| Corporate governance
The Group is committed to the highest standards of corporate governance. This report (and where appropriate, the Remuneration report) describes how it applies the principles and complies with the provisions of the Combined Code. Compliance
The Board confirms that in 2000, the Company complied with all the provisions of the Combined Code. The Board
The Board comprises a chairman, a chief executive, six other executive directors and five non-executive directors. Biographies of the directors appear on page 24. Lord Moore of Lower Marsh has held the position of non-executive Deputy Chairman since 1996 and is the Company's Senior Independent director. All the non-executive directors are considered by the Board to be independent of management and free of any relationship which could materially interfere with the exercise of their independent judgement. They are appointed by the Board for specified terms on the basis of recommendations put to the Board by the nominations committee. The Board meets regularly throughout the year. It considers all issues relating to the strategy, direction and future development of the Group. It has a schedule of matters reserved to it for decision, which is regularly updated. The requirement for Board approval on these matters is understood and communicated widely throughout the Group. To enable the Board to function effectively and the directors to discharge their responsibilities, full and timely access is provided to all relevant information. There is an agreed procedure for directors to take independent professional advice at the Company's expense. This is in addition to the access every director has to the Company Secretary and to the General Counsel. The Group Executive
The Group Executive is responsible for the running of the Company within the strategy determined by the Board. The Group Executive is chaired by Mr J E V Rose –
Chief Executive. Its other members are:
Mr J P Cheffins, Chief Operating Officer and
President – Civil Aerospace
Mr J Gaskell, President – Energy Business
Mr C H Green, President – Defence Aerospace
Mr J M Guyette, President and Chief Executive Officer of Rolls-Royce North America Inc.
Mr P Heiden, Finance Director
Mr C J Hole, Director of Procurement
Dr S Lanyado, President – Marine Business
Mr J R Rivers, Director – Human Resources
Mr P C Ruffles, Director – Engineering and Technology
Mr R T Turner, Group Marketing Director. Board committees
The Board has delegated certain powers and duties to Board committees, all of which operate within defined terms of reference. The nominations committee makes recommendations to the Board on the appointment of executive and non-executive directors. The committee is chaired by Sir Ralph Robins and its other members are Mr P J Byrom, Lord Moore of Lower Marsh, Sir Robin Nicholson, Mr J E V Rose, Mr C G Symon and Sir John Weston. The remuneration committee's membership and principal terms of reference are set out in the Remuneration report. The audit committee meets regularly with the external auditors, reviews the Group's annual and interim financial statements and also ensures that appropriate accounting policies and compliance procedures are in place. The committee is chaired by Mr P J Byrom and its other members are Lord Moore of Lower Marsh and Sir Robin Nicholson. The risk committee is accountable for the Company's risk management and for reporting key risks and the associated mitigating actions to the Board. The committee is chaired by Mr J E V Rose and its other members are Mr J P Cheffins, Mr C H Green, Mr J M Guyette, Mr P Heiden and Mr P C Ruffles. The health, safety and environment committee is chaired by Mr J E V Rose and its other members are Mr P J Byrom, Mr C H Green, Mr J M Guyette and Mr P C Ruffles. It is responsible for setting HS&E policy and objectives. Further information on the committee's work in this important area is set out in the Group's environmental report. The nuclear propulsion assurance committee is responsible for the HS&E aspects of the Company's nuclear facilities. It is chaired by Sir Ralph Robins and the other members are Mr P Heiden, Sir Robin Nicholson, Mr J E V Rose and
Mr P C Ruffles. The community investment committee is responsible for administering the Company's policy on charitable donations. The committee is chaired by Sir John Weston and its other members are Sir Robin Nicholson and Mr R T Turner. The Company's annual charitable donations budget is administered by the committee and by regional site committees. The policy the committee follows when considering charitable appeals is set out below: ‘As a forward-looking, innovative and global company, Rolls-Royce plc is committed to being a good corporate citizen in its operations throughout the world. The Group's policy on donations is to direct its support primarily to causes with educational, engineering and scientific objectives, as well as to social objectives connected with the Company's business and place in the wider community.' During 2000, the Company made charitable donations amounting to £371,000. A list of the principal donations made in 2000 is available on written request to the Company Secretary. The Group made no political contributions in 2000. Communication with shareholders
The Company attaches considerable importance to the effectiveness of its communication with shareholders. It publishes a concise summary financial statement as well as its full report and accounts and there is a separate environmental report. There is regular dialogue with individual institutional shareholders as well as general presentations after the interim and preliminary results. All shareholders can gain access to these presentations, as well as to the annual report and other information about the Group, through the Group's web site at www.rolls-royce.com. They may also attend the Company's Annual General Meeting at which the key business developments during the financial year are highlighted and at which they have an opportunity to
ask questions. Internal controls and risk management Directors' responsibilities
The directors are responsible for the Group's system of internal control and for reviewing its effectiveness from both a financial and operational perspective. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and to provide reasonable but not absolute assurance against material misstatement or loss. In reviewing the effectiveness of the system of internal control, the Board has taken account of the results of all the work carried out to audit and review the activities of the Group. There is an on-going process to identify, assess and manage risk. This process is subject to continuous improvement and has been in place throughout the financial year to which these statements apply and up to the date of their approval. The Board has reviewed the process and has confirmed that it complies with the Turnbull Committee Guidance on Internal Control issued in September 1999. The Board has established a risk committee chaired by the Chief Executive with specific accountability for the system of risk management and for reporting key risks and their associated mitigating actions to the Board. Details of the membership of the committee are set out on page 27. Organisation
The Group has a clearly defined organisation structure within which operational management have detailed responsibilities and levels of authorisation, supported by written job descriptions and operating manuals. The Group also has a code of business conduct. The risk management system
Management are responsible for the on-going identification and evaluation of significant risks within their areas of responsibility and the design and operation of suitable controls or mitigation actions. Risks may arise from a variety of internal and external sources. They may be associated with regulation, customer requirements, competitor actions or could result from the capability of the processes we use to execute our business. All risks, irrespective of source, are actioned through the processes operated by our project and functional teams. Management report regularly on their review of risks, and how they are managed, to the risk committee so that the Board can then consider and review these risks in terms of their potential impact. During 2000, management have carried out a comprehensive risk review at individual business and sector levels and have developed action plans to enhance the business process performance. Systems of internal control
The general managers of individual businesses are aware of their responsibility to operate systems of internal control which provide reasonable assurance of effective and efficient operations, reliable financial information and reporting and compliance with law and regulation. In addition financial managers are required to acknowledge in writing that their routine financial reporting is based on reliable data and that their results are properly stated in accordance with Group requirements. The Group has a comprehensive budgeting system with an annual budget approved by the directors. Revised forecasts for the year are reported at least quarterly. Actual results are reported monthly against budget and variances reviewed. In view of the long-term nature of the business, the Group also prepares, annually, a detailed five-year plan which is reviewed by the directors. The activities of the Group are subject to review by the risk management organisation and the audit functions of health, safety and environment, the quality management system, engineering and business assurance. These functions operate to work programmes agreed by the appropriate Board member. In particular, the business assurance function, which works closely with the external auditors, undertakes a financial and operational audit programme agreed by the audit committee and covering all Group activities. The programme includes independent reviews of the systems of internal control and risk management. Findings are reported to the audit committee three times a year. | 
