Terms of Reference BAE SYSTEMS plc Independent Committee In forming…

Terms of Reference
BAE SYSTEMS plc
Independent Committee

In forming this Independent Committee to study and publicly report upon its policies and
processes, the Company seeks to:

   a.   garner and implement recommendations which enable it to maintain a leadership position
        in ethical business practice amongst comparable industry peers;

   b.   further enhance the publicly available level of assurance regarding the accuracy of its
        assertions as to its policy, processes and conduct.

Terms of Reference and programme of work

The terms of reference for the Independent Committee are as follows:

   1.   The Committee will be formed as an ad hoc committee. Its members will have the
        background, experience and standing to enable the Committee to perform its work to the
        highest standards. The Committee will be chaired by one of its members. The Chairmen of
        the Board s Audit and Corporate Responsibility Committees will liaise closely with the
        Committee on behalf of the Board.

   2.   The Committee will report to the Chairman of the Company, acting on behalf of the
        Company s Board of Directors.

   3.   The Committee will review and evaluate the Company s (a) policies and processes relating
        to ethical business conduct generally; (b) internal control procedures; and (c)
        recordkeeping procedures as each of the foregoing may relate to the Company s ethical
        business policy generally and its compliance with applicable anti-corruption legislation,
        including UK law, the US FCPA and relevant international treaty obligations, in particular.
        The Committee s review and evaluation shall include an assessment of the foregoing as
        currently implemented in practice.

   4.   The Committee may, in the furtherance of its duties, request information from the
        Company to the extent necessary and/or useful to inform itself, and the Company shall
        cooperate by providing access to Company documentation and personnel to the maximum
        extent possible.

   5.   Based on its work, the Committee shall reach a judgment as to how the Company s
        policies and procedures benchmark against industry standards, whether they are
        sufficiently robust to ensure compliance with its ethical business policies generally and in
        particular to detect and prevent violations of anti-corruption laws.

   6.   To the extent the Committee identifies any opportunities for the improvement of the
        Company s policies or procedures as implemented, it shall make recommendations
        concerning remedial actions or changes in policies and/or procedures that in its judgment
        the Company should adopt, with particular regard to the ongoing roles of the Board s Audit
        and Corporate Responsibility Committees. The Company is committed to measuring its
        performance in the relevant areas and would welcome recommendations as to appropriate
        performance measures and measurement techniques that can be applied by the Company
        in order to ensure that the Committee s recommendations are implemented appropriately.

   7.   The Company intends that the Committee should publish its report.

   8.   The Committee shall be the final judge as to how it performs its duties. It is anticipated
        that the work may be performed in three stages, as follows:

        Phase 1 familiarisation with contract structures typical in the defence sector, the Company
        s business and organisation and the collection and review of relevant policies and
        procedures.
     Phase 2 review of the actual implementation of the relevant policies and procedures,
     including, for example, field testing of the efficacy of the procedures.

     Phase 3 formulation of conclusions and recommendations and preparation of written
     report.

9.   The Company will pay fees at the rate customarily charged by Committee members for
     professional services and will reimburse all expenses incurred by Committee members in
     carrying out their duties. Secretarial and clerical support will also be made available by the
     Company and appropriate external resource funded as required by the Committee.