Governance and risk

As a publicly listed company, Carillion is subject to, and complies with, the provisions of the UK Corporate Governance Code. See our Annual Report and Accounts 2010 for full details of our corporate governance practices.

Carillion’s Board comprises five Non-Executive Directors, including the Chairman, and three Executive Directors. They all have extensive, relevant experience and we have ensured that their membership of the Carillion Board does not give rise to any conflicts of interest as a result of other positions they may hold outside Carillion.

The Board and our senior management team communicates regularly with our shareholders, through regulatory announcements, presentations, site visits, one-to-one meetings and our Annual General Meeting (AGM).

Shareholders, with a particular interest in sustainability, also meet our Director of Group Corporate Affairs and our Head of Sustainability. We welcome and encourage engagement with shareholders and we make relevant contact details available in all our corporate communications, including our website. Shareholders are also able to submit resolutions to which the Board responds.

The Board takes independent advice on the level of fees for its Non-Executive Directors. When deciding remuneration for the Executive Directors, again, we take independent advice and consider current market practice and the need to attract individuals capable of delivering our objectives. We also ensure remuneration is linked to performance and that it comprises the appropriate elements, including salary and performance-related bonuses and share-based incentives.

Risk

Our sustainability strategy, which relates our social and environmental impact to business performance, is integral to the Group’s risk management policies and processes. These are firmly embedded in the Carillion culture.

Risk professionals from every business unit form our Risk Forum. Our Group Head of Risk advises the Board on strategic risks, oversees risk training and appraises all projects before submission to our Major Projects Committee, which sanctions all major commitments and transactions.

To further ensure we apply rigorous risk management at all operational levels, we have the following controls in place.

• Independent, external auditors review financial controls and other business systems to ensure they are operating effectively.
• ‘Peer reviews’ are conducted within each business unit, by teams of impartial representatives from other parts of our business who are empowered to carry out thorough reviews based on comprehensive guidelines.

In addition, there are annual high-level peer reviews of health, safety and sustainability risks in each of our businesses. This process provides independent validation of our internal reporting mechanisms, and assurance that key health, safety and sustainability risks are being managed appropriately. They also offer the added benefit of sharing best practice across the business. These reviews do not duplicate the external management system audits that take place as part of our ongoing external certification requirements.

As part of non-financial risk management, we have reviewed and enhanced our ethical compliance programmes. Carillion has a clear and unequivocal approach to business integrity and ethics, which underpins Our Values.

Our Ethics and Business Integrity Policy covers all our people across the Group and encompasses all relevant issues, including fraud, bribery and corruption. We adopt a zero tolerance approach to all activities that do not meet the high standards we set and expect from all our people and in respect of all business operations.

In response to the Bribery Act 2010, we established an Ethics and Compliance Office to review and monitor compliance and ensure that Carillion maintains high ethical standards. We have also launched mandatory training on ethics, integrity and anti-bribery procedures for our employees.

If any employee worldwide has concerns regarding fraud, corruption or any other malpractice within Carillion, they can call our whistle-blowing hotline anonymously. We also encourage our people to engage with their managers and colleagues in one-to-one meetings, monthly Team Talks, forums and feedback sessions.

We received 44 ‘whistle-blower’ reports from across the Group in 2010: 51% of these resulted in action, 40% were identified as ‘unfounded’ and 9% are being investigated in 2011.

In 2010, 63% of relevant employees in the Middle East and 76% in Canada were trained on our anti-corruption policies. In the UK, our bribery and anti-corruption courses are available online.

Here is a list of our principal operational risk areas and mitigating actions. Read more about our risk management in our Annual Report and Accounts 2010.

Risk area	Mitigation
Continuing to win contracts consistent with our target margins in markets that are more competitive	Continually seeking to differentiate our offering by reviewing our competitive strategy and target markets. ‘Living’ our values and listening to our customers in order to develop services that meet their needs. Focusing on our efficiency and cost reduction programmes to remain competitive.
Managing our pension schemes to ensure that scheme liabilities are within a range appropriate to our capital base	The Group’s main defined benefit pension schemes have been closed to future accruals. Regularly reviewing our investment policies to ensure that employee and company contributions, together with scheme benefits, remain appropriate.
Managing major contracts to ensure they are delivered on time, to budget and to the required standards	Applying selectivity criteria to ensure we take on contracts only where we understand, and can manage, the risks involved. Applying rigorous policies and processes to monitor and manage contract performance. Ensuring we have high-quality people delivering projects.
Maintaining financial discipline	Applying strong cash management policies and processes to deliver cash-backed profit.
Attracting, developing and retaining excellent people	Developing and implementing leadership, personal development and employee engagement programmes that encourage and support all our people to achieve their full potential.
Maintaining high standards of performance in respect of security, health and safety, and other statutory requirements	Applying rigorous risk management processes supported by robust business continuity plans. An ongoing commitment to ‘Target Zero’, our programme to eliminate reportable accidents, including implementing management systems that conform to Occupational Health and Safety Assessment Series 18001. Implementing thorough, mandatory staff training programmes.