corporate governance

The committee meets at least four times a year. At the request of the committee chairman, the chairman of the board, the chief executive, the finance director, the group director enterprise risk, the director group finance, the director internal audit and the external auditors are invited to attend each meeting.

Should it be requested, the committee has access to independent expert advice at the Company’s expense. The performance and effectiveness of the committee are reviewed as part of the main performance evaluation of the board and all its committees.

financial and business reporting

The audit and risk committee shares responsibility with the board for reviewing in detail the annual report and half year results announcement, which provide a clear assessment of the performance and prospects of the Group through the business model, strategy and a review of strategic risks and financial and non financial performance. Also included in the annual report is the external auditors’ report to the members providing an independent view of the state of the Group’s affairs. The half year results announcement includes the external auditors’ review report to the Company.

Other published financial information is reviewed by the committee for statutory and regulatory compliance and is submitted to the board with a recommendation for approval.

risk management and internal control

The Group has well established risk management and internal control systems. While all elements of risk cannot be eliminated, the processes and systems aim to identify, assess, prioritise and, where possible, mitigate the Group’s risks. Although no system can provide absolute assurance against material misstatement or loss, the Group’s systems are designed to provide the board with reasonable assurance that assets are safeguarded, transactions are properly authorised and recorded and that material errors and irregularities are either prevented or detected within a timely period.

A separate enterprise risk function was established in 2010 led by a senior executive who is a member of the executive leadership team. The enterprise risk management function has brought an increased focus and emphasis on global risk management, providing leadership and co-ordination across the Group’s business and operational risk activities. Other responsibilities include health and safety, environment, fire and property protection, security, insurance, business continuity and crisis management.

There is an ongoing process for identifying, assessing, mitigating, reporting and monitoring the risks faced by the Group with a formal audit and risk process (known as the ARC process) led by the group director enterprise risk together with the finance director, the director internal audit and other senior management representatives. Meetings are held with businesses and functional managers who present their risk registers, enabling discussion of the risks identified, the management of those risks and the mitigation measures as well as the effectiveness of the systems of internal control. The process ensures that risks are not just the product of a bottom up approach but are also examined from a top down perspective and closely aligned with the Group’s strategy.

The results of the ARC process are reported to the audit and risk committee and provide an opportunity for the committee to discuss and analyse the risks reported. In addition to reviewing the risks, as presented by management, the committee also receives presentations from the Group’s businesses or functional managers to assess first hand the effectiveness of the process, and whether the risks identified are being managed successfully, and to challenge management on the mitigation measures in place. The committee then reports its conclusions to the board for review. Details of the key risks to which the Group is exposed and additional information on risk processes and management are included in the business review and can be found in the key risks section.

The framework which the board has established to provide effective internal control for both the Group and its associates and joint ventures is supported by the key areas set out in the table below.

internal audit

The internal audit function plans and undertakes audits of the businesses to ensure that the controls operating in the businesses conform with Group controls and procedures, and reviews the effectiveness of the risk management process.

The director internal audit provides regular updates to the audit and risk committee and reports on all significant audit findings. He also has separate meetings with the chairman of the audit and risk committee without any other member of management being present.

In 2011 the committee reviewed and approved the annual internal audit plan including the proposed audit approach, coverage and allocation of resources. It also reviewed the results of the audits undertaken, with particular emphasis on the recommendations made and management’s response to the matters raised. A change in the audit ratings used by internal audit in its reports to better evaluate the control environment was also approved.

external auditors

The committee has primary responsibility for and advises the board on the appointment, reappointment and the remuneration of the Company’s external auditors. PricewaterhouseCoopers LLP (PwC) have been the Company’s external auditors since 2003 with the lead audit partner changing by rotation in 2008. During 2011, the committee reviewed the effectiveness of the external auditors and recommended to the board that a resolution to reappoint PwC be proposed at the AGM 2012. A further review of PwC’s effectiveness will be undertaken in 2012 following completion of the 2011 year end audit. The committee will continue to keep under review the independence and objectivity of the external auditors.

The external auditors attend all audit and risk committee meetings. The committee chairman also has separate meetings with the external auditors to discuss relevant matters.

The first meeting within the Group’s annual audit cycle is to consider the nature and scope of the audit and to consider any additional special reviews that may be necessary. Further meetings are held prior to the approval of the half year and full year results to consider, as relevant, the audit conclusions, the results of any special reviews undertaken, the business risks facing the Group and the reports from the ARC process meetings. The committee reports its findings on the audit process and on the wider aspects of internal control to the board.

Non audit services are provided by PwC to the Group only in accordance with Rexam’s policy on the provision of non audit services, which assesses the type of service to be provided and the associated fees. Any request for non audit services above a fee threshold of £25,000 is presented to the finance director for approval prior to commencement of the work. The finance director will, depending on the nature of and fee for the service, obtain the prior authorisation of the chairman of the audit and risk committee. This committee reviews the level of non audit fees to ensure that the provision of non audit services does not impair PwC’s independence or objectivity. Non audit fees in 2011 relate mainly to assurance reporting on historic financial information required for business disposals, assurance in relation to IT projects, including a new treasury system, and global tax advisory services. The fees for non audit services are disclosed in note 5 to the consolidated financial statements. Other audit firms were engaged to provide expatriate and specialist tax advisory services as well as to advise on disposal transactions.

PwC are prohibited from providing services to the Group that would be considered to jeopardise their independence, such as financial systems design and implementation, actuarial services, internal audit outsourcing services and investment services. The policy on non audit services has been reviewed during 2011 to ensure it is in line with best practice.

directors’ conflicts of interest

The board has a formal system in place for directors to review regularly their interests and to deal with situations where a director reports any conflicts of interest. Any conflict situation reported to the chairman and the company secretary is considered by the board based on its particular facts. Any authorisations given to a director who has a conflict situation are recorded in the board minutes and in a register of directors’ conflicts which is reviewed annually by the board. No conflict situations were reported to the board during 2011 and up to the date of this annual report.

code of conduct

A worldwide Code of Conduct, which applies to all the Company’s employees, has been approved by the board and provides a clear statement for the benefit of stakeholders involved with or impacted by Rexam’s activities. It is communicated through an induction process for new employees, as part of the team briefings in the Group’s businesses, and on the Group’s intranet and website. The board is kept informed regarding the maintenance of the Code of Conduct and any breaches of it. An online training system has been introduced to ensure all management are aware of their responsibilities and are in compliance with the Code of Conduct.

In addition, with the introduction of the UK Bribery Act, all policies and procedures relating to bribery and corruption were reviewed to ensure they are in line with best practice and that there are adequate procedures to prevent bribery or corruption taking place.

whistle blowing policy

Rexam has an open door policy on communication whereby employees are encouraged to share concerns, raise issues, provide ideas for improvement, with all levels of management in the business. It is recognised, however, that there will be times when an employee might be uncomfortable raising concerns directly with local management and, in such cases, communication with business and Group management is encouraged.

Rexam operates a whistle blowing policy which is supported by an external confidential telephone helpline, available to all employees for the raising of any concerns, including those of a financial nature. The Raise Your Concern policy is highlighted in team meetings to ensure the policy is understood and available to all employees.

The Raise Your Concern telephone helpline has been beneficial as an independent point of contact for employees where, if requested, the anonymity of the employee is maintained. During 2011 there were 41 concerns logged (2010: 45 concerns) raising matters, in the majority of cases, related to human resource issues and practices. All concerns reported are investigated at the earliest opportunity by the director internal audit, in conjunction with the company secretary and, if appropriate, by management of the respective business. The director internal audit provides an update on all calls received, and the actions taken to respond to and resolve them, to Group management and the audit and risk committee on a regular basis. Any significant concerns are reported directly to the chairman of the audit and risk committee as well as to Group management.

The committee reviews the whistle blowing policy and the Raise Your Concern process annually.

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 business review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are detailed in the financial review. In addition, notes 24, 25 and 26 to the consolidated financial statements include the Group’s objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposures to credit risk and liquidity risk.

The Group has considerable financial resources together with established agreements with a number of key customers and suppliers across different geographic areas and markets. The financial resources include £2.6bn of debt facilities with the next significant maturities due in March 2013 (£0.5bn) and June 2013 (£0.5bn). The directors believe that the Group is well placed to manage its business despite the economic environment which increases risks and uncertainties.

The directors, having made appropriate enquiries, are satisfied that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the consolidated and Company financial statements.

remuneration

remuneration policy for directors

The remuneration committee is responsible for making recommendations to the board on the Group’s remuneration policy and setting the remuneration levels and specific packages appropriate for the chairman and the executive directors taking into account the Group’s annual salary negotiations. The remuneration report is available in the governance section.

shareholder relations

dialogue with shareholders

The board believes that it is a priority to communicate with shareholders and uses various methods to reach as many shareholders as possible. There are programmes for the chief executive, finance director and the head of investor relations to meet with the Company’s major institutional investors in the UK, the US and Europe. Presentations are made on the operating and financial performance of the Group, including corporate governance related matters, and the Group’s longer term strategy. The presentation slides shown to representatives of the investment community following the announcement of the half and full year results are available on the Company’s website, as is a live webcast of the related results presentation. Roadshows are held in the UK, the US and Europe following the announcement of the half and full year results. Where it is not possible to meet face to face, meetings are held by video or telephone conference.

The Company also hosts plant visits and annual seminars for institutional shareholders and representatives of the investment community. The seminars are webcast live and replays, together with presentation slides, are available online.

Institutional shareholders can request an opportunity to meet with any of the executive and non executive directors. The non executive directors have an opportunity to meet with shareholders at the AGM and may attend analyst presentations made by the chief executive and finance director. The board fully supports the principle of the Code which seeks to encourage more active interest and contribution from institutional shareholders.

The non executive directors are given regular updates as to the views of institutional shareholders. After the investor meetings held following the announcement of the half and full year results, a summary report on investor responses is prepared for the board, normally by the Company’s corporate brokers. The board also commissions an annual presentation of major investors’ views on Company management and performance, based on results of surveys and extensive interviews. This survey also helps to plan the investor relations programme for the following year.

annual general meeting

Communication with private shareholders is largely through the AGM, which is held at a central London location. The notice of the AGM is posted to shareholders with, if requested, the annual report and any related papers at least 20 working days before the date of the AGM to ensure that shareholders have sufficient time in which to consider the items of business to be voted upon. The majority of shareholders have elected to access the annual report and other shareholder documents online via the Rexam website rather than receiving a copy by post.

A presentation is made at the AGM to update shareholders on the Group’s activities. Shareholders are given the opportunity to ask questions of the board and the chairman of each board committee during the AGM and to meet all the directors informally at the AGM. Separate resolutions are proposed at the AGM on a poll for each item of business and shareholders are asked to vote ‘for’, ‘against’ or ‘vote withheld’ on each resolution. Votes are counted and an announcement confirming whether each resolution was passed at the AGM is made through the London Stock Exchange and can be viewed on the Rexam website, together with a summary of the number of votes cast in respect of each resolution.

Rexam’s ADR investors receive details of the AGM and are entitled to instruct the depositary, The Bank of New York Mellon, to vote on the resolutions to be proposed at the AGM.