performance of the Board was very useful; it reminded us all that while the Board’s performance is “very good”, relatively minor and focussed adjustments, for example in the Group’s strategic planning processes, can provide a basis for further performance improvements and enable us to better utilise the diverse skills and abilities of individual Board members. 

## The Board and induction 

It has been CRH’s practice since the formation of the Group in the 1970s that the roles of Chairman and Chief Executive are not combined. A summary of our respective responsibilities are set out on page 40. 

It is also our practice that a majority of the Board comprises non-executive Directors. My non- executive Director colleagues are expected to challenge management proposals constructively and to examine and review management performance in meeting agreed objectives and targets. In addition, they are expected to draw on their experience and knowledge in respect of any challenges facing the Group and in relation to the development of proposals on strategy. 

Ernst Bärtschi and Heather Ann McSharry were appointed to the Board in late-2011 and early-2012 respectively. In order to provide them with an in-depth understanding of the Group, Kieran McGowan agreed a comprehensive induction programme with each of them, which was designed to cover their first year on the Board. Following my appointment as Chairman, I met with Ernst and Heather Ann approximately half way through the programme to ensure that it was meeting their needs. I would like to thank both of them and the senior management team for the time and effort they invested in the programme, the details of which are set out on page 42. 

My colleagues and I are committed to ensuring that the Board is sufficiently diverse and appropriately balanced, and these are core elements taken into account by the Nomination and Corporate Governance Committee  when it makes recommendations on Board appointments. The renewal policy is described in detail on page 41. Recent appointments have been very much in keeping with these principles. 

## Performance appraisal, independence and re-election 

I have conducted a formal evaluation of the performance of individual Directors, which 

included training needs where appropriate. I can confirm that each of the Directors continues to perform effectively and to demonstrate strong commitment to the role. Jan Maarten de Jong was appointed a Director in January 2004 and has entered his tenth year on the Board. Notwithstanding his tenure, we consider him to be independent. In forming this view, we have taken into account his performance as a non-executive Director in terms of the judgement, objectivity and commitment he brings to the Board. We have invited him to serve as a Director for a further period of one year, with the position to be reviewed in 2014. In accordance with the policy adopted in 2011, each Director will retire at the Annual General Meeting on 8 May 2013. I strongly recommend that each of them be re-elected. 

## Meetings and time commitment 

I work closely with the Chief Executive and Company Secretary in setting the agendas of the Board to ensure that sufficient time is allocated to strategy setting and review, performance monitoring, portfolio management, including acquisitions and divestments, succession planning and talent management. The papers for scheduled Board meetings are circulated electronically in the week prior to the meeting. The papers are regarded by the non-executive Directors as being comprehensive. However, following the feedback from the external evaluation process, we have focussed over the past year on rationalising the documentation circulated to the Board. Further details in relation to the agenda items dealt with by the Board throughout the year are set out on page 43. 

The Board makes two visits each year to Group operations; one in Europe and one in North America. Each visit lasts between three and five days and incorporates a scheduled Board meeting. In 2012, these visits were to Belgium in Europe and to Montreal in Canada. Since my appointment as Chairman, I have also visited our joint venture in India and in the coming months I will be visiting our operations in Ukraine and our joint venture in China. 

Prior to their appointment, potential non-executive Directors are made aware of the calendar of meetings and are asked to confirm that they are able to allocate sufficient time to meet the expectations of their role. My agreement is required before a non-executive Director accepts additional commitments that might impact adversely on the time he or she is able to devote to CRH. 

## Risk management and ethics 

Risk management continues to be the focus of much attention in the context of both the recessionary environment and high profile failures of risk systems in global organisations. The principal strategic risks which the Group faces are set out in the Directors’ Report on pages 68 and 69. The Board has delegated responsibility for the monitoring of risk management and internal controls to the Audit Committee ¹. However, the Board retains ultimate responsibility for determining the Group’s “risk appetite” and annually considers a report in relation to the monitoring, controlling and reporting of identified risks and uncertainties. In recent years management has undertaken a significant review of the Group’s risk management framework to ensure that the systems in place are appropriately robust and reflect the organisation structure and diversity of the Group. The Board and management are satisfied that appropriate risk management and internal controls are in place throughout the Group. 

The international regulatory environment in which the Group operates continues to evolve in the area of compliance and ethics, with a significant step-up in enforcement activity around the world. Our stakeholders demand transparency from us in terms of business ethics, particularly as we develop a more diverse, global footprint. The Group’s policies and procedures are designed to reinforce our high standards of business conduct and ensure our employees everywhere act in a manner consistent with CRH’s core values to safeguard our excellent reputation. As outlined on page 46, the Head of Compliance and Ethics reports regularly to the Audit Committee . 

## Conclusion 

In summary, I believe that your Board operates very effectively and that the Board’s governance structures outlined above and in the remainder of this report are appropriate and robust. As Chairman, I am focussed on ensuring that CRH remains at the forefront of best practice in this area. 

Nicky Hartery Chairman 

February 2013 

¹ In accordance with Section 91(6)(b) of the EC (Directive 2006/43) Regulations 2010 

