Our framework for corporate governance is set forth in our Governance Principles, committee charters, and our Third Amended and Restated Bylaws, which can be found on our website.
Our Governance Principles provide guidelines for Board matters, including the leadership structure of the Board. Written charters for the Board's Audit Committee, Human Capital and Compensation Committee, Governance and Corporate Responsibility Committee, and Conflicts Committee (a subcommittee of the Governance and Corporate Responsibility Committee) describe the roles and responsibilities of each committee. Additionally, our Code of Conduct applies to all officers, directors, and employees.
Operating responsibly and with accountability to serve the best interests of our stakeholders requires sound corporate governance-a commitment that begins with our Board of Directors. Our Board is led by our Chairman, President, and CEO, Lorenzo Simonelli. Geoffrey Beattie has been elected as lead independent director, a role specifically required under our Governance Principles. As lead independent director, Mr. Beattie has a clear and comprehensive set of duties, including responsibility to lead meetings of the independent directors and to regularly meet with the Board Chair. Our Board has determined that this role provides an effective check on management and provides the appropriate balance between our focus on strategic execution and independent Board oversight.
Our Board recognizes that operating responsibly - minimizing the environmental impact of our operations, fostering employee engagement, and respecting human rights by creating an environment of respect, integrity and fairness for our employees and customers wherever we do business - is fundamental to the long-term success of our Company. Our Board exhibits an effective mix of skills, experience, diversity, and perspectives, collectively demonstrating leadership and a substantive understanding of our strategy as an energy technology company. Our directors' sustainability expertise includes direct experience with human resources and talent development, legal and corporate governance issues, environmental and safety regulations, and risk oversight including cybersecurity, finance, and operations. Our Governance and Corporate Responsibility Committee, which recommends director candidates for annual election, evaluates the composition of the Board annually and identifies desired skills, experience, and capabilities. The Committee strives to maintain a Board with varied expertise and perspective and one that reflects diversity, including but not limited to gender, ethnicity, background, and experience.
The Board Governance and Corporate Responsibility Committee has oversight responsibility of the Company's environmental matters including monitoring its sustainability strategy and initiatives and management of environmental, health and safety compliance and related risks. The Governance and Corporate Responsibility Committee receives regular reports from management on the Company's environmental, health and safety, corporate responsibility, and sustainability activities and risks, including risks related to climate change, among others.
Attracting, developing, retaining, and inspiring the best people globally is crucial to all aspects of our business. The Board believes that the Company's strong ethical leadership, grounded in the values expressed in Our Code of Conduct, is central to the Company's long-term success. To that end, the Board and its Committees are actively engaged in overseeing the Company's human capital management strategy. The Human Capital and Compensation Committee assists the Board in discharging its oversight responsibility for the Company's human capital management matters, including DEI initiatives, talent development, and corporate culture, among other programs. Management provides regular updates to the Human Capital and Compensation Committee on human capital management strategy and programs, and the Board is kept apprised of any developments in these areas.
Baker Hughes identifies risks to our strategic and business objectives utilizing an effective enterprise risk management (ERM) process - a risk-based management and continuous monitoring program that is aligned to the business cycle, leads to more informed decision making, and builds resilience across the organization.
Our ERM process includes an annual risk review with representatives of business segments and functions to proactively identify and monitor key risks and opportunities that have significant potential to affect our business or strategy. Every identified risk is rated according to probability, impact, and our preparedness. Those that are identified as severe require enhanced monitoring and improvement efforts. Identified risks are then reviewed with executive leadership for validation and alignment. Executive sponsors are assigned to the top risks and key risk indicators are established to monitor the mitigation and adaptation. The ERM Steering Committee and the Board of Directors have oversight of the ERM program and will recommend further analysis or in some cases, specific improvements to strengthen the company's safeguards.
The CEO and ERM executive sponsors perform deep dive reviews of response actions and key risk indicators with the risk owners and quarterly updates are presented to the Executive Leadership Team. In addition, the top sixteen risks are reviewed during Board of Directors meetings throughout the year. In 2021, the ERM process was expanded to identify environmental, social and governance risks. In response to the evolving risk environment, our 2022 risk categories now specifically include Supply Chain and Climate Change.
The ERM Team works closely with key stakeholders to introduce, support, and promulgate the risk management culture across the company. There are six main cultural values driving Baker Hughes' ERM practices. These are:
- Tone at the top
- Awareness of risk
- Willingness to participate
- Ownership of risks
- Inclusion of risk in decision making
- Ongoing risk management education
The primary responsibility for developing, managing, and executing our strategy, including our people, planet, and principles priorities, rests with our management team. Our Vice President of Energy Transition oversees our energy transition strategy and serves as the primary point of contact on day-to-day sustainability matters. Additionally, our VP of Energy Transition chairs our Sustainability Steering Team that, together with subject matter working teams, manages our sustainability priorities, sets goals, monitors our progress, and coordinates our sustainability reporting. We also have a formalized sustainability management structure with designated executive sponsors that report to the Board.