Chairman’s introduction

The board has three primary functions: the provision of clear strategic leadership, the appointment and oversight of management and other issues of stewardship and to represent and listen to the views of shareholders. The highest standards of governance are critical to the board’s objectivity and effectiveness in addressing these three pillars of its role. The board is also committed to operating the business in a responsible and sustainable manner. Our governance framework is integral to delivering our responsibilities to shareholders and to our colleague as well as to those who come into contact with our activities.

The principal change to governance processes arising from the new UK Corporate Governance Code (“the Code”) was our move to give shareholders the opportunity to re-elect directors annually. We adopted this principle at last year’s annual general meeting ahead of the Code taking effect. Another governance development is the introduction of the UK Bribery Act in connection with which we have taken the opportunity to update our anti-corruption arrangements including a wide ranging programme of training and reinforcement. This is in addition to the introduction in 2010 of an updated code of conduct which articulates our fundamental business principles.

It is clear to me that the non-executive directors as a group and individually constructively challenge the executive team both at board and committee meetings as well as during the many exchanges which occur between formal meetings. Our board evaluation process gives me assurance that all non-executive members of the board retain their independence of judgement which underpins the culture of constructive challenge in the boardroom. In addition to constructive challenge the non-executive directors are also effective in bringing their wide experience to the boardroom for the benefit of the execution of business strategy.

The board is always mindful of its obligations to act in the best interests of shareholders and acts collectively with that paramount aim in mind. I believe that decisions are taken on good quality information and advice and only after a good level of discussion and debate and our board performance evaluation supports this view.

I am pleased that we have been successful in attracting Angela Seymour-Jackson to join the board and I am sure that her service industry experience, most recently as the chief executive of the RAC, will bring a welcome added dimension to the existing skills and experience of the board.

For both executive and non-executive directors, it is my responsibility that the board maintains the best possible balance of skills and therefore the process of achieving the optimum level of diversity will be carried out in that context.

I hope that the information contained in this corporate governance report and elsewhere in the annual report is helpful to shareholders’ understanding of the challenges facing the company and of the way in which the company is managed and governed to meet these challenges.