As envisaged in the 2015 Annual Report, we asked Independent Audit Limited* (“Independent Audit”) to conduct an externally-facilitated review of the effectiveness of the Board and its Committees in January 2016 to:
- assess the Company’s progress in closing gaps that were identified in the 2013 external review;
- evaluate the Company’s response to the changes made to the UK Corporate Governance Code in 2014;
- analyse the Company’s response to the new FRC guidance on Internal Control and Risk Management; and
- benchmark Board and Committee effectiveness against other large publicly-listed companies in the UK.
We then worked on addressing the opportunities for improvement identified by Independent Audit. Independent Audit provided a progress report in January 2017 based on further interviews and observations so that we could focus further on specific areas for improvement in 2017 and beyond.
Significant improvements have been made to Board effectiveness over the last three years.
We will use the findings of the January 2017 progress report to make targeted additional improvements to Board and Committee effectiveness in 2017. This will include maintaining the strengths and continuing to address those areas identified in January 2016 as in need of further improvement.
AREAS OF IMPROVEMENT IDENTIFIED IN JANUARY 2016
Independent Audit reported that significant improvements have been made to Board effectiveness following the changes that had been made to address the areas for improvement identified in 2013. In particular:
- the appointment of new independent Non-Executive Directors has improved Board balance and diversity;
- the appointment of a Santiago-based Secretary to the Board has significantly improved Board planning, organisation, focus and follow-up;
- specific requests made by the Board are followed through into agreed actions which are tracked and reviewed until they have been reported back to the Board;
- the Committees are functioning well, allowing the Board to receive more detail and enhanced visibility across the business;
- the introduction of a Projects Committee has improved Board oversight of project development and execution, informed capital allocation decisions and allowed the members of that Committee to add additional value to the management team; and
- the management team has been strengthened, resulting in the Board having even greater confidence in management.
During the year, led by the Senior Independent Director, the Non-Executive Directors met without the Chairman present and reviewed the Chairman’s effectiveness. The Senior Independent Director subsequently met with the Chairman to provide feedback. The Chairman used these comments to develop further the effective operation of the Board. In turn, the Chairman reviewed the individual effectiveness of each of the Non-Executive Directors.
OPPORTUNITIES FOR FURTHER IMPROVEMENT IDENTIFIED IN JANUARY 2016
Independent Audit reported that, although no major issues needed to be addressed in order to ensure that the Board and Committees continue to operate effectively, further improvements could be made by:
- reflecting on the Group’s culture and how it affects the Group’s ability to cope with change, to work within controls, and to respect the Group’s values; and
- changing the structure of materials circulated ahead of meetings to further enhance the quality of discussion, use of time, and ability for Directors to focus on key strategic issues and risks;
JANUARY 2017 PROGRESS REPORT
Improvement is a continuous process and Independent Audit’s January 2017 progress report noted that:
- a very thorough approach to follow-through of the agreed actions has been adopted;
- considerable progress has been made across many aspects of the Board’s activity, including a strong focus on cost and competitiveness as well as considerable attention given to other crucial areas, including relations with local communities, and to safety and health; and
- looking ahead, management will need to focus on the further development of the information provided to Directors to help support discussion of the main challenges and risks, and the Board will need to assess how the Group will respond to industry trends, macroeconomic developments and innovation.