Vedanta

Introduction

The Board of Vedanta Resources plc believes that high standards of corporate governance are critical to maintaining investor confidence and the integrity of the Group. The Board also believes that its corporate governance framework must reflect the changing nature of the Group’s businesses.

The objective of this report is to provide details of the Group’s governance policies, processes and structures and its compliance with the principles of the Combined Code on Corporate Governance issued by the Financial Reporting Council in June 2006 (‘the Code’).

Statement of Compliance with Code Provisions

With the exception of the following matters, the Company has throughout the year fully complied with the principles set out in Section 1 of the UK Financial Reporting Council’s Combined Code on Corporate Governance adopted in June 2006.

First, as previously reported, the Executive Chairman, Mr Anil Agarwal, did not meet the independence criteria on appointment because he was previously the Chief Executive of the Company and, through Volcan Investments Ltd (‘Volcan’), he and his family have a controlling interest in the Company (Code Provision A.2.2 and A.3.1).

As the founder of Vedanta, Mr Agarwal has built the Group since its inception in 1976. The Board considers that Mr Agarwal has made a major contribution to the Company’s phenomenal growth and development into a FTSE 100 company and that he has been responsible for leading the Group to strong profitability and cash flows.

Mr Agarwal’s appointment in March 2005 as Executive Chairman allowed him to step back from operational management and focus on turning new opportunities into value-creating projects, thereby extending the Group’s exceptional growth pipeline into the future. The Board is unanimously of the opinion that his continued involvement in an executive capacity is vitally important to the success of the Group.

Second, pursuant to the Relationship Agreement and as disclosed at the time of listing, Volcan will be consulted on all appointments to the Board. The Nominations Committee therefore works collaboratively with Volcan over making appointments to the Board and, to this extent, the Board appointment process differs from that set out in Code Provision A.4.1.

The Board

Role and Responsibilities of the Board

The role of the Board is to provide leadership to the Group in a manner which maximises opportunities to develop its portfolio of businesses profitably whilst assessing and managing the associated risks.

The Board assesses the strategic objectives of each business, monitors performance, ensures the availability of financial, management and other resources required to meet the objectives, sets Group standards of conduct and ensures that effective controls are in place to manage risk and that the interests of investors and other stakeholders are taken into consideration.

The Board has adopted a schedule of matters reserved for its consideration to ensure that it is in a position to deliver its strategic objectives, monitor performance and maintain effective controls whilst delegating operational management to the Executive Committee and the businesses. Such matters reserved to the Board include, but are not limited to, approving Group strategy and annual budgets, major capital expenditure, major acquisitions and disposals.

There are five Board Committees: Executive, Remuneration, Audit, Nominations and Health, Safety and Environment. Each has its own clearly defined terms of reference and reports directly to the Board. Additional information on the Executive, Remuneration, Audit and Nominations Committees is given later in this report and, in the case of the Health, Safety and Environment Committee, in the Sustainable Development Report . 

Board Balance and Independence

The Board comprises the following members:

Mr AK Agarwal, Executive Chairman
Mr N Agarwal Deputy, Executive Chairman
Mr MS Mehta, Chief Executive
Mr N Chandra, Non-executive Director and Senior Independent Director
Mr A Mehta, Non-executive Director
Mr ER Macdonald, Non-executive Director

All three Non-executive Directors served throughout the year ended 31 March 2009 and up to the date of this report. There have been no new appointments to the Board during the year.

Brief biographies of all of the Directors can be found here.

The Board considers that all of the Non-executive Directors are independent of the Group as defined by Code Provision A.3.1. In making its assessment, the Board has considered the fact that Mr Mehta and Mr Macdonald have held previous senior management positions within subsidiary companies of HSBC Holdings plc (which acted as the joint global co-ordinator and book runner when the Company listed in 2003).

At the time of their appointments, the Board considered that neither Mr Mehta’s nor Mr Macdonald’s previous employments included the provision of corporate finance services in London by the HSBC Group (and thus they had no involvement with the Group prior to their appointment) and that the value of the business transacted between the Company and the HSBC Group was less than 1.0% of the turnover of either organisation.

The Board therefore remains of the view that these circumstances will not affect the judgement exercised by either Mr Mehta or Mr MacDonald and therefore considers them to be independent.

Mr Naresh Chandra is the Senior Independent Director (‘SID’). His primary responsibilities are to lead discussions at meetings of the Non-executive Directors, provide an effective channel of communication between the Chairman and Non-executive Directors, ensure that the views of the Non-executive Directors are given due consideration and provide a point of contact for any shareholder who wishes to raise concerns which the normal channels of communication through the Chairman and Chief Executive have failed to resolve, or for which contact is inappropriate.

During the year, the Chairman held regular meetings with Non-executive Directors without the Executive Directors being present.

Board Meetings and Attendance

The Board met nine times during the year in the ordinary course of business and maintains close dialogue between meetings. Board committees are appointed to deal with the execution of specific projects requiring Board approval. The Board is updated regularly by these committees on the development of these projects. The terms of reference of Board committees are reviewed from time to time in order to enhance the decision-making process.

Each member of the Board receives information comparing the performance of each business and of the Group with the annual budget each quarter and is given sufficient briefing materials with the agenda in advance of each Board meeting to enable informed decisions to be made. In addition to these formal processes, Directors are in regular communication with the senior executives.

The Chief Financial Officer, Mr DD Jalan, attends all Board meetings to represent the finance function and act as a conduit between the Board and the Executive Committee. Directors’ attendance at Board and committee meetings during the year.

 ^{1 Resigned from the Board on 30 September 2008}

 ^{2 Appointed to the Board on 1 October 2008}

 ^{3 Resigned from the Board on 6 March 2009}

Notes:
1. A = Maximum number of meetings the Directors could have attended.
2. B = Number of meetings attended.

Only members of a Board committee are entitled to attend the relevant committee meetings, although other Directors may attend Board committees at the invitation of the relevant committee chairman.

The Non-executive Directors possess a range of experience and are of sufficiently high calibre to bring to bear independent judgement on issues of strategy, performance and resources that are vital to the success of the Group.

Next >