Marks and Spencer 2006 Annual Report Download - page 35

33Marks and Spencer Group plc
During 2005/06, in Clothing and Home, we worked hard on
restoring our competitiveness, engaging with our suppliers to
improve value, styling and the amount of new and exciting
product across our ranges. In Food, we continued to focus on
offering high quality, innovative products. This is beginning to
contribute towards improved customer perceptions, market share
and financial performance. At the same time, we extended our
store refurbishment trial and continued to open new mainline and
‘Simply Food’ stores. Finally, improved service remained a priority.
We undertook our biggest ever customer service training
programme. We also overhauled pay rates and improved career
planning for customer assistants. This will help us attract and
retain the best people for our business. We are clear about what
we have achieved. But we are equally clear that, at a time of
intense competition, there can be no let-up in the work to return
the Group to profitable growth.
There have been significant changes to Board membership
during the year and increased focus given to succession
planning and leadership development within the Group
(described on page 36).
The Board delegates to management, through the Chief
Executive, the overall performance of the Group, which is
conducted principally through the setting of clear objectives and
effective performance coaching against business competencies,
building long-term management capability and ensuring that
the business is managed in a fit and proper manner in keeping
with its values and business principles. The business unit
directors report directly to the Chief Executive and give regular
presentations to the Board on strategies and performance in
their relevant areas of the business.
We are committed to our principles of Quality, Value, Service,
Innovation and Trust. Trust is earned from others as a result of
our commitment to long-held values and the way we behave.
In April 2006, we re-launched our Code of Ethics which outlines
the behaviours that M&S expects from employees whether they
are dealing with our customers, suppliers, shareholders or
colleagues. It also includes guidelines on the environment,
fraud and financial reporting and the management of conflicts
of interest.
Committees of the Board
The Audit Committee comprises Kevin Lomax (Chairman),
Jeremy Darroch, Steven Holliday, David Michels and Jack
Keenan, all of whom are independent, non-executive directors.
Anthony Habgood was a member until he resigned from the
Board on 30 August 2005. Jeremy Darroch joined the
Committee on 1 February 2006 and David Michels on 26 May
2006. Kevin Lomax is retiring from the Board on 31 August
2006. On 1 September 2006, Jeremy Darroch will succeed him
as Committee Chairman.
The committee assists the Board in fulfilling its oversight
responsibilities. Its primary functions are:
•to monitor the integrity of the financial statements and other
information to shareholders;
•to review the systems of internal control and risk
management; and
•to maintain an appropriate relationship with the Company’s
external auditors and to review the effectiveness and
objectivity of the audit process.
Items reviewed during the year include: General Merchandise
stock commitment controls, Food new product development
process, business continuity planning and controls over
advertising expenditures and payroll. Whistleblowing procedures
were reviewed and updated and a new Code of Ethics policy
was recommended to the Board and subsequently approved.
Private meetings have also been held separately with the
external auditors and the Chief Internal Auditor. From 1 May
2005 Stuart Rose and Charles Wilson, supported by the
Finance Group, assumed the responsibilities normally performed
by a Finance Director until the appointment of Ian Dyson on
27 June 2005.
The Audit Committee keeps under review the independence
and objectivity of the external auditors, PricewaterhouseCoopers
LLP (PwC), including the review of audit fee proposals and non-
audit fees. An engagement and fee approvals process is
in place which requires prior approval from the Committee for
some engagements and excludes others. In some cases, the
nature of the non-audit advice may make it more timely and
cost-effective to select PwC, who already have a good
understanding of the Group. PwC may also be appointed for
consultancy work, but only after rigorous checks, including
competitive tender, to confirm they are the best provider.
PwC is also subject to professional standards which safeguard
the integrity of the auditing role performed on behalf of
shareholders. Following shareholder approval at the AGM in
July 2005 the Audit Committee now determines the level of
remuneration for the external auditors on behalf of the Board.
Details of this year’s fees are given in note 4 to the financial
statements.
The Board is confident that the collective experience of the
Audit Committee members enables them, as a group, to act as
an effective audit committee and does not single out any one
Committee member as having recent and relevant financial
experience. With the appointment of Jeremy Darroch on
1 February 2006 as a non-executive director and member of the
Audit Committee, the skills and experience of the Committee as
a whole have been refreshed. The Committee also has access
to the financial expertise of the Group and its auditors and can
seek further professional advice at the Company’s expense if
required.
The Remuneration Committee comprises Jack Keenan
(Chairman), Steven Holliday, David Michels, Kevin Lomax and
Louise Patten, all of whom are independent, non-executive
directors. Anthony Habgood was a member until he resigned
from the Board on 30 August 2005. Louise Patten joined the
Committee on 1 February 2006 and David Michels on 26 May
2006. Kevin Lomax will retire from the Board and the Committee
on 31 August 2006. Its primary role is to recommend to the