BOARD ACCOUNTABILITY:
Board at Vodafone consists of four executive directors, nine non-executive directors, and the chairperson. Demarcation of the duties of the board members has been clearly mentioned on the charter. Chief executive has more actionable role of implementing boards’ strategy, plans and policies whereas chairperson is responsible for their formation as well as governance of board.
At Vodafone, the system of election of executive as well as nonexecutive members is very transparent and well prepared. There is separate “evaluation procedure” laid down for the whole committee as well as the individual board members. This evaluation procedure takes place continuously to have vigilance on the accountability of the board
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There various other committees established by board like Audit Committee, Nominations, Governance Committee, and a Remuneration Committee. The Board reviews the terms of reference for each of the committees on an ongoing basis and is satisfied that they comply with the requirements of the Combined Code.
The board is majorly responsible for strategies to manage business risks, business performance, financials, business awareness etc. It also laid down policies for sustainable growth, shareholders’ focus and health & safety compliances of public.
FINANCIAL DISCLOSURE & CONTROL:
Vodafone has been ranked high on financial disclosure parameters because of its compliance of code of conduct and transparency. Some of non-executive members of audit & risk committee like Anne lauvegran (Alcatel) have prior experience in the telecom industry. Audit committees have responsibility of operations in local market.
It also focuses on risk management in addition to its role of integration of groups’ financial reporting. It also assesses internal audit functions of Vodafone as well as maintains relationships with external auditor.It is also involved in quarterly as well as annual assessments of all the financial disclosures as well as eternal auditors’ report. All the financial disclosures appropriateness has been crosschecked by Vodafone’s’ Disclosure committee, on the behalf of CFO &.CEO.
Internal control systems including financial, risk & compliance control system has been reviewed in accordance with the code from april1, 2011 to 22may 2012 & has been reported off without any significant failings.
Vodafone maintained all disclosure and control in accordance with Rule 13a- 15(e) of Exchange Act.
MARKET FOR CONTROL:
The directors can be removed without cause. The company does not have a single entity or shareholder group with voting power in excess of 50% (majority owner).
At each AGM all directors who were elected or last re-elected at or before the AGM held in the third calendar year before the current year shall automatically retire. Fair price provision is in place or the company is subject to fair price protection under applicable law In 2005 the Company reviewed its policy regarding the retirement and re-election of directors and, although it is not intended to amend the Company’s articles of association in this regard, the Board has decided in the interests of good corporate governance that all of the directors wishing to continue in office should offer themselves for re-election annually.
GMI considers such large ownership positions to be a deterrent to an offer for the company, thus non- existence of such major ownership strengthens the Market for Control.
The Articles of the company states that there must be at least three directors for the normal working of the company. Directors are not required under the Company’s articles of association to hold any shares of the Company as a qualification to act as a director, although executive directors participating in long-term incentive plans must comply with the Company’s share ownership guidelines.
In AGM of 2010 a resolution was passed regarding the continued operation of the Vodafone share incentive plan through voting. This is considered positive by GMI (substitute of the TIDE provision).
CORPORATE BEHAVIOR:
The company has been involved in the criminal litigations from past three years, however it has no relations with the accounting fraud during the same time frame. The company abides by the code of conduct for environmental issues. It discloses the environmental policies and green house gas emissions from time to time.
It also discloses the targets for reducing environmental exposures plus it had a formal regulatory investigation in the previous year. It also depicts transparency regarding corporate level political donations. Regarding the workplace safety it has a policy addressing to this issue also. It also discloses its workplace safety norms in the published annual reports.
It has been never charged with workplace safety violations within the last two years. There has been no case of child labor within the last two years. It has never used child labor as source of sub contracted work within the last 3 years.
REMUNERATION:
The Remuneration Committee considers the remuneration increases for the different groups of employees across all of our local markets and other relevant factors when assessing the pay of the executive directors.
External advisors to the Remuneration Committee : pwc and Towers Watson. There is Conflict of Interest because a member of the Remuneration Committee, Mr. Phillip Yea also sits on the advisory board of pwc
As per Annual Report 2012 : “The subject of executive reward has been, and continues to be, an issue of concern both to shareholders and the wider public”
Thus, there has been a number of amendments - composition and activities of the Remuneration Committee, value of these packages under different performance scenarios, etc.
No pay increases have been awarded for the executive directors in the coming year but the system in place has extensive benefit components : Base Salary + Benefits + Global Short Term Incentive + Global Long Term Incentive + Share Ownership Incentives (ShareSave etc)
SHAREHOLDER RIGHTS:
The Shareholders have sufficient rights as far as company policy is concerned. Though there are some issues related to the lack of difference in rights between foreign and resident shareholders, and lack of confidential voting, still the company takes good measures by cumulative voting. Also all the directors submit themselves for re-election at the AGM to be held on 24 July 2012 and continue to do so every year.
OVERALL RATINGS:
We have considered 6 Broad Variables :
We have given board accountability, financial disclosures and internal control, remuneration higher priority and then shareholders rights, market control and corporate behaviour.
Board Accountability : We have got a score of 9.1 out of 10 as there is a proper demarcation of the roles and responsibilities of the Board ,proper policies for shareholders are laid down. The Election Procedure is quite transparent.
Financial disclosures :Vodafone has been scored high in this area. It maintains all disclosure and control in accordance with Rule 13a- 15(e) of Exchange Act. Internal and external audit and is cross checked by Vodafone Disclosure Committee on behalf of CFO and CEO giving a high level of transparency to the company.
Market for Control: Company is subject to Fair Price Protection. Directors can offer themselves for re-election annually thereby acting as a deterrent to an offer for the company. Thus absence of nonexistence of ownership strengthens market control thereby giving it a score of 8.5/10
Corporate Behaviour : Has been quite good at the company. The company practices safe environmental practices, abide by workplace safety and does not encourage child labour. Thus Corporate Behaviour is quite high for the company.
Remuneration: In this case Vodafone has been performing relatively poorly. This is because remuneration is an acknowledged concern by the management itself as per AR 2012. They have been trying to improve but there are issues of conflict of interest as far as the Remuneration committee is concerned and also excessive payouts to the Board.
Shareholder’s Rights: Vodafone has rated fairly as far as Shareholder rights are concerned. While there could be improvements in areas such as confidential ballot and disclosure of vote related issues, it performs well overall.
Thus in a nutshell the company has a good board accountability record, abide by the laws and regulations of the society, makes complete financial disclosures and is not into any accounting scams.
OVERALL CONCLUSION:
GMI considers 500 Variables, however in our report we have considered 100 variables approximately.
Since 2004 GMI ratings for Vodafone has been 8.5+/10, however in our calculations for 2012 we have got
Vodafone has been considered as one of the top 50 companies as per GMI Ratings.