Tesco 2005 Annual Report Download - page 14

12 Tesco PLC
Corporate governance continued
The Executive Committee has also set up further operational
groups or boards aimed at seeing through the key elements
of the strategic plan, managing the UK and international
operations, Joint ventures, property acquisitions, trading,
finance, funding and people management. These groups
are heavily populated with Executive Directors and senior
management from relevant functions.
Nominations Committee In the light of assessment of Board
capability, the Nominations Committee leads the process for
Board appointments and the re-election and succession of
Directors and the Chairman. The Committee is chaired by
Mr D E Reid and its members during the year were Mr C LAllen,
Mr R F Chase, Mr E M Davies, Dr H Einsmann, Mr K J Hydon
and Sir Terry Leahy. Mrs K R Cook joined the Committee in
October 2004 and Ms C McCall joined in March 2005. Where
matters discussed relate to the Chairman, the Senior
Independent Non-executive Director chairs the meeting.
In the last twelve months, two new independent Non-executive
Directors were appointed to the Board. Prior to these
appointments the Board agreed clear criteria against which to
assess each of the candidates. External recruitment consultants
were employed to advise and oversee the process. Both
appointees underwent a rigorous nomination process before
the Board agreed on their appointments.
Mrs K R Cook is a Managing Director and President at
Goldman Sachs, Europe, and her appointment took effect
from 1 October 2004. Mrs K R Cook has previously served
for six years as a Non-executive Director at Dixons plc. She
is a highly respected investment banker and brings with
her considerable knowledge of the financial markets.
Ms C McCall joined the Board on 1 March 2005 and also has
relevant experience of the retail industry having previously served
as a Non-executive Director at New Look Group plc. Her strategic,
brand marketing and media experience as Chief Executive of
Guardian Newspapers Ltd will be an asset to the Board.
All new Directors are submitted for election by shareholders
in their first year. All Directors have to submit themselves for
re-election at least every three years if they wish to continue
serving and are considered by the Board to be eligible.
Remuneration Committee The Remuneration Committee’s
role is to determine and recommend to the Board the
remuneration policy for the Executive Directors. It monitors
the level and structure of remuneration for senior management
and seeks to ensure that the levels and structure of remuneration
is designed to attract, retain and motivate the Executive
Directors needed to run the company. Mr C L Allen chairs
the Committee which is composed entirely of independent
Non-executive Directors. Committee members for the full year
were Mr R F Chase and Dr H Einsmann. Mr E M Davies joined
the Committee in October 2004 and Mr G F Pimlott resigned
from the Committee during the year. The responsibilities of
the Remuneration Committee, together with an explanation
of how it applies the Directors’ remuneration principles of the
Combined Code are set out in the Directors’ remuneration
report on pages 17 to 31.
Audit Committee The Audit Committee’s primary responsibilities
are to review the financial statements; to review the internal
control systems including risk management; to review the
internal audit programme; to consider the appointment of
the external auditors and their independence, and to review
the Committee’s own effectiveness. The annual schedule
also includes a review of Protector Line, the company’s
‘whistle-blowing’ procedure.
After the 2004 AGM, Mr G F Pimlott passed the Chairmanship
of the Committee to Mr K J Hydon, who has recent and
relevant financial experience. The other Committee members
for the full financial year were Mr R F Chase and Mr E M Davies.
Mrs K R Cook joined the Audit Committee on appointment
to the Board in October and Ms V Morali resigned from the
Committee on her retirement from the Board on 26 February
2005. The Committee consists entirely of independent Non-
executive Directors. At the invitation of the Committee, the
Finance Director, Head of Internal Audit and representatives
of the external auditors normally attend meetings. The
Committee meets with the external auditors without Executive
Board members present at least once a year.
The Audit Committee’s Terms of Reference are reviewed
annually and represent current best practice. This year the
Committee met five times. To facilitate the Committee’s
understanding of the Group’s international affairs, a special
meeting is held at an international location. The Committee
has arranged an away-day for training and updating on audit
specific matters. This training is for members of the Audit
Committee and Executive and Non-executive Directors, with
complementary sessions tailored to individual needs.
Board performance evaluation With the full support of the
Board, the Chairman led a formal evaluation of the performance
of the Board and its key committees. The process, which
included interviews with each Director and the Company
Secretary, was conducted by an external independent consultant.
The review concluded that the Tesco Board is highly effective
and that there have been significant improvements in the
Board’s culture, dynamics and administrative processes
during the year.