Carphone Warehouse 2003 Annual Report Download - page 16

Corporate Governance
Introduction
The Board recognises the importance of high standards of corporate
governance. This report and the Remuneration Report set out on pages
16 to 19 explain how the Company complies with the key corporate
guidance set out in the Combined Code appended to the Listing Rules.
Compliance with the Combined Code
The Company has been in compliance with the requirements of the
Combined Code and the Turnbull Report throughout the period.
Board
The Company has a well-balanced Board. There are five Executive
Directors and, after the appointment of Martin Dawes on 2 June 2003,
there are six Non-Executive Directors. Directors’ names and brief
biographies are set out on page 12. There were no changes to the
Board in the period, except the appointment of Hans Roger Snook
became effective on 1 May 2002.
Hans Roger Snook is the Chairman, Charles Dunstone is Chief Executive
Officer and Sir Brian Pitman is the Senior Independent Director.
The Board considers that, other than Hans Roger Snook and
Martin Dawes, each of the Non-Executive Directors is independent of
management and free from any business or other relationship which
could materially interfere with the exercise of their independent judgement.
The majority of Non-Executive Directors are therefore independent.
Hans Roger Snook is not considered independent due to the fact that he
holds 1 million share options in the Company. Martin Dawes is currently
not considered independent because as a previous shareholder of Opal
Telecom plc which was acquired by the Group in November 2002, he is
entitled to receive part of any additional consideration payable in respect of
Opal’s performance in the two financial periods ending 27 March 2004.
The Board will review his independence at the end of such period.
The Board meets at least ten times a year, receiving key briefing papers
before each meeting. The Board is responsible to the shareholders for
the proper management of the Company and its subsidiaries. It sets
out and monitors the Group’s strategy, reviews its trading performance,
examines major capital expenditure, formulates policy on key issues,
ensures adequate funding and reports to shareholders where appropriate.
The Board has underlined its commitment to internal control in the
Group by setting clear operating guidelines for all of its businesses, and
monitoring key performance indicators and risks on a monthly basis.
Board Committees
The Board has established three principal committees to consider
various aspects of the Group’s operations in more detail than would
be the case within full Board meetings. Details of the members of each
committee are given on page 13.
IAudit Committee
The Audit Committee comprises four Non-Executive Directors and is
chaired by Adrian Martin. The Committee meets at least three times
a year together with the Group’s internal audit and risk management
team and the Group’s external auditors. Terms of reference for the
Committee include reviewing the annual accounts and interim
statements, ensuring compliance with generally accepted
accounting principles and satisfying itself as to the adequacy and
effectiveness of the Group’s internal control procedures. It receives
reports from both internal and external auditors on a regular basis.
II Remuneration Committee
The Remuneration Committee comprises three Non-Executive
Directors and is chaired by John Gildersleeve. The Committee
meets at least twice a year. Terms of reference include making
recommendations to the Board on the Group’s framework of
executive remuneration and determining on behalf of the Board
specific remuneration packages for the Executive Directors and
senior management. It also approves contractual terms and
incentives including executive share option awards for Executive
Directors and senior management. The Remuneration Report is set
out on pages 16 to 19.
III Nomination Committee
The Nomination Committee comprises two Non-Executive Directors
and David Ross and is chaired by Des Wilson. It advises generally
on Board appointments and the composition of the Board.
It advised the Board on the appointment of Martin Dawes as
a Non-Executive Director.
During the period the Nomination Committee also proposed,
and the Company adopted, a policy that each Non-Executive
Director should serve a maximum of two three year terms of office,
unless there are exceptional circumstances for their continued
appointment. Non-Executive Directors will continue to be subject
to re-election every three years and will be entitled to no
compensation for loss of office.
Relations with shareholders
The Company maintains a regular dialogue with institutional
shareholders, primarily in the periods following announcements of
results. The importance of maintaining this dialogue is recognised
in order to ensure that the Group’s strategy is understood and that
concerns are addressed in a constructive way.
The Annual General Meeting will be used as a forum to communicate
with individual investors and is an opportunity to raise with the Directors
issues concerning the Group’s operations and performance. Investor
information including financial results, press releases and management
presentations are available on cpwplc.com.
Accountability and Audit
Internal control
The Board of Directors has overall responsibility for systems of internal
control throughout the Group and for reviewing their effectiveness.
The Board monitors all controls, including financial, operating and
compliance controls and risk management. The control systems in
place are designed to provide reasonable and not absolute assurance
against misstatement or loss and are designed to manage rather than
eliminate the risk of failure to achieve business objectives.
Among the principal features of the Group’s systems of internal
control is a planning process within which the Board approves strategy
and a Group business plan. Managers of individual business units
prepare plans and budgets covering a two year period. These plans
are challenged and approved by the Executive Board.
The Board receives comprehensive monthly information including
financial and business performance showing variances against budget
and key performance indicators. There is also a regular reforecasting
process in place.
Capital expenditure is subject to the disciplines of appraisal and
approval by appropriate levels of management.
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The Carphone Warehouse Group PLC Annual Report 2003