Operation of Board Committees
The Board has delegated certain responsibilities to the Audit, Remuneration, Nomination and Governance, and Science Committees. The Board provides adequate resources to enable each committee to undertake its duties. Further details of the role, membership and terms of reference for each committee are set out below. In addition to the standing committees of the Board, there may from time to time be constituted ad hoc committees for specific projects or tasks. In these cases, the scope and responsibilities of the committee is documented.
Board Committee membership
| Name | Audit Committee | Remuneration Committee | Nomination and Governance Committee | Science Committee | Independent1 |
|---|---|---|---|---|---|
| Bo Angelin | x | x | x |  |
|
| David Brennan | x | x | x | x | - |
| John Buchanan | Chair | |
x | x | |
| Jean-Philippe Courtois | |
x | x | x | |
| Jane Henney | |
x | |
|
|
| Michele Hooper2 | |
x | |
x | |
| Simon Lowth | x | x | x | x | - |
| Rudy Markham | |
x | x | x | |
| Håkan Mogren3 | x | x | |
x | x |
| John Patterson4 | x | x | x | |
- |
| Nancy Rothwell | x | |
x | Chair | |
| Louis Schweitzer | x | |
Chair | x | -5 |
| John Varley | x | Chair | |
x | |
| Marcus Wallenberg | x | x | x | x | x |
- 1
- As determined by the Board for Combined Code purposes.
- 2
- Michele Hooper is the senior independent Non-Executive Director.
- 3
- Håkan Mogren retired from the Board on 30 April 2009.
- 4
- John Patterson retired from the Board on 31 March 2009.
- 5
- Louis Schweitzer was considered independent by the Board upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate to the Chairman after his appointment.
Audit Committee
The current members of the Audit Committee are John Buchanan (Audit Committee Chairman), Jane Henney, Michele Hooper (senior independent Non-Executive Director), Jean-Philippe Courtois and Rudy Markham. They are all Non-Executive Directors. The Board considers each member to be independent under the Combined Code and under the general guidance and specific criteria of the Listing Standards concerning the composition of audit committees applicable to non-US companies. In April 2009, the Company submitted the required annual written affirmation to the NYSE confirming its full compliance with those standards. For the purposes of the Combined Code, the Board remains satisfied that at least one member of the Audit Committee has recent and relevant financial experience. At its meeting in December 2009, the Board determined that Michele Hooper and Rudy Markham are audit committee financial experts for the purposes of the Sarbanes-Oxley Act. The Deputy Company Secretary acts as secretary to this committee.
The core terms of reference of the Audit Committee continue to include reviewing and reporting to the Board on:
- Matters relating to the audit plans of the external auditor and GIA as well as oversight of the work of the Global Compliance function.
- The Group's overall framework for internal control over financial reporting and for other internal controls and processes.
- The Group's overall framework for risk management, particularly financial risks.
- The accounting policies and practices of the Group.
- The annual and quarterly financial reporting carried out by the Group.
The Audit Committee is responsible for notifying the Board of any significant concerns of the external auditor or the Vice-President, Group Internal Audit (GIA) arising from their audit work, any matters that may materially affect or impair the independence of the external auditor, any significant deficiencies or material weaknesses in the design or operation of the Group's internal control over financial reporting or other internal controls, and any serious issues of non-compliance.
The Audit Committee oversees the establishment, implementation and maintenance of the Code of Conduct and other related policies. It has established procedures for the receipt and handling of complaints concerning accounting or audit matters. It recommends to the Board the appointment of the external auditor, subject to the approval of the Company's shareholders at a general meeting. Shareholders in a general meeting authorise the Directors to fix the remuneration of the external auditor. The Audit Committee reviews and approves the appointment and any dismissal of the Vice-President, GIA.
The Audit Committee maintains policies and procedures for the pre-approval of all audit services and permitted non-audit services undertaken by the external auditor, the principal purpose of which is to ensure that the independence of the external auditor is not impaired. The policies and procedures cover three categories of work - audit services, audit-related services and tax services. The policies define the type of work that falls within each of these categories and the non-audit services that the external auditor is prohibited from performing under the rules of the SEC and other relevant UK and US professional and regulatory requirements. The pre-approval procedures permit certain audit, audit-related and tax services to be performed by the external auditor during the year, subject to fee limits agreed with the Audit Committee in advance. The CFO (supported by the Senior Vice-President, Group Finance) monitors the status of all services being provided by the external auditor. The procedures also deal with placing non-audit work out for tender, where appropriate. Authority to approve work in excess of the pre-agreed fee limits is delegated to the Chairman of the Audit Committee in the first instance. A standing agenda item at Audit Committee meetings covers the operation of the pre-approval procedures and regular reports are provided to the full Audit Committee.
The Audit Committee's terms of reference are available on our website, astrazeneca.com and on request from the Company Secretary.
The Audit Committee held four scheduled meetings in 2009. The individual attendance record of members of the Audit Committee is set out in the Board and Committee meeting attendance in 2009 table above.
Following each Audit Committee meeting, the Chairman of the Audit Committee (or the senior independent Non-Executive Director in the absence of the Chairman of the Audit Committee) reported to the Board on the principal matters covered at the meeting and minutes of the meetings were circulated to all Board members.
During 2009, members of the Audit Committee met individual managers or groups of managers on a number of occasions, which helped the members gain a deeper insight into areas relevant to the Audit Committee's work and provided an opportunity to discuss specific areas of interest.
During the year, in line with its normal practice, the Audit Committee also held a number of private meetings, without management present, with the Vice-President, GIA, the Global Compliance Officer and the lead partners from the Company's external audit firm. The purpose of these meetings was to facilitate free and open discussions between the Audit Committee members and those individuals, separately from the main sessions of the Audit Committee, which were attended by the CFO and the Senior Vice-President, Group Finance.
During 2009 and January 2010, the business considered and discussed by the Audit Committee included the matters referred to below:
- The Group's financial disclosures were reviewed and various accounting matters considered.
- Reports were received from the external auditor concerning its audit of the Financial Statements of the Group and from management, GIA, Global Compliance and the external auditor on the effectiveness of the Group's system of internal controls and, in particular, its internal control over financial reporting. This included review and discussion of the results of the Group's 'continuous assurance' and annual 'letter of assurance' processes (described further below in the UK corporate governance requirements section). The Audit Committee also reviewed quarterly activity reports of audit work carried out by GIA and the status of follow-up actions with management as well as reports from the Global Compliance function.
- The systems and processes that management has developed pertaining to risk identification, classification and mitigation.
- Continuing work to comply with the applicable provisions of the Sarbanes-Oxley Act. In particular, the Audit Committee regularly reviewed the status of compliance with the programme of internal controls over financial reporting implemented pursuant to section 404 of the Sarbanes-Oxley Act; further information about this is set out in the Sarbanes-Oxley Act section 404 section.
- Data about calls made by employees via the AZethics telephone lines and other routes regarding potential breaches of the Code of Conduct together with the results of enquiries into these matters.
- The succession of the Vice-President, GIA.
- Accounting issues relevant to litigation and taxation matters.
- Reports from the Group Treasury function and, in particular, the Group's liquidity and cash position and the appropriateness of its cash management policies in the context of the current economic situation.
- Other reports concerning the GIA, Global Compliance and Finance functions, including the internal audit plan and progress and plans of the Global Compliance Officer.
- The amount of audit and non-audit fees of the external auditor throughout 2009. The Audit Committee was satisfied throughout the year that the objectivity and independence of the external auditor were not in any way impaired by the nature of the non-audit work undertaken by the external auditor during the year, the level of non-audit fees charged for such work or any other facts or circumstances. Further information about the audit and non-audit fees for the year is disclosed in Note 27 to the Financial Statements.
- A review and assessment of the Audit Committee's performance which concluded that such performance was satisfactory.
In line with best practice, the Group will periodically consider how the audit requirements of the Group are best served in the context of business need and the prevailing external environment and, against the background of this review, will from time to time undertake a formal tendering programme with audit firms of appropriate size and calibre. Following discussions at a meeting in January 2010, the Audit Committee unanimously recommended to the Board that a resolution for the re-appointment of KPMG as the Company's external auditor be proposed to shareholders at the AGM in April 2010. Based on its experience of working with external auditors, the Audit Committee believes that the quality of the interaction with and level of service received from KPMG were key factors supporting this recommendation. The Audit Committee was also satisfied that, notwithstanding the length of tenure of KPMG, KPMG met the independence criteria under the relevant statutory, regulatory and ethical standards applicable to auditors. Consistent with current market practice, KPMG's services to the Group are provided pursuant to terms of engagement which are reviewed by the Audit Committee. These terms of engagement do not include any contractual obligations under which the Directors would be prevented from appointing a different audit firm were they to consider this to be in the best interests of the Group. The Audit Committee, through management, continues to maintain contact and dialogue with other major audit firms who are familiar with the Group's business for succession purposes as required. This is reported to the Audit Committee in order to ensure a smooth transition from the current auditor, should this be necessary.
At the same meeting, the CEO and the CFO presented to the Audit Committee their conclusions following the evaluation of the effectiveness of the Group's disclosure controls and procedures required by Item 15(a) of Form 20-F at 31 December 2009. Based on their evaluation, the CEO and the CFO concluded that, as at that date, the Group maintains an effective system of disclosure controls and procedures.
There was no change in the Group's internal control over financial reporting that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, the Group's internal control over financial reporting.
The Audit Committee is currently scheduled to meet four times in 2010 and will meet at such other times as may be required.
Remuneration Committee
The principal role of the Remuneration Committee continues to be to consider, on behalf of the Board, the remuneration (including pension rights and compensation payments) of Executive Directors, the Chairman and senior executives. More information is set out in the Directors' Remuneration Report.
Nomination and Governance Committee
The Nomination and Governance Committee's core role continues to be (after appropriate consultation with the Chairman and the CEO) to recommend to the Board any new appointments of Directors. Any decisions relating to the appointment of Directors are made by the entire Board based on the merits of the candidates and the relevance of their background and experience, measured against objective criteria, with care taken to ensure that appointees have enough time to devote to the job. The Nomination and Governance Committee also advises the Board periodically on significant developments in corporate governance and the Company's compliance with the Combined Code.
During 2009, the members of the Nomination and Governance Committee were Louis Schweitzer (Nomination and Governance Committee Chairman), Håkan Mogren (until his retirement from the Board on 30 April 2009), Jane Henney, Michele Hooper and John Varley. They are all Non-Executive Directors. The Board considers all current members of the Nomination and Governance Committee to be independent (Louis Schweitzer was considered by the Board to be independent upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate in relation to the Chairman after his appointment). The Company Secretary acts as secretary to this committee.
The Nomination and Governance Committee met twice in 2009. The individual attendance record of members of the Nomination and Governance Committee is set out in the Board and Committee meeting attendance in 2009 table above. During 2009, the Nomination and Governance Committee reviewed the knowledge, experience and balance of the Board overall and considered its likely future requirements given the strategic and business objectives of the Group. In addition, the Nomination and Governance Committee received reports about the various corporate governance reviews and proposals that were a feature of 2009, and carefully monitored developments and their potential impact on the Group.
The Nomination and Governance Committee's terms of reference are available on our website, astrazeneca.com.
Science Committee
The Science Committee's core role continues to be to provide assurance to the Board regarding the quality, integrity and competitiveness of the Company's science-based R&D activities. It does not review individual projects. The Science Committee, together with external experts, where appropriate, does review important bioethical issues faced by the Group and assists in the formulation of, and agrees on behalf of the Board, appropriate policies in relation to such issues. In addition, the Science Committee is responsible for considering general future trends in medical science and technology, and any new areas of science or medicine in which the Group may be interested.
During 2009, the members of the Science Committee, all of whom have a knowledge of, or an interest in, life sciences, were Nancy Rothwell (Science Committee Chairman), Jane Henney, Bo Angelin, all Non-Executive Directors, and Jan Lundberg (until his resignation in November), John Patterson (until his retirement from the Board on 31 March 2009), Anders Ekblom and Christer Köhler (from his appointment as Interim Executive Vice-President, Discovery Research in November). The Vice-President, Business Performance and Continuous Improvement, R&D also attends all meetings and acts as secretary to this committee.
The Science Committee met twice in 2009. Its remit is available on the Company's website, astrazeneca.com.
