Corporate governance

Governance

The Corporate Responsibility Committee was in place throughout 2007 during which all its members were non-executive directors deemed to be independent in accordance with provision A.3.1 of the Combined Code.

The Committee normally asks the Head of Internal Audit, Group Human Resources Director, Group General Counsel and Corporate Responsibility Director to attend its meetings.

The Committee met five times in 2007.

Activities

Corporate responsibility concerns a company’s economic, social and environmental impact. All companies are different when it comes to their impact in these areas and therefore it is important for the Corporate Responsibility Committee to focus on the areas of corporate responsibility that are of particular importance for BAE Systems. The Committee has therefore agreed that its prime focus should be ethics and health and safety. However, it also deals with a range of other areas, including matters such as workforce diversity and a range of environmental matters.

The Committee monitors and reviews compliance with the Company’s standards of business behaviour and the work undertaken to ensure that all employees are aware and understand the application of these. The activities of the Committee during 2007 included reviewing the Company’s Ethics Helpline and Group ethics awareness programmes, including the results of surveys assessing such awareness. As reported elsewhere in this report, the Board has formed the Woolf Committee to study and report on the Group’s ethical policies and processes. During the year the Corporate Responsibility Committee met with members of the Woolf Committee to discuss ethics in general and its role in relation to the prospective implementation and assurance of activity that may be recommended. We look forward to the publication of the report later this year.

The health and safety of our employees is a key priority for the Company and also for the Corporate Responsibility Committee. We monitor safety performance and have reviewed various aspects of the management of health and safety within the Company. In addition, the Committee considered the output from a workshop held by management on corporate responsibility and was pleased to endorse the priority it is giving to health and safety in addition to ethics.

During the year the Company has been developing further its risk management processes, particularly in respect of the monitoring and mitigation of non-financial risks. The Committee reviews, on an annual basis, the relevant output from such processes as they relate to health and safety, workplace policies, environmental impact, business ethics and compliance with anti-corruption laws and regulation.

The Committee undertook the following activities in 2007:

• received reports on corporate responsibility matters including, amongst other things, engagement with shareholders and safety, health and environment performance information;
• received reports from the Internal Audit function on audits undertaken on ethical and environmental matters;
• reviewed and approved the proposed approach to progress the Company towards a ‘best in class’ position on safety performance;
• reviewed the Company Corporate Responsibility Report;
• reviewed its terms of reference; and
• liaised with the Remuneration Committee on the setting of corporate responsibility-related non-financial objectives to be included in the directors’ annual bonus plan.

See the Corporate responsibility review pages for more detail on the Group’s corporate responsibility activities.

On behalf of the Corporate Responsibility Committee

Peter Weinberg
Corporate Responsibility Committee Chairman