Governance

Sound governance and management systems enable a company to operate in a transparent and accountable way and provide effective oversight of operations. High ethical standards – formalized in company policies and demonstrated by managers at all levels – help a company translate its aspirations into action.

The concept of governance has expanded beyond its traditional focus on fiduciary responsibility to shareholders to a broader focus on a company’s impact on the world and its responsibilities to diverse stakeholders. At Ford, this is reflected in our development and integration of sustainability structures, processes and management systems into the core business.

Assessing Materiality

In our latest materiality analysis, completed in early 2011 for this report, a number of topics relating to governance and accountability were identified as issues of importance to Ford and our stakeholders.

Ethical business practices were identified, for example, to be of high potential impact on Ford and of medium concern to stakeholders. Also, issues related to Ford’s “sustainability strategy, vision, governance and management” were identified to be of high potential impact on the Company and medium concern to stakeholders. The governance aspect of this item was newly added this year, reflecting growing investor and NGO interest in integrating sustainability into business processes.

The materiality analysis found that the issue of human rights and working conditions in Ford operations was of lower concern to stakeholders than in previous years, perhaps because our human rights code has been integrated into our overall governance. These issues are now discussed in this Governance section, rather than a separate human rights section. (The issue of human rights in our supply chain remains of high importance to stakeholders, and is discussed in the new Supply Chain section.)

Finally, several public policy issues were identified in the analysis, including the following:

• Sustainable raw materials. This topic, which is new for this year, includes issues around conflict minerals and rare earth metals, as well as the overall impact of raw materials extraction on the environment, communities, geopolitics and Ford’s costs. This set of issues was judged to be of high potential impact on Ford and high concern to stakeholders.
• Greenhouse gas (GHG) and fuel economy regulation. Regulations related to GHG emissions and fuel economy were judged to be of continued high potential impact on the Company and high concern to stakeholders.
• Global environmental regulations. Changing environmental and safety regulations in general were judged to be of high potential impact on Ford and medium concern to stakeholders.
• Political payments and contributions. Political contributions were judged to be of medium potential impact on the Company and medium concern to stakeholders. The analysis found that stakeholders, including shareholders, are increasingly interested in transparency around corporate participation in the political process and various forms of corporate political donations.

Based on this assessment, we included discussion of these issues in this web report.