Corporate governance

This information is sourced from the Annual Report 31 March 2010.

Statement of compliance with the Code of Best Practice

The Company has complied throughout the year with the Provisions of The Combined Code on Corporate Governance 2008, other than that, following Kate Swann’s departure on 10 July 2009, until Dido Harding’s appointment on 1 January 2010, the Remuneration Committee comprised two independent
non-executive directors rather than three.

Board effectiveness

The Board is responsible for the strategy, effective control and management of the Group. There is a written division of responsibilities at the head of the Company between the Chairman and Chief Executive, which has been approved by the Board. There is a formal schedule of matters specifically reserved for Board approval, which includes approval of the annual and quarterly accounts, the approval of authority levels below the Board and material acquisitions, disposals and financing arrangements. The Board delegates authority to the executive directors of the Company, in
respect of certain transactions within defined, limited parameters. The Board has a regular schedule of meetings together with further meetings as required by the ongoing business of the Company. The executive directors and
senior executives who comprise the Executive Committee meet fortnightly, chaired by the Chief Executive, to deal with the ongoing management of the Group. In addition, the Investment Committee, which comprises the executive directors, meets as required to review and approve all major capital transactions.

The Chairman of the Board and individual directors meet regularly, outside formal Board meetings, as part of each director’s continuing contribution to delivery of the Company’s strategy and superior returns for shareholders. This process also allows for open two-way discussion about the effectiveness of the Board, its committees and individual directors, both executive and non-executive. By this means the Chairman is continuously aware of the views of individual directors and can act as necessary to deal with any issues relating to Board effectiveness before they can become a risk to the Company.

There is a strong and independent non-executive element on the Board.

British Land Board performance evaluation

This year, Dr Long of Boardroom Review acted as an independent facilitator for the Board evaluation process. This was designed to assess the quality of the Board’s decision making and debate, its overall contribution and value to the long-term health and success of the Company, and its preparation for future challenges. It included a confidential questionnaire, one-to-one interviews with each Director and the Company Secretary, Board and Committee meeting observation and a review of relevant papers. Feedback from the review was provided in the form of a written report and presentation to the Board, which then discussed its findings. The review concluded that the British Land Board rates very highly in its effectiveness and engagement with the Company. Given the Board’s desire for continuous improvement, there were a number of issues arising from the review which affect the Board’s capacity for effectiveness in the longer term. The review’s recommendations focused on sustained efforts to determine, refine and adapt the strategic direction, to understand and respond to the external environment and to improve the collective decision process through effective use of the Board’s time.

The annual appraisal process also includes the Senior Independent Non-executive Director meeting to discuss the performance of the Chairman with other directors annually, or more frequently as necessary. In addition, the Chairman meets with each non-executive director annually to discuss their contribution and the Chairman provides the Remuneration Committee with a written appraisal of the Chief Executive’s performance for the year. Similarly, the Chief Executive provides the Remuneration Committee with a written assessment of the executive directors’ performance.

Committees of the Board

The Board has established Audit, Remuneration and Nomination Committees which operate within defined terms of reference, which are made available on the Company’s website http://www.britishland.com/ and their minutes are circulated to the Board. The Audit and Remuneration Committees are entirely composed of independent non-executive directors. Robert Swannell is the Senior Independent Non-executive Director.

Attendance at Board or Committee meetings during the year to 31 March 2010

Please note: where '-' is shown, the Director listed is not a member of the Committee

Nomination Committee

The The Nomination Committee’s responsibilities include making recommendations to the Board on all new Board appointments and succession planning. It consists of Chris Gibson-Smith, Lord Turnbull and Robert Swannell.

The Nomination Committee during the year has made recommendations to the Board on the appointment of two new executive directors, Charles Maudsley and Stephen Smith and for two new non-executive directors, Dido Harding and Richard Pym. The recommendations were made after considering a wide range of candidates and employing external search consultants. It has also considered succession planning, the structure, size and composition of the Board and its committees, the recommendations to the Board of directors retiring by rotation for re-election by shareholders and the renewal of nonexecutive directors’ letters of appointment.

Remuneration policy and Committee

Details of the Group remuneration policy and Committee are set out in the remuneration report.

Audit Committee

The Audit Committee meets regularly during the year aligned to the quarterly financial reporting timetable. During the financial year it met on five occasions. It was chaired by Robert Swannell until 28 January 2010 and then by Richard Pym who was appointed to the Committee on 1 January 2010. Robert Swannell continues to serve on the Committee
and has been a member and a non-executive director for 10 years bringing valuable experience and knowledge. The other Committee members are Clive Cowdery, Lord Turnbull and Aubrey Adams, who have two, four and one years of experience on the Committee respectively. All are non-executive directors. Richard Pym is the member with the
most recent and relevant financial experience.
The Committee’s responsibilities include:
> monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance;
> reviewing the Company’s internal financial controls and the Company’s internal control and risk management systems;
> monitoring and reviewing the effectiveness of the Company’s internal audit function;
> making recommendations to the Board in relation to the appointment of the external auditor and approving the
remuneration and terms of engagement of the external auditor;
> reviewing and monitoring the external auditors independence, objectivity and effectiveness;
> developing and implementing policy on the engagement of the external auditor to supply non-audit services, taking
into account relevant ethical guidance;
> reviewing and monitoring the valuation process; and
> reviewing the Audit Committee terms of reference and monitoring its execution.

The Audit Committee has undertaken each of the above responsibilities during the year on which it has received and reviewed relevant reports from management, the valuers, the internal and the external auditors. It has agreed a schedule of internal audit reviews of various of the Group’s processes and controls to be undertaken, and has reviewed the results of those reviews already completed.

At the invitation of the Committee Chairman, there are a number of regular attendees at each meeting including the Chairman of the Company, the Finance Director, the Head of Financial Reporting, Head of Internal Audit and representatives of the valuers and external auditors. Other executives, including the Chief Executive, are invited to attend from time to time. The Committee meets regularly with the external auditors and Head of Internal Audit without management being present.

Areas formally reviewed by the Committee during the financial year included:
> the Group’s key risks by priority and their mitigations;
> an annual report on Internal Control;
> valuation processes, particularly with regard to the effect of market conditions on the pricing of investment and
development properties. This included valuer and internal property analyst presentations to the Committee;
> monitoring of processes and procedures in place to ensure the Board is able effectively to assess borrowing covenant compliance headroom and forecast sensitivity;
> the Group’s business exposure to bank counterparties including syndicated and bilateral loan facilities, deposits and interest rate swap derivatives;
> tenant credit risk;
> external auditors’ reports on planning, conclusions and final opinion;
> external auditors’ management letters containing observations arising from the annual audit leading to recommendations for control or financial reporting improvement;
> legal and professional fees paid;
> treasury policy and processes including cash management, electronic payments and trades;
> corporation tax;
> REIT compliance processes;
> information systems security;
> business continuity and disaster recovery; and
> capital expenditure approval and cost control.

Auditors

The Audit Committee meets with the external auditors to discuss with them the scope and conclusions of their work.

The Committee is specifically charged under its terms of reference with considering matters relating to the audit appointment, the independence and objectivity of the auditors, and reviewing the results and effectiveness
of the audit. Deloitte LLP were first appointed external auditors of the Group in 2002. During the year, the Committee considered the appointment, compensation and independence of the external auditors.

With respect to other services provided by the auditors the following framework is in place:
> audit related services – the auditors are one of a number of firms providing audit related services, which include formal reporting relating to borrowings, shareholder and other circulars and various other regulatory reports and work in respect of acquisition and disposals. Where they must carry out the work because of their office or are best placed to do so, the auditors are selected. In other circumstances the selection depends on which firm is best suited;
> tax advisory – the auditors are one of a number of firms that provide tax advisory services. The selection depends on who is best suited in the circumstances; and
> general consulting – the auditors do not provide general consultancy services except in rare circumstances, and then only after consideration that they are best placed to provide the service and that their independence and objectivity would not be compromised.

Deloitte LLP have provided written confirmation of their independence to the Committee. Deloitte have also provided
a report on the effectiveness of the external audit process which covers audit objectives, leadership, qualification, quality and independence. In addition, a performance evaluation questionnaire on Deloitte LLP was completed by the Head of Internal Audit and presented to the Committee. The Committee and Board has recommended that the
reappointment of Deloitte LLP be proposed to shareholders at the 2010 Annual General Meeting. The arrangements with auditors have been approved by the Audit Committee and are regularly reviewed in the light of changing
requirements and best practice.

Rotation of directors

Under the Articles of Association of the Company, each director retires at the third Annual General Meeting (‘AGM’) after the general meeting at which he was last elected.

Non-executive directors

The Board considers that Aubrey Adams, Clive Cowdery, John Gildersleeve, Dido Harding, Richard Pym, Robert Swannell and Lord Turnbull are independent non-executive directors. In making this determination the Board has considered whether each director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could affect, the director’s judgement. The Board believes that it is evident from consideration of the non-executive directors’ biographies detailed on the Board of Directors pages that they are of the integrity and stature to perform their roles of independent non-executive directors. In particular, the Board considers that Robert Swannell remains independent although he has served over 10 years on the Board. This was concluded after considering his integrity and the effectiveness with which he carries out his responsibilities to the Company. In addition, in a Board where many have joined the Company recently, Robert Swannell provides a valuable continuity of knowledge and experience to the benefit of the Company.

The terms and conditions of appointment of non-executive directors are available for inspection at the Company’s registered office and at the AGM.

Internal Control

The directors are responsible for the maintenance of a sound system of internal control. The Board continues to apply the internal control provisions of The Combined Code on Corporate Governance (the Code) through a continuous process for identifying, evaluating and managing the significant risks the Group faces. This process has been in place throughout the year, up to the date of approval of this report, and the Group has been in compliance with the provisions set out in Section 1 of the Code. The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Group applies the following fundamental control principles:
> a defined schedule of matters reserved for decision by the Board;
> a detailed authorisation process which ensures that no material commitments are entered into without competent and proper authorisation by more than one approved executive;
> formal documentation of all significant transactions;
> a system of business and financial planning including long-term cash flow and profitability forecasting and scenario
exercises performed on major corporate, property and financing proposals;
> a property investment appraisal process;
> monitoring against budget and forecast;
> continuous benchmarking of property performance with external sources such as the Investment Property Databank (IPD);
> a comprehensive property and corporate insurance programme; and
> a formal whistleblowing policy.

In compliance with the provisions of the Code, the Board continuously reviews the effectiveness of the Group’s system of internal control. The key risks that the Group faces and features of the internal control system that
operated throughout the period covered by the accounts are described below:

Identification and evaluation of commercial risks and related control objectives

British Land undertakes a comprehensive risk assessment semi-annually, which identifies the principal risks that affect the Group. The resulting risk reports are reviewed by the Executive Committee of the Board. The adequacy of risk mitigating strategies and controls are considered at each review. This helps to assist in defining the risk profile of the business, the risk appetite and ensuring alignment to the business strategy.

These risk reports are presented at the Audit Committee for oversight and discussion, and influence the setting of the internal audit programme.

The responsibility for management of each individual risk is clearly identified and delegated by the Board to specific executive directors and senior executives within the Group. The executive directors also have close involvement with the day-to-day operational matters of the Group.

The reporting and discussion of risks to ensure effective risk management is further supported by the presence of a solid governance structure including committees of the Board (Investment Committee, Audit Committee, Corporate Responsibility Committee and the Derivatives Committee) which have well defined responsibilities and authorities. Clearly articulated policies help maintain consistent and regulated practices with regard to the key business functions, including development, investments and treasury. Finally, extensive procedural documents detail the range of operational level controls in place for the management of risks associated with these transactions, including billings and expense management.

The Group has a range of reports that assist management in understanding risks and managing them appropriately. Semi-annually, risk reports are sent to executives and directors that articulate the key business risks. Monthly management reports are prepared and circulated which include a range of risk and performance indicators.

Monitoring

The Audit Committee meets regularly throughout the year and has reviewed the Group’s internal controls. The Audit Committee has agreed a schedule of internal audit reviews of several of the Group’s processes and controls to be undertaken, and has reviewed the results of those reviews already completed. The Head of Internal Audit reports directly to the Audit Committee.

A number of key business control procedures in property and accounting areas have been identified. An annual programme of audit testing, performed by Internal Audit, has been put in place to ensure these key controls are working effectively throughout the period.

A number of key business control procedures in property and accounting areas have been identified. An annual programme of audit testing, performed by Internal Audit, has been put in place to ensure these key controls are working effectively throughout the period.

A number of key business control procedures in property and accounting areas have been identified. An annual programme of audit testing, performed by Internal Audit, has been put in place to ensure these key controls are working effectively throughout the period.

A number of key business control procedures in property and accounting areas have been identified. An annual programme of audit testing, performed by Internal Audit, has been put in place to ensure these key controls are working effectively throughout the period.

Investor Relations

The directors place considerable importance on maintaining open and clear communication with investors. The Company’s Investor Relations department is dedicated to facilitating communication with shareholders. The Company has an ongoing programme of dialogue and meetings between the executive directors and its shareholders, where a wide range of relevant issues including strategy, performance, the market, management and governance are discussed within the constraints of the information already known to the market. In addition, the Company undertakes regular roadshows to the US, Europe and Japan and participates in sector conferences.

The directors consider it is important to understand the views of shareholders, and at each scheduled Board meeting the directors receive a written report of the major issues which have been raised with management. Meetings are also held between shareholders and the Senior Independent Non-executive Director and other non-executive directors, and the Company facilitates such meetings on request.

During the course of a year, shareholders are kept informed of the progress of the Company through results statements and other announcements that are released through the London Stock Exchange and other news services. Company announcements and presentations are made available simultaneously on our website, affording all shareholders full access to material information. Shareholders can also raise questions directly with the Company at any time through a facility on the website.

Additionally, there is an opportunity at the AGM for individual shareholders to question the Chairman and the Chairmen of the Audit, Remuneration and Nomination Committees. At the meeting, the Company complies with the Code as it relates to voting, including votes withheld, the separation of resolutions, the attendance of committee chairmen and voting by poll. The Annual Report and Notice of Meeting are sent to shareholders at least 20 working days prior to the AGM. All AGM resolutions are decided by poll and the voting results are announced to the London Stock Exchange and are available on the website and on request.

Additionally, there is an opportunity at the AGM for individual shareholders to question the Chairman and the Chairmen of the Audit, Remuneration and Nomination Committees. At the meeting, the Company complies with the Code as it relates to voting, including votes withheld, the separation of resolutions, the attendance of committee chairmen and voting by poll. The Annual Report and Notice of Meeting are sent to shareholders at least 20 working days prior to the AGM. All AGM resolutions are decided by poll and the voting results are announced to the London Stock Exchange and are available on the website and on request.

Additionally, there is an opportunity at the AGM for individual shareholders to question the Chairman and the Chairmen of the Audit, Remuneration and Nomination Committees. At the meeting, the Company complies with the Code as it relates to voting, including votes withheld, the separation of resolutions, the attendance of committee chairmen and voting by poll. The Annual Report and Notice of Meeting are sent to shareholders at least 20 working days prior to the AGM. All AGM resolutions are decided by poll and the voting results are announced to the London Stock Exchange and are available on the website and on request.

Additionally, there is an opportunity at the AGM for individual shareholders to question the Chairman and the Chairmen of the Audit, Remuneration and Nomination Committees. At the meeting, the Company complies with the Code as it relates to voting, including votes withheld, the separation of resolutions, the attendance of committee chairmen and voting by poll. The Annual Report and Notice of Meeting are sent to shareholders at least 20 working days prior to the AGM. All AGM resolutions are decided by poll and the voting results are announced to the London Stock Exchange and are available on the website and on request.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors’ Report and Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, together with the Group’s financing policy, are described in the Financial Performance section of the Performance Review.

The Group has considerable undrawn debt facilities and cash deposits in excess of current drawn banking facilities. There is substantial headroom against the covenants for its unsecured banking facilities, details of which are included in the financing and cash flow pages of the Business Review. It also benefits from a diverse and secure income stream from leases with long average lease terms. As a consequence, the directors believe that the Group is well placed to manage its business risks satisfactorily despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual report and accounts.

Directors’ responsibilities statement

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing the parent company financial statements, the directors are required to:
> select suitable accounting policies and then apply them consistently;
> make judgements and accounting estimates that are reasonable and prudent;
> state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
> prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

In preparing the group financial statements, International Accounting Standard 1 requires that directors:
> properly select and apply accounting policies;
> present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
> provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
> make an assessment of the company’s ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:
> the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
> the management report, which is incorporated into the directors’ report, includes a fair review of the development
and performance of the business and the position of the company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and uncertainties that they face.

Terms of reference

Remuneration Committee PDF > (59KB)
Nomination Committee PDF > (62KB)
Audit Committee PDF > (57KB)
Strategic Remuneration Agreement PDF > (1MB)

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