0
1
G roup o ve rv ie w02
Str ate gic re po rt
0
3
G ov er na nc e0
4
Di rec to rs’ rem uner ati on rep or t
0
5
Fin anc ial sta temen ts0
6
Eu ro pe an E m bed ded V alu e (E EV ) b as is r es ult s
07
A dd iti ona l in fo rma tio n Prudential’s approach
Area Non-executive Directors Executive Directors
External
appointments —Directors may hold directorships or other significant interests in companies outside the Group which may have business relationships with the Group.
—Non-executive Directors may hold positions on a number of external company boards or other bodies provided that they are able to demonstrate satisfactory time commitment to their role at Prudential and that they discuss any new
appointment with the Chairman prior to accepting. This ensures that they do not compromise their independence and that any potential conflicts of interest or possible issues arising out of the time commitments required by the new role can be identified and addressed appropriately.
—The major commitments of the Non-executive Directors are detailed in their biographies on pages 74 and 75.
—Executive Directors may accept external directorships and retain any fees earned from those directorships subject to prior discussion with either the Chairman or Group Chief
Executive and, where necessary, consideration by the Nomination Committee. Permission is granted provided that the appointments do not lead to any conflicts of interest.
—In line with the UK Code, we would not expect our Executive Directors to hold more than one Non-executive Directorship in another FTSE 100 company nor chair such a company.
—Details of any fees retained from such appointments are included in the Directors’ remuneration report on page 101.
Conflicts
of interest —Directors have a statutory duty to avoid conflicts of interest with the Company. The Company’s Articles allow its Directors to authorise conflicts of interest, and the Board has adopted a policy and effective procedures to manage and, where appropriate, approve conflicts or potential conflicts of interest.
—Under these procedures, Directors are required to notify all directorships in companies which are not part of the Group, along with other positions which could result in a conflict or could give rise to a potential conflict, before they take on their additional positions.
—The Chairman and the Group General Counsel and Company Secretary assess new appointments which Board members are considering, in order to identify any conflicts or potential conflicts. Where a conflict or potential conflict is identified, the Nomination Committee, or the Board where appropriate, considers, and if thought fit, approves each such situation individually.
—Authorisations of conflicts are reviewed annually prior to the publication of the Annual Report. Election and
re-election —Proposals for election and re-election are supported by the annual performance evaluation of each Director, which concluded that each Director continues to make an effective contribution.
—All Directors will retire from the Board at the 2016 Annual General Meeting.
—John Foley, Penny James, David Law, Lord Turner and Tony Wilkey will seek election for the first time.
—All other Directors, except Alistair Johnston, wish to seek re-election. Indemnities and
protections —The Company’s Articles permit the Directors and Officers of the Company to be indemnified in respect of liabilities incurred as a result of their office.
—Suitable insurance cover is in place in respect of legal action against directors and senior managers of companies within the Group.
—This includes qualifying third-party indemnity provisions for the benefit of the Directors of the Company and other such persons in their capacity as Directors of other companies within the Group.
—These indemnities were in force during 2015 and remain so. Independent
legal advice —Directors have the right to seek independent professional advice at the Group’s expense and copies of such advice are circulated to other Directors where applicable and appropriate. Share dealing and
inside information —Prudential has adopted share dealing rules relating to securities transactions by Directors on terms no less exacting than required by Appendix 10 to the HK Listing Rules and by the UK Model Code. The Directors have complied with this code of conduct throughout the period. Relevant controls are applied to the handling and dissemination of inside information which form part of the Group’s internal governance framework.
Compensation
for loss of office —The Company’s policy on loss-of-office payments for Directors forms part of the Directors’ remuneration policy which was approved by shareholders at the 2014 Annual General Meeting. A copy of the policy is available on the Company’s corporate website www.prudential.co.uk
Significant
First line of defence
(risk-taking and management)
—Takes and manages risk exposures in accordance with the risk appetite, mandate and limits set by the Board;
—Identifies and reports the risks that the Group is exposed to, and those that are emerging;
—Promptly escalates any limit breaches or any violations of risk-management policies, mandates or instructions;
—Identifies and promptly escalates significant emerging risk issues; and
—Manages the business to ensure full compliance with the Group risk management framework as set out in the Group Governance Manual, which includes the Group risk framework and risk policies as well as approvals requirements, among other requirements.
Second line of defence (risk control and oversight)
—Assists the Board to formulate and then implements the approved risk appetite and limit framework, risk-management plans, risk policies, risk reporting and risk identification processes; and
—Reviews and assesses the risk-taking activities of the first line of defence and where appropriate, challenges the actions being taken to manage and control risks, and approves any significant changes to the controls in place.
Third line of defence (independent assurance)
—Provides independent assurance on the design, effectiveness and implementation of the overall system of internal control, including risk management and compliance. The Board is responsible for ensuring that
an appropriate and effective system of internal control and risk management is in place across the Group. The framework of internal control and risk management centres on clear delegated authorities to ensure Board oversight and control of important decisions. The framework is underpinned by the Group Code of Business Conduct, which sets out the ethical standards the Board requires of itself, employees, agents and others working in the Group.
Internal control
The Group Governance Manual sets out the delegated authorities and establishes the requirements for subsidiaries to seek approvals from or report to Group Head Office. Group-wide standards are established through policies and other governance arrangements which are also included in the Group Governance Manual. Internal controls and processes, based on the provisions established in the Group Governance Manual, are in place across the Group. These include controls for the preparation of financial reporting. The operation of these controls and processes facilitates the preparation of reliable financial reporting and the preparation of local and consolidated financial statements in accordance with the applicable accounting standards and requirements of the Sarbanes-Oxley Act. These controls include certifications by the Chief Executive and Chief Financial Officer of each business unit regarding the accuracy of information provided for use in preparation of the Group’s consolidated financial reporting and the assurance work carried out in respect of US reporting requirements.
The Board has delegated authority to the Audit Committee to review the framework and effectiveness of the Group’s systems of internal control. The Audit Committee is supported in this responsibility by the assurance work carried out by Group-wide Internal Audit and the work of the business unit audit committees, which oversee the effectiveness of controls in each respective business unit. Details of how the Audit Committee oversees the framework of controls and their effectiveness on an ongoing basis, is set out more fully in the report on pages 89 to 94.