Subject to those matters reserved for its decision, the Board delegates certain responsibilities to a number of standing committees - the Remuneration, S&SD, Nomination and Audit Committees. The terms of reference for each of these committees and a schedule of matters reserved for the Board's decision can be found here.
The Remuneration Committee is responsible for establishing and developing the Group's general policy on executive and senior management remuneration and determining speciﬁc remuneration packages for executive directors.
The directors' Remuneration report, sets out Anglo American's policy on executive remuneration. A resolution to approve the Remuneration report will be proposed at the forthcoming AGM. The Committee met three times during 2009.
The Remuneration Committee presently comprises: Sir Rob Margetts (chairman), David Challen, Sir CK Chow, Peter Woicke and Sir Philip Hampton, all of whom are independent non-executive directors.
The S&SD Committee is responsible for developing framework policies and guidelines for the management of sustainable development issues, including safety, health and environment matters, and ensuring their progressive implementation throughout the Group.
The S&SD Committee normally meets three or four times each year, including a visit to an operation, and business unit heads are invited to attend committee meetings. Each business unit head makes a safety and sustainable development presentation to the Committee. The Committee met five times during 2009. The Report to Society 2009, to be published in April, will focus on the safety, sustainable development, health and environmental performance of the Group's managed operations, their performance with regard to the Company's Good Citizenship principles and the operational dimensions of their social programmes.
The S&SD Committee presently comprises: Chris Fay (chairman), Cynthia Carroll, Sir John Parker, Mamphela Ramphele, Jack Thompson and Peter Woicke.
The Nomination Committee makes recommendations to the Board on the appointment of new executive and non-executive directors, including making recommendations as to the composition of the Board and its committees and the balance between executive and non-executive directors. The Nomination Committee meets as and when required and engages external consultants to identify appropriate candidates. During 2009, the services of Spencer Stuart were used by the Committee.
The Board, via the Nomination Committee, has taken steps to ensure that the Human Resources function of the Group regularly reviews and updates the succession plans of directors and senior managers. The Committee met five times during 2009.
The Nomination Committee currently comprises Sir John Parker (chairman), David Challen, Mamphela Ramphele, Peter Woicke and Sir CK Chow.
The primary role of the Audit Committee is to ensure the integrity of ﬁnancial reporting and the audit process, and that a sound risk management and internal control system is maintained. In pursuing these objectives, the Audit Committee oversees relations with the external auditors and reviews the effectiveness of the internal audit function. The Committee also monitors developments in corporate governance to ensure the Group continues to apply high and appropriate standards.
The Audit Committee presently comprises: David Challen (chairman), Chris Fay and Sir Philip Hampton, all of whom are independent non-executive directors. The Board, in consultation with the Audit Committee chairman, makes appointments to the Committee. The Board has determined that the Committee members have the skills and experience necessary to contribute meaningfully to the Committee's deliberations. In addition, the chairman has requisite experience in accounting and ﬁnancial management.
The Committee met three times during 2009, and on two of those occasions the members held discussions with the external audit partners and the head of internal audit in the absence of management.
In fulﬁlling its responsibility of monitoring the integrity of ﬁnancial reports to shareholders, the Audit Committee has reviewed accounting principles, policies and practices adopted in the preparation of public ﬁnancial information and has examined documentation relating to the Annual Report, Half Year Financial Report, preliminary announcements and related public reports. The clarity of disclosures included in the ﬁnancial statements was reviewed by the Audit Committee, as was the basis for signiﬁcant estimates and judgements. In assessing the accounting treatment of major transactions open to different approaches, the Committee considered written reports by management and the external auditors. The Committee's recommendations are submitted to the Board for approval.
The chief ﬁnancial ofﬁcers of all operations have provided conﬁrmation, on a six-monthly basis, that ﬁnancial and accounting control frameworks operate satisfactorily. The Committee considered summaries of the signiﬁcant risk and control issues arising from these reports. The Committee also received regular internal audit reports on the results of audits at various operations. During 2009, the Audit Committee approved the internal audit and risk management plans for 2010 and the process by which the new audit engagement partner received induction to the business prior to taking up his role in 2010. The Audit Committee held meetings with the External Auditors without the presence of management on two occasions and the chairman of the Audit Committee held regular meetings with the audit engagement partner during the year. Further information on risk management processes is provided in the internal control disclosure statement.
Anglo American's policy on auditors' independence, which came into effect on 1 January 2003, is consistent with the ethical standards published by the Auditing Practices Board in December 2004 and revised in April 2008 and October 2009.
A key factor that may impair auditors' independence is a lack of control over non-audit services provided by the external auditors. In essence, the external auditors' independence is deemed to be impaired if the auditors provide a service which:
Anglo American addresses this issue through three primary measures, namely:
The deﬁnition of prohibited non-audit services corresponds with the European Commission's recommendations on auditors' independence and with the Ethical Standards issued by the Audit Practices Board in the UK.
Other safeguards encapsulated in the policy include:
The Audit Committee has satisﬁed itself that the United Kingdom professional and regulatory requirements for audit partner rotation and employment of former employees of the external auditors have been complied with.
The Audit Committee considered information pertaining to the balance between fees for audit and non-audit work for the Group in 2009 and concluded that the nature and extent of non-audit fees do not present a threat to the external auditors' independence.
Furthermore, after reviewing a report from the external auditors on all their relationships with Anglo American that might reasonably have a bearing on the external auditors' independence and the audit engagement partner and staff's objectivity, and the related safeguards and procedures, the Committee has concluded that the external auditors' independence was not impaired.
The Audit Committee approved the external auditors' terms of engagement, scope of work, the process for the 2009 interim review, the annual audit and the applicable levels of materiality. Based on written reports submitted, the Committee reviewed, with the external auditors, the ﬁndings of their work and conﬁrmed that all signiﬁcant matters had been satisfactorily resolved.
The appointment of Deloitte LLP as the Group's external auditors (incumbents since the listing in 1999) is kept under annual review, and if satisfactory, the Committee will recommend the re-appointment of the audit firm. The appointment of Deloitte LLP followed a detailed evaluation of the predecessor audit firms following the listing and, rather than adopting a policy on tendering frequency, an annual review of the effectiveness of the external audit is supplemented by a periodic, comprehensive reassessment by the Committee.
The Committee's assessment of the external auditors' performance and independence underpins its recommendation to the Board to propose to shareholders the re-appointment of Deloitte LLP as auditors until the conclusion of the AGM in 2011. Resolutions to authorise the Board to re-appoint and determine their remuneration will be proposed at the AGM on 22 April 2010.
The Group has an internal audit department that reports centrally with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of Anglo American's operations. The head of internal audit is responsible for reporting and following up on the ﬁndings of this internal audit work to local management and the Audit Committee on a regular basis. Internal audit teams operated in all of the Group's principal divisions in the period under review, reporting ﬁndings to local senior management. The internal audit function's mandates and annual audit coverage plans were approved by the Audit Committee.
The internal audit activities are performed either by teams of appropriate, qualiﬁed and experienced employees, or through the engagement of external practitioners upon speciﬁed and agreed terms. A summary of audit results and risk-management information was presented to the Committee and Group senior management at regular intervals throughout the year. The Group's head of internal audit reports to the Audit Committee on the internal audit function's performance against the agreed internal audit plan.
Assurance regarding the accuracy and reliability of mineral resources and ore reserves disclosures is provided through a combination of internal technically proﬁcient staff and independent third parties.
During 2009, over 300 audit projects were completed covering a variety of financial, operational, strategic and compliance related business processes across all business units and functions. In addition, the internal audit department responded to a number of management requests to investigate alleged breaches of our business principles.