Achieving good governance

The Board is responsible to all Tullow stakeholders for providing strong leadership in Group strategy and ensuring that the risks and rewards of the business are properly balanced and managed.

"A good governance structure must be underpinned by a strong organisational culture that values ethics and integrity and the highest standards of corporate
behaviour."

Pat Plunkett, Chairman

2010 Board evaluation

We undertook an external evaluation of the Board’s effectiveness in 2010, as the last externally facilitated review was in 2007. Overall, the results of the review demonstrate that the Board was effective during the year.

Recognising the important role the Board plays in setting the strategic direction of the Group, the Board performance report identified the need to continue to refine how the Board is engaged in developing strategy. This includes ensuring that adequate time is allocated to discussions on strategy and, as appropriate, that alternative strategies to deliver corporate objectives are fully considered.

As last year, we have provided information on the detailed annual objectives for the Board and the Board’s performance against those objectives. See the Governance highlights for performance against the 2010 objectives and the table for the 2011 Board objectives.

For full information see the review of the Board's effectiveness

2010 Board time allocation

We have set out the approximate time we allocated at Board meetings during the year to various discussion topics. Next to strategy, discussions on the situation and progress in Uganda took up the second highest time. Very considerable effort was devoted at Board level and in-country by Executive Directors and senior management trying to satisfactorily conclude this transaction. Achieving First Oil in Ghana and successful operational delivery across the business was also given high importance to ensure we met our targets and stakeholder expectations. EHS commanded more of our time, mainly as a result of the implications of the Macondo incident in April and what that potentially meant for Tullow. Corporate Governance is another important area for the Board, in relation not just to the new UK Corporate Governance Code but also to the UK Bribery Act and the Group’s Code of Business Conduct. In recognition of the importance attached to these areas, a Group Compliance Manager was recruited early in 2011, reporting to the General Counsel.

Group Compliance

The newly appointed Group Compliance Manager has responsibility for Tullow’s anti-bribery and corruption and regulatory compliance programmes worldwide. The UK Bribery Act, which is due to be introduced this year, will place onerous requirements on UK companies to demonstrate the effectiveness of their anti-bribery measures. Tullow is introducing a new Code of Business Conduct, supporting policies and guidelines and detailed reporting requirements for staff. A comprehensive and mandatory training programme is under development which all management, employees and contractor staff will undertake. An online training programme is also planned for later in 2011. Tullow is also establishing a Compliance Committee to oversee the Group’s compliance activities and report regularly to the Board on progress. We will outline these initiatives more fully in our Corporate Responsibility Report, to be published in June.

Stakeholder engagement

Tullow has strong stakeholder engagement programmes in place for shareholders and employees as well as increasing levels of engagement with local communities and suppliers, particularly local in-country suppliers. An area we are focusing on this year is our external stakeholder engagement to help us identify and analyse the major issues that impact on our ability to run our business and achieve our plans and strategic objectives. One of our main goals is to operate in a way that creates shared prosperity so that we understand what this means to our key external stakeholders. Our aim, over time, is to develop a best-in-class approach so that all our stakeholders see real benefits from our success.

Succession planning

As I outlined in my Chairman’s Statement, I plan, after more than 12 very enjoyable years as a non-executive Director of Tullow, to step down as Chairman by next year’s AGM. I have announced this early to enable Tullow to identify a successor and to ensure a smooth transition for the new Chairman. This is part of an overall process to develop and implement a succession plan for my role and the ongoing refreshment of the non-executive Directors.

Governance and culture

Achieving good governance and being a responsible company is inextricably linked with organisational culture and how we run and manage our business. Culture defines our values, how decisions are made and what we deem as acceptable risk. Equally, it is about what standards we apply in how we deal with people, whatever stakeholder group they might be. What we strive to do is to adopt and implement what is right for our business, while being open and transparent in all that we do. This helps us to create trust, demonstrate accountability and build our reputation, which in turn will create new opportunities for Tullow and for all our stakeholders.

Pat Plunkett, Chairman