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Ethics Committee Report

Introduction by Ken Hanna, Ethics Committee Chairman

I am pleased to introduce the report from the Ethics Committee for 2012.

During the year the Committee has continued to concentrate on anti-bribery and corruption issues against the background of a number of recent developments.

First, in September we announced a new regional structure. In the past we have taken the view that none of the businesses that we would consider to be at elevated risk of ethical issues came within the jurisdiction of the US Foreign Corrupt Practices Act (FCPA) – although we did model our compliance regime on the requirements of the FCPA since, until the implementation of the UK Bribery Act, it was seen as setting the highest standards. However, with the reorganisation of our regional businesses at the start of 2013, our Southern and Central American businesses will combine with those in North America, and it is arguable that in limited cases some parts of our business could now fall within the jurisdiction of the FCPA. Whether or not this is the case will, of course, depend on the particular circumstances, but in any event we think it would be prudent, in setting our standards, to have regard to both the UK Bribery Act and, where appropriate, the FCPA.

Secondly, we have also agreed that, since each of the new regional businesses covers countries with heightened ethical risk, each regional Director will be invited to attend the Committee at least once each year.

Thirdly, although there have been no substantial changes in applicable law, both the UK Serious Fraud Office and the US Department of Justice have issued policy statements/guidance on the Bribery Act and FCPA respectively.

Finally, there have been two changes to the membership of the Committee. I succeeded Philip Rogerson as Chairman on 25 April 2012 and Diana Layfield joined the Committee on 1 May 2012.

Responsibilities and role of the Ethics Committee

The main responsibilities of the Committee are:

  • to advise the Board on the development of strategy and policy on ethical matters; 
  • to advise the Board on steps to be taken to establish a culture of integrity and honesty in all of the Company's business dealings; 
  • overseeing the Company's policies and procedures for the identification, assessment, management and reporting of ethical risk; 
  • overseeing the Company's policies and procedures to prevent persons associated with the Company from engaging in bribery; and 
  • monitoring and reviewing the operation of the Company's policies and procedures.

The full Terms of Reference of the Committee are available on our website at http://ir.aggreko.com/committee-terms-of-reference.

Membership of the Committee

The members of the Committee throughout the year were as follows:

Ken Hanna  Chairman (appointed as Chairman of the Committee on 25 April 2012)

David Hamill

  

Diana Layfield         

 (appointed to the Committee on 1 May 2012) 
Philip Rogerson   (resigned from the Committee on 25 April 2012)

All members of the Committee are therefore independent Non-executive Directors. Peter Kennerley is Secretary to the Committee and during 2012 Rupert Soames and Kash Pandya, Regional Director for Aggreko International attended meetings by invitation.

The Committee met three times in 2012.

Main activities of the Committee during the year

The Committee receives regular reports on the development of Aggreko's anti-corruption and bribery strategy, including the communication of our procedures, together with associated training, legislative developments, reports of incidents and actions taken and the activities of our Sales Consultants.

Some of the particular matters addressed by the Committee during 2012 were:

Poit Energia

Part of the Committee's role is to ensure that we address ethical risk in the context of acquisitions, and we have established a process within the business to ensure that we address those risks in a proportionate way.

Aggreko acquired Poit Energia, the leading provider of temporary power and temperature control in South America, in the early part of 2012. In line with our processes, as part of Aggreko's pre-acquisition due diligence we appointed external consultants to review the past ethical conduct of the company and its associates. They reported no significant issues of concern. We also gave employees of the acquired business appropriate training on Aggreko's Ethics Policy as soon as practicable after of the acquisition was completed.

Sales consultants

The most significant ethical risk we run is the behaviour of third party sales consultants (see Principal Risks and Uncertainties – Failure to conduct business dealings with integrity and honesty). In that section we summarise the steps we take to mitigate that risk through our approach to appointing, training, rewarding, controlling and monitoring our sales consultants. Given the significance of the risk, the Committee takes a special interest in this area. For the last two years we have received a report from Group Internal Audit on the operation of our policy for sales consultants, and in 2012 we separately reviewed the amounts paid to sales consultants as commission to ensure that they were in line with our policy. In each case we were satisfied with the report.

London 2012 Olympics

Aggreko's appointment as exclusive supplier of temporary energy services for the London 2012 Olympic and Paralympics Games provided a unique opportunity to develop business relationships and demonstrate our products and services to existing and prospective customers and agents. This would normally include a visit with us to the Games, and associated hospitality, recognising that many of our customers will have travelled far to meet us.

We therefore drew up a policy specifically for the London 2012 Olympics to underpin our general policies. We appointed a steering committee of two Regional Directors, and no invitation was issued without the approval of the steering committee as to the identity of each guest. We kept a separate register of all invitations and specifically identified any individuals who might be categorised as foreign public officials. In line with our general policies, we sought to ensure that all invitations had a legitimate business purpose, were reasonable and proportionate and would not improperly influence any business decision. We also sought confirmation from each customer that the visit would comply with the customer's own local legal requirements and was permitted and authorised by the customer's own organisation.

Once the Games were over, we commissioned Group Internal Audit to report on compliance with the policy. The report identified no improper conduct and we were pleased to conclude that the policy had been followed in all material respects.

Governance

On an annual basis the Board reviews the Committee's effectiveness as part of the Board's evaluation process. We undertook a thorough review of our terms of reference and recommended minor revisions to the Board, which were adopted in July.

We last comprehensively reviewed our policies and procedures in 2011, following the implementation of the UK Bribery Act. We believe they have worked well in ensuring that our employees and agents comply with the high ethical standards we have set ourselves at Aggreko. But we continue to monitor the effectiveness of our regime and identify improvements, through formal reports and suggestions from our compliance staff and other employees. We are therefore currently reviewing our policies to reflect the recent regulatory guidance referred to above, the new Group structure, and the improvements and clarifications we have identified internally. Changes are likely to be minor, but we plan to implement them early in 2013.

Ken Hanna
Chairman of the Ethics Committee

7 March 2013