Good Governance:
Leadership and Openness

"Good governance is not merely following a set of rules, but ensuring that the highest standards of behaviour begin at board level and flow throughout the organisation."

Sir John Parker

Chairman's Introduction

The UK Corporate Governance Code (the Code) states that the purpose of corporate governance is to, 'facilitate effective, entrepreneurial and prudent management that can deliver the long term success of the company'. For us, this means not merely following a set of rules, but ensuring that the highest standards of behaviour begin at board level and flow throughout the organisation. Good governance takes different forms; whether it be adopting best practices early - such as the annual re-election of all directors in 2011, or committing to building a diverse board.

Two key developments in the corporate governance field during 2011 were the publication of the report from Lord Davies on the representation of women in the boardroom and the implementation of the guidance on 'adequate procedures' under the Bribery Act.

We believe that diversity in the boardroom, in terms of background, skills and experience, encourages independent and challenging debate and leads to better decision making. I was privileged to have served on Lord Davies' steering group and therefore welcomed his 'Women on Boards' report, published in February 2011, which states that 'evidence suggests that companies with a strong female representation at board and top management level perform better than those without and that gender diverse boards have a positive impact on performance'. In our 2010 annual report, we already announced our intention to increase the representation of women on the Board from 20% to about 30% (excluding the chairman) by 2013. The Group is also committed to increasing the pipeline of diverse talent within the organisation and specifically increasing gender diversity overall and within the management population. At a Group and business unit level we have established internal targets through to 2014, progress against which is tracked regularly, with Group assisting the spread of best practice in this area.

During the year, Nicky Oppenheimer retired from the Board and in April, we welcomed Phuthuma Nhleko as a non executive director (NED) who has an excellent international business track record. These changes continue our comprehensive refreshment programme.

In 2011, we intensified our Business Integrity training, that commenced in 2009, to ensure that our workforce is fully equipped to manage potential scenarios relating to bribery and corruption - more detail about this is included on page 102.

New to this section on pages 98 to 100 as part of our commitment to disclosure and openness, are detailed reports on items discussed by our Committees during the year. We are pleased to confirm that we complied with the Code for the period under review. For more information on this, please see the checklist on our website.

Board Effectiveness

As chairman, I manage the Board and oversee the operation of its Committees. My aim is to ensure that they should operate effectively via directors with the relevant range of skill sets and experience to ensure they are fit for purpose. In this report I will explain how we cultivate a talented and diverse board whose performance is regularly reviewed and continuously improved.

An external evaluation of the Board by a facilitator with no prior relationship with the Anglo American Group, commenced towards the end of 2011. This involved interviews with the Board members on an individual basis and attendance at a Board meeting by the external facilitator. The results of this review are being analysed as this report is finalised and therefore an update on the results of this externally facilitated assessment will be disclosed in next year's report.

Achievements Against 2010 Board Effectiveness Action Plan

  Action plan resulting from 2010 board effectiveness review Action plan update 2011
Relationship between Board and management Increase contact between directors and management during intervals between board meetings The flow of management information to the Board was enhanced and the frequency of dissemination of this was improved
  Introduce more 'free flowing' informal discussions
outside board meetings - the pre-board meeting
dinners will be more 'structured' whilst retaining an
informal style
Structured board dinners took place during the year
where matters such as strategy and the HR talent
review were discussed
Improving Board meeting effectiveness Enhance the information flow to NEDs between board meetings to allow for a more focused board agenda Items disseminated such as economics reports
  Introduction of iPads to ensure timely provision of board materials Successful implementation with a high percentage choosing electronic over paper copies
  Management to consider the optimum level of detail in presentations to the Board Ongoing - items such as company risks, operational safety and performance will be provided in such detail as is appropriate
Committees S&SD Committee - outside stakeholders to be invited to address some committee meetings Implemented during the year - for more information see page 98 relating to the S&SD Committee
  Nomination Committee - talent strategy Detailed talent strategy presented to NEDs in February
  Remuneration Committee - the Committee will allot more time for 'members only' discussions More time allocated accordingly
Key focus points highlighted by NEDs Political and regulatory uncertainty; business integrity processes - Bribery Act 2010 Please see detailed report on page 102
  Safety and the environment Board papers were amended to show more detail on these issues
  Strategy Two day strategy meeting held in June
  Project execution Detailed quarterly project 'dashboards' reviewed by the Board
  Talent development and management succession Presentations from the chief executive in February and June - see detail on succession on page 99
Performance of NEDs Site visits The number of visits was increased in 2011 including a special visit to Moranbah in Australia - see page 95
  Induction of board A half day exploration seminar took place in February and a full day mining seminar took place at the July board meeting

The achievements against the action plan flowing from the 2010 board effectiveness review are detailed in the table above. As chairman I interviewed each director to review those issues raised during the board evaluation process and on any other issue of concern to them as individual directors. This process also provides an opportunity to review the personal performance of a director on a one-to-one basis. Following that I am happy to confirm that each board member's performance is effective and they each continue to demonstrate full commitment to the role.

In relation to NEDs' involvement in developing the strategy of the Company, we held a two day strategy meeting in June 2011, in which the entire Board and senior management participated. Six key focus areas were agreed upon. The proposed increase in the Company's share in the De Beers Group is but one example of the agreed strategic priorities that are being implemented.

As I said last year, corporate governance is a much abused term - to us, it is much more than simply following a set of guidelines. My aim in this report is to illustrate our commitment to creating value with the right people making the right decisions within a board and committee environment that promotes challenge and debate.

Sir John Parker