Board committees

The main role and responsibilities of the Audit committee are set out in written terms of reference.

View Audit committee terms of reference »   (43.0kb)  

The principal activities undertaken by the Audit Committee during 2010 are set out below.

Risk management

• The Audit Committee terms of reference include monitoring of the financial reporting process and the effectiveness of the Group internal control, internal audit and risk management systems.
• In fulfilling this responsibility the Audit Committee continued its programme of evaluating the key areas of risk for Glanbia through a series of risk report presentations on the steps taken to manage such risks from the relevant responsible individuals within the Group.
• During 2010 the Audit Committee also approved the introduction of a quarterly, formal, documented key risk review process to identify and analyse the principal risks across each business unit and Group function.
• This process is aimed at the early identification of key risks to the Group's businesses and the Group's overall strategy, followed by an understanding of the nature of those risks, the probability of them occurring and their likely impact if they did occur.
• Risk owners and robust action plans are developed and implemented with the aim of reducing or removing the likelihood of the risk occurring or managing the impact if the risk cannot be avoided. The results of the year end risk review are outlined in the risk management section
• A full and half yearly assessment of the Board's performance against regulatory requirements and best practice guidance was completed following which the Audit Committee reported to the Board expressing their level of satisfaction with the Group's internal control and risk management systems.

Internal controls

• The Audit Committee received and considered reports during the year from the Group's auditors, PricewaterhouseCoopers, which included reports on any key matters arising from the statutory audit and on any material weaknesses in internal control in relation to the financial reporting process. The Audit Committee also received and considered reports from the Group's Internal Audit function on the work undertaken in reviewing and auditing the control environment, in order to assess the quality and effectiveness of the internal control system.
• A comprehensive Internal Audit programme is agreed annually and is designed to ensure that all business units and key Group functions are audited on a regular basis. Internal Audit reports are issued to relevant senior management following the completion of the reviews which set out agreed Management Action Plans (MAPs) to address recommended areas of improvement. Members of the Audit Committee receive an executive summary of all such Internal Audit reports.
• All MAPs are kept under review by the Internal Audit team until they are resolved. The Group Head of Internal Audit provides an update on the status of the resolution of the MAPs at regular intervals.
• Internal controls were assessed in detail as part of the bi-annual Control Self-Assessment (CSA) process. This assessment is approved by senior management and reviewed by Internal Audit for completeness.
• The Audit Committee assessed the effectiveness of the Group's internal controls and reviewed the related disclosures in the Annual Report.
• As part of the Board and the Audit Committee's programme to gain a greater awareness of the Group's operations, during 2010 the Board (which also comprised the Audit Committee's members) met with senior executives from all US businesses in the USA and inspected the facilities of the Performance Nutrition business in the USA, US Cheese and Southwest Cheese, one of the Group's principal joint ventures.

Financial reporting

The Audit Committee monitored the statutory audit of the annual and consolidated financial statements and:

• reviewed the financial statements and, as part of this process, the significant financial reporting estimates contained within them;
• reviewed the basis for preparing the Group accounts on a going concern basis, including the analysis supporting the going concern statement and disclosures in the financial statements; and
• reviewed the financial statements in the 2009 Annual Report and the 2010 Half-Yearly Report, and received a report from the auditors on the statements.

Internal Audit

The Audit Committee:

• approved the Internal Audit Charter which sets out the framework for the Internal Audit department, its role and responsibilities, its authority, the conduct of the function and how it will operate to accomplish its mission;
• approved the Internal Audit programme for 2010;
• reviewed output from the Internal Audit programme during the year and considered progress against the programme; and
• reviewed the effectiveness of the Group's Internal Audit function.

External auditors

The Audit Committee:

• agreed the approach and scope of the audit work to be undertaken by the auditors;
• reviewed the Group's processes for disclosing information to the auditors;
• reviewed the effectiveness and independence of the auditors. Based on the results of this review the Audit Committee proposed to the Board that it recommend that the shareholders support the re-appointment of the auditors at the 2010 Annual General Meeting; and
• agreed the auditors' fees in respect of the 2011 audit work.

Terms of reference

The Board engaged a leading external governance expert to review the terms of reference of the Audit Committee. This review indicated that the terms of reference met very high standards of corporate governance. Some opportunities for minor incremental improvement were noted and have now been incorporated into the terms of reference which are available for inspection on the Company's website.

Review of Audit Committee performance

The Board and Audit Committee assessed its performance, covering terms of reference, composition, procedures, contribution and effectiveness. As a result of that assessment, the Audit Committee is satisfied that it is functioning effectively and it has met its terms of reference.

Committee membership:

J Callaghan - Chairman, H Corbally, Mn Keane, P Haran, L Herlihy, J Liston, V Quinlan.

The main role and responsibilities of the Nomination committee are set out in written terms of reference.

View Nomination committee terms of reference »   (38kb)  

The principal activities undertaken by the Nomination Committee during 2010 are set out below.

Review of Directors' independence

The Nomination Committee reviewed the independence of the non-executive Directors in accordance with the guidance in the UK 2008 Combined Code on Corporate Governance (the "Code"). The Nomination Committee's review took into consideration the fact that:

• John Callaghan had served on the Board for thirteen years and Jerry Liston had served on the Board for eight years.
• Fourteen of the non-executive Directors are nominated by the Board of the Society, for appointment to the Board of the Company, of which each of Henry Corbally, Edward Fitzpatrick, James Gilsenan, Liam Herlihy and Victor Quinlan had served as Directors for nine years or more.
• William Murphy, who retired as Deputy Group Managing Director in September 2005, remains on the Board as a non-executive Director.
  

Provision A.3.1 of the Code suggests that the following could be relevant to the determination of a non-executive Director's independence:

• serving more than nine years from the date of their first election.
• represents a significant shareholder.
• has been an employee of the company or Group within the last five years.

The Nomination Committee concluded that:

• Jerry Liston and John Callaghan, in the same manner as the other non-executive Directors, continued to demonstrate the essential characteristics of independence expected by the Board and that there are no relationships or circumstances that are likely to affect, or could appear to affect, their judgment. Futhermore, they continue to constructively and appropriately challenge the executive Directors and the Board
• throughout the reporting period, John Callaghan, Paul Haran and Jerry Liston were Independent
• William Murphy demonstrates the essential characteristics of independence and from September 2010, the fifth anniversary of his retirement from the Group, was independent
• the remaining non-executive Directors did not meet the criteria for independence as specified in the Code but considered that they were independent in character and judgement

The Nomination Committee reported its conclusions to the Board for final determination.

Appointment of vice-Chairman

The Nomination Committee considered the appointment of Martin Keane as vice-Chairman of the Company and recommended his appointment to the Board. As part of their consideration, the Nomination Committee noted that Martin Keane had been appointed as vice-Chairman of Glanbia Co-operative Society Limited and while there was no obligation on the Board of the Company to appoint the same candidate as the Society to the position of vice-Chairman, the custom and practice to date had been that the vice-Chairman of the Society is also appointed vice-Chairman of the Company. The Nomination Committee considered the merits of the custom and practice in this regard and the quality of the candidate elected by the Society. The Nomination Committee noted the experience of Mr. Keane and his suitability for the role of vice-Chairman of the Company and recommended his appointment to the Board of the Company which was subsequently approved.

Review of the time required from a non-executive Director

The Nomination Committee assessed the time dedicated to the Company by each non-executive Director. Each of the Directors at the time of appointment agrees to a minimum time commitment of one to two days per month (after the induction phase). This will include attendance at monthly board meetings, the Annual General Meeting, two annual board away days, and at least one site visit per year and appropriate preparation time ahead of each meeting. The nature of the Directors appointments is, however, such that the Directors are required to be flexible in terms of their availability. Sometimes they can be required to work part-time, and sometimes significant time input is required depending on the criticality of the issues and challenges facing the Group. This review also considers the extent of the Directors' other interests to ensure that the effectiveness of the Board is not compromised by such interests. The Board and Nomination Committee are satisfied that the Chairman and each of the non-executive Directors commit sufficient time to the fulfilment of their duties as Chairman and Directors of the Company respectively. The Chairman holds a number of other directorships including the Irish Dairy Board Co-operative Society Limited and Irish Co-operative Organisation Society Limited and farms at Headborough, Knockanore, Tallow, Co. Waterford, but the Nomination Committee and the Board considers that these do not interfere with the discharge of his duties to the Group.

Board Committee membership

The Nomination Committee is responsible for recommending appropriate individuals for membership of the Board's committees to ensure that the committees are comprised of individuals with the necessary skills, knowledge and experience. During the year the Nomination Committee recommended to the Board that Martin Keane be appointed to the Audit and Remuneration Committees following the retirement of John Fitzgerald. This was implemented during the year by the Board.

Review of Nomination Committee performance

The Board and Nomination Committee assessed its performance, covering terms of reference, composition, procedures, contribution and effectiveness. As a result of that assessment, the Nomination Committee is satisfied that it is functioning effectively and it has met its terms of reference. Arising from the review, our Board has agreed to review the terms of appointment of the non-executive Directors arising from the changes to the UK Corporate Governance Code and other related matters.

The Nomination Committee did not use an external search consultancy or open advertising in the appointment of the new non-executive Directors, Brendan Hayes, Michael Keane and John Murphy, as they were nominated by the Board of the Society for appointment to the Board.

Committee membership:

L Herlihy - Chairman, J Callaghan, P Haran, J Liston.

The main role and responsibilities of the Remuneration committee are set out in written terms of reference.

View Remuneration committee terms of reference »   (26kb)  

During 2010, the Remuneration Committee:

• considered and approved executive Directors and other senior executives bonus arrangements for 2010.
• assessed and agreed the level of achievement against bonus objectives for 2009 under the approved Annual Incentive Plan.
• reviewed and approved the 2010 grant under the 2008 Long Term Incentive Plan ("2008 LTIP") to executive Directors and other senior executives.
• considered the outcome of the performance conditions for the 2007 LTIP share awards and the real growth in Adjusted Earnings Per Share¹ ("EPS") and Total Shareholder Return² ("TSR") over the three-year performance and determined the level of shares to be vested.
• initiated an external remuneration consultant selection process to assist the Remuneration Committee in formulating an updated executive remuneration policy to be put to the Board for approval in 2011.
• undertook a review of executive Directors and other senior executives base salaries.
• assessed its performance, covering terms of reference, composition, procedures, contribution and effectiveness. As a result of that assessment, the Remuneration Committee is satisfied that it is functioning effectively and has met its terms of reference.
  
  
¹ Adjusted EPS is calculated as the profit for the year attributable to the equity holders of the Parent before exceptional items and amortisation of intangible assets (net of tax).
² TSR represents the change in capital value of a listed/quoted company over a period, plus dividends, expressed as a plus or minus percentage of the opening value.

Committee membership:

J Liston - Chairman, J Callaghan, Mn Keane, P Haran, L Herlihy, V Quinlan.