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Committees of the Board

Subject to those matters reserved for its decision, the Board delegates certain responsibilities to a number of standing committees – the Audit, Remuneration, Nomination and S&SD Committees. The terms of reference for each of these committees and a schedule of matters reserved for the Board’s decision are published on the Company’s website.

Remuneration Committee

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 six times during 2008.

The Remuneration Committee presently comprises: Sir Rob Margetts (chairman), David Challen and Chris Fay, all of whom are independent non-executive directors, and Sir Mark Moody-Stuart. Sir CK Chow and Peter Woicke will join the Committee with effect from the conclusion of the AGM.

Safety and Sustainable Development (S&SD) Committee

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 Report to Society 2008, 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 Committee met four times during 2008.

The S&SD Committee presently comprises: Chris Fay (chairman), Cynthia Carroll, Sir Mark Moody-Stuart, Mamphela Ramphele and Peter Woicke.

Nomination Committee

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 2008, 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 three times during 2008.

The Nomination Committee presently comprises: Fred Phaswana (chairman), Sir Rob Margetts, Sir Mark Moody-Stuart, Nicky Oppenheimer, Mamphela Ramphele, Karel Van Miert and Peter Woicke. In accordance with the provisions of the Code, the majority of members and the chairman of the Committee are independent non-executive directors.

With effect from the conclusion of the AGM, the Committee will consist of Sir Mark Moody-Stuart (chairman), Fred Phaswana, Mamphela Ramphele, Karel Van Miert, Peter Woicke and Sir CK Chow.

Audit Committee

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.

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, Interim 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 and external audit reports on the results of audits at various operations. Further information on risk management processes is provided in the internal control disclosure statement.

External audit

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.

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:

  • results in auditing of own work by the auditors;
  • results in the auditors acting as a manager or employee of the Group;
  • puts the auditors in the role of advocate for the Group; or
  • creates a mutuality of interest between the auditors and the Group.

Anglo American addresses this issue through three primary measures, namely:

  • disclosure of the extent and nature of non-audit services;
  • the prohibition of selected services; and
  • prior approval by the Audit Committee chairman of non-audit services where the cost of the proposed assignment is likely to exceed $50,000.

Disclosure entails reporting non-audit services to the Group’s audit committees and inclusion of prescribed detail, i.e. the breakdown of fees paid to external auditors for audit and non-audit work in the Annual Reports of listed entities. The policy’s definition of prohibited non-audit services corresponds with the European Commission’s recommendations on auditors’ independence.

Other safeguards encapsulated in the policy include:

  • the external auditors are required to adhere to a rotation policy based on best practice and professional standards in the United Kingdom. The standard period for rotation of the audit engagement partner is five years and, for any key audit principal, seven years.
  • any partner designated as a key audit principal of Anglo American shall not be employed by Anglo American in a key management position unless a period of at least two years has elapsed since the conclusion of the last relevant audit.
  • the external auditors are required to periodically assess, in their professional judgement, whether they are independent of the Group.
  • the Audit Committee ensures that the scope of the auditors’ work is sufficient and that the auditors are fairly remunerated.
  • the Audit Committee has primary responsibility for making recommendations to the Board on the appointment, re-appointment and removal of the external auditors.
  • the Audit Committee has the authority to engage independent counsel and other advisers as they determine necessary in order to resolve issues on auditor independence.

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 2008 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 2008 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 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 as auditors until the conclusion of the AGM in 2010. Resolutions to authorise the Board to re-appoint and determine their remuneration will be proposed at the AGM on 15 April 2009.

Internal audit

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 the findings of this internal audit work to 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. 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.

Composition

The Audit Committee presently comprises: David Challen (chairman), Chris Fay, Fred Phaswana, Karel Van Miert and Peter Woicke, all of whom are independent non-executive directors. In view of his appointment to other committees, Peter Woicke will step down as a member at the conclusion of the AGM. 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 2008, and on one of those occasions the members held discussions with the external audit partners and the head of internal audit in the absence of management.

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