Board effectiveness

The effectiveness of the Board is key to the Group's success. Because of this, the Board has, through the Nomination and Governance Committee, developed a formal annual review process to assess how well the Board, its Committees and Directors are performing collectively and individually and how their respective performances might be improved. The process involves completing confidential questionnaires, which are updated each year, and conducting individual interviews based on these questionnaires with all Board members to gather their views on things that have gone well, and areas for improvement. A report on the output is considered in detail by the Nomination and Governance Committee before being formally reviewed by the Board. This report includes an action plan. Progress against this plan is monitored and reported back to the Board. The process of reviewing individual Directors is led by the Chairman. The review of the Chairman's performance is led by the Senior Independent Director and involves obtaining feedback from each of the other Directors. The Board effectiveness review is undertaken with internal support. The Nomination and Governance Committee considers each year whether this remains the most effective approach.

Following the review in late 2007, the Board concluded that it had performed effectively overall, and agreed actions in respect of certain areas identified for improvement. These included, for example, continuing to focus on the Group's strategy and planning processes, and strengthening the use of KPIs to improve management information.

The Chairman also held one-to-one meetings with the Directors to assess their individual performances and contributions against performance objectives set out in the Board Charter. These meetings were designed to ensure that each Director was contributing effectively and remained committed to the role. No review meeting was held with Colin Buchan, who was appointed in January 2008. The confidential questionnaires used in the process also supported the Board's review of the Chairman's performance for the period since his appointment. The Directors, led by Hugh Stevenson and without the Chairman being present, met once during the period to consider the Chairman's performance and concluded that he had performed effectively during the period. In addition, the Chairman and the non-executive Directors met without the executive Directors present to discuss the performance of the executive Directors and executive succession planning processes.

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