Governance

Senior management oversight

The Xstrata Board sets and reviews Sustainable Development Policy globally. The chief executives of our commodity businesses are represented on the Group Executive Committee, which is formally responsible for sustainability strategy development and implementation. The Board provides oversight of the Executive Committee's performance.

Xstrata's Board Health Safety Environment and Community (HSEC) Committee was established in 2005 to assist the Board in its HSEC responsibilities and to provide guidance on sustainable development issues. The Board HSEC Committee is chaired by Ian Strachan, independent non-executive director. The other members of the committee are David Rough, Senior Independent Director and Deputy Chairman, Claude Lamoureux, and Dr Con Fauconnier, independent non-executive directors, and Mick Davis, Xstrata plc Chief Executive.

The terms of reference for the Board HSEC Committee and all other Board committees are available on our website.

The Board HSEC Committee meets quarterly to review and evaluate reports from the commodity businesses on their performance in implementing Xstrata's Sustainable Development Policy and Standards and benchmarks our performance against other mining and extractives sector companies. At each formal meeting, the Chief Executive of one of Xstrata's commodity businesses presents the sustainability strategy of the business and provides an overview of social, environmental and ethical risk management, future targets and performance. The members of the Board HSEC Committee regularly visit operations to gain a close understanding of how our SD Framework is implemented. In 2009 members of the HSEC Committee visited Xstrata Nickel's Koniambo project in New Caledonia, Xstrata Coal's operations and projects in NSW, Australia and Xstrata Copper's operations and projects in Peru.

All Board members receive quarterly reports of key performance indicators, critical and high potential risk incidents and the sustainable development assurance programme results. The Executive Committee receives the same information on a monthly basis. Board members are provided with independent briefings on social, ethical and environmental issues as required and are able to consult with external experts at Xstrata's expense.

Remuneration
Remuneration is linked to SD performance at all levels in our business. The executive management bonus includes a variable component relating to health, safety, community and people development in line with individual objectives. For managers and other employees, the proportion of remuneration determined by SD criteria varies between commodity businesses and regions. For mine supervisors and operational employees, up to 80% of total bonus awards is determined by SD performance.

Ensuring consistent implementation of our SD Framework
We believe our devolved management structure and culture support entrepreneurial leadership, balanced with a rigorous approach to risk management and a strong framework for sustainable development. Clear governance and effective communication across the Group are essential to enable our management model to function effectively and to ensure consistently high standards of ethics and sustainable development performance. Each business is governed by a commodity business Board, which includes representatives of Xstrata's corporate centre, typically the Group CEO, CFO or other senior corporate personnel.

Each commodity business has an executive level SD committee, chaired by the commodity business Chief Executive, to provide additional focus and guidance on sustainable development strategy and issues.

Xstrata's SD Framework applies across all commodity businesses ensuring they apply common principles, policy and standards. The Group General Manager Sustainable Development (Group GM SD), who reports to the Group Chief Executive, oversees the implementation of Xstrata's SD Framework. We audit compliance with the SD Framework through internal and external programmes. For more information see SD Framework.

Risk and crisis management
Our approach to risk management is value driven and we have implemented a comprehensive risk management system across our business. We regularly review and publicly report the principal risks and uncertainties which may affect our ability to deliver our strategy effectively, the potential impact on our business and the controls in place to mitigate these risks. For more information see Xstrata Annual Report 2009.

The Group crisis management plan is supported by crisis management plans at each commodity business. Xstrata's SD Standard for Emergencies, Crises and Business Continuity sets out the requirement for all sites and commodity businesses to implement emergency response, business continuity and crisis management plans in consultation with external emergency agencies. The plans include clear protocols for when and how to escalate a crisis at the commodity business level to a Group crisis. They also cover training for employees and other stakeholders, annual reviews and the incorporation of lessons learnt from actual emergencies and simulations into plans.