Sustainability website / Governance, Ethics and Engagement / Governance

Xstrata is committed to robust and accountable corporate governance, as set out in the Group’s Statement of Business Principles. Stringent governance mechanisms and high levels of ethical performance are important elements in establishing and maintaining Xstrata’s reputation as a responsible and trusted developer of resources, business partner, employer, and corporate citizen. We identify and engage with all stakeholders in our business in an equitable, transparent and culturally appropriate manner in respect of their concerns and expectations with regard to Xstrata’s operations, activities and products.

Xstrata’s Board comprises seven non-executive directors and three executive directors. Five of the non-executive directors are considered by the Board to be independent, defined as independent from management and free from any relationship which could materially interfere with the exercise of their independent judgement. Claude Lamoureux has been proposed by the Board for election at the 2008 Annual General Meeting in May as an additional independent non-executive director. Further information, including Xstrata’s adherence to the principles of the UK Combined Code on Corporate Governance, is provided in the corporate governance report on pages 110-120 of the 2007 Annual Report.

Board HSEC committee

Board HSEC committee / Sustainable development management

The Board sets and reviews Sustainable Development Policy globally. Xstrata’s Board HSEC Committee was established in February 2005 to assist the Board in its HSEC roles and obligations and to provide additional guidance on HSEC and sustainable development issues. The Board HSEC Committee reviews and evaluates reports on the effectiveness of Xstrata’s Sustainable Development Framework and benchmarks Xstrata against other mining and extractives sector companies. The terms of reference for the Board HSEC Committee and all other Board committees are available from the Xstrata website. The performance, constitution and terms of reference of the HSEC Committee are reviewed annually as part of the Board’s evaluation, carried out by a third party.

Xstrata’s Board HSEC Committee is chaired by Ian Strachan, independent non-executive Director. David Rough, senior independent Director and deputy Chairman, and Mick Davis, Xstrata plc Chief Executive are also members of the committee. Claude Lamoureux joined the committee in February 2008 as an independent external consultant to the Board until the annual general meeting. Dr Fred Roux, an independent non-executive Director, was a committee member until his resignation on 7 August 2007 which followed Xstrata Alloys’ acquisition of Eland Platinum and reflected the potential conflict of interest posed by Dr Roux’s position as Chairman, Impala Platinum.

The HSEC committee of the Board meets quarterly. At each formal meeting, the Chief Executive of one of Xstrata’s commodity businesses presents the SD strategy of the business, an overview of key social, environmental and ethical risk management, future targets and overall performance. A summary of the Board HSEC Committee’s activities in 2007 is provided on page 120 of Xstrata’s 2007 Annual Report.

Key performance indicators, critical and high potential risk incidents and sustainable development assurance programme results are reported to all Board members on a quarterly basis. Board members are provided with independent briefings on social, ethical and environmental issues as required and are able to consult external experts at Xstrata’s expense.

Sustainable development management

Board HSEC committee / Sustainable development management

The Group General Manager Sustainable Development has overall responsibility for the strategic management and global implementation, review and assurance of Xstrata’s Sustainable Development Framework and reports directly to the Group Chief Executive.

Xstrata operates a highly devolved management model. Each commodity business is responsible for all elements of its own operational and financial performance within the Group’s governance framework. HSEC and Sustainable Development resources are focused at the site level. Each commodity business executive committee includes a specific HSEC Committee which provides the commodity business Board with additional focus and guidance on sustainable development strategy and HSEC issues.

The remuneration of all Directors and the details of short-term and long-term incentive plans are fully disclosed in the Remuneration Report on pages 121 to 135 of the 2007 Annual Report. Remuneration is linked to performance with a high proportion of senior management’s remuneration at risk. HSEC performance determines a proportion of all commodity business senior management and operational management bonus awards. Individual performance criteria include non-financial criteria such as safety performance, and are evaluated in determining individual allocations from the bonus pool. The proportion of remuneration determined by various HSEC criteria varies between commodity businesses and regions. For mine supervisors and operational employees, up to 80% of total bonus awards is subject to safety and other HSEC criteria.