007) | 6 of 6 |
| George Rose | 7 of 9 |
| Paul Joskow (to 31 July 2007) | 3 of 3 |
* 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 Director of Human Resources and external advice is sought when appropriate.
During the year the Committee:
- reviewed the size of the Board, its structure and composition;
- reviewed and recommended changes to the composition of Board Committees;
- recommended individuals for appointment to the Board, including the appointments of Tom King and Philip Aiken;
- considered succession planning for Board members; and
- reviewed development and succession plans for senior management, as developed by the Chief Executive and the Global Director of Human Resources.
Remuneration Committee
The Remuneration Committee is responsible for developing Company policy regarding executive remuneration 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. All members of the Committee are Non-executive Directors.
The Remuneration Committee determines remuneration policy and practices with the aim of attracting, motivating and retaining high calibre Executive Directors and other senior employees to deliver value for shareholders and high levels of customer service, safety and reliability in an efficient and responsible manner. The Remuneration Committee sets remuneration policies and practices in line with best practice in the markets in which the Company operates.
Further details of the policy on remuneration and details of individual remuneration are available in the Directors’ Remuneration Report.
Remuneration Committee membership and attendance at meetings was as follows during 2007/08 from a total of 7 meetings:
| Name | Attendance* |
|---|---|
| John Allan (chairman) | 6 of 7 |
| Ken Harvey | 7 of 7 |
| Stephen Pettit | 7 of 7 |
| George Rose | 7 of 7 |
* Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The Global Director of Human Resources and Global Head of Compensation & Benefits provide advice on remuneration policies and practices and are usually invited to attend meetings, along with the Chairman and the Chief Executive.
No Director or other attendee is present during any discussion regarding his or her own remuneration.
Risk & Responsibility Committee
The Risk & Responsibility Committee is tasked with proactively reviewing the strategies, policies, management, initiatives, targets and performance of the Company within the responsible business framework. Accordingly, it reviews matters such as public and process safety, the environment, occupational health, inclusion and diversity, security and human rights, and business ethics and conduct.
Risk & Responsibility Committee membership and attendance at meetings was as follows during 2007/08 from a total of 4 meetings:
| Name | Attendance* |
|---|---|
| Stephen Pettit (chairman) | 4 of 4 |
| Linda Adamany | 4 of 4 |
| Ken Harvey | 4 of 4 |
| Bob Catell (from 25 September 2007) | 2 of 2 |
| Maria Richter (to 1 September 2007) | 1 of 1 |
* Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director
The Chief Executive, the Company Secretary & General Counsel, the Director of UK Safety, Health and Environment and Corporate Security and the 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.
The Committee members made site visits during the year to:
- a key London substation; and
- the London 2012 Olympics site powerlines undergrounding project.
Disclosure Committee
National Grid has established disclosure committees that are tasked with various duties relating to the material disclosures made by the Company and relevant subsidiaries. The National Grid Disclosure Committee is chaired by the Finance Director and its members are the Company Secretary & General Counsel, the Group Director of Tax and Treasury, the Financial Controller, the Director of Investor Relations, the Head of Internal Audit and the 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 the Finance Director in fulfilling their responsibility for oversight of the accuracy and timeliness of the disclosures made by the Company. Accordingly, the Committee reviewed during the year the process and controls over external disclosures and reviewed key documents before release including the Annual Report and Accounts, Interim Management Statements and other material stock exchange announcements and presentations to analysts.