Tesco 2006 Annual Report Download - page 22

20 Tesco plc
Corporate governance
Directors’ report on corporate governance
Tesco PLC is committed to the highest standards of corporate
governance. We recognise that good governance helps the
business to deliver our strategy, generate shareholder value and
safeguard their long-term interests. We believe that the revised
Combined Code provides a useful guide from which to review
corporate governance within the Group. This statement
describes the Board’s approach to corporate governance.
Board composition and independence
Asat 25 February 2006, the Board of Tesco PLC comprised
six Executive Directors, seven independent Non-executive
Directors and Mr D E Reid, Non-executive Chairman.
Mr R F Chase is Deputy Chairman and Senior Independent
Non-executive Director. Ms C McCall joined the Board
during the financial year ended 25 February 2006 and her
appointment was approved by shareholders at the AGM
in June 2005.
Both Mr C L Allen and Dr H Einsmann have served on the
Board for more than two three-year terms. The Chairman
conducted a rigorous review with each Director to assess their
independence and contributions to the Board and confirmed
that they both continue to be effective independent Non-
executive Directors. Mr C L Allen brings experience as a
CEO with knowledge of the media industry and the recent
Remuneration Committee review confirmed the quality of
his leadership as Chairman. Through his wealth of business
experience, Dr H Einsmann contributes a different
dimension to the Board and he also provides coaching
for directors overseas.
The Chairman has primary responsibility for running the Board.
The Chief Executive, Sir Terry Leahy, has executive responsibilities
for the operations, results and strategic development of the
Group. Clear divisions of accountability and responsibility exist
and operate effectively for these positions.
The Board requires all Non-executive Directors to be
independent in their judgement. The structure of the Board
and the integrity of the individual Directors ensure that no one
individual or group dominates the decision-making process.
Biographies for the Board Directors can be found on
pages 40-41 of the Annual Review and Summary Financial
Statement 2006.
Board responsibilities
The Board meets eight times a year and annually devotes two
days to a conference with senior executives on performance
and longer-term planning, giving consideration both to the
opportunities and risks of future strategy. The Board has set
out clearly the Schedule of Matters Reserved for Board Decision
in order to ensure overall control of the Group’s affairs. These
include the approval of financial statements, major acquisitions
and disposals, authority levels for expenditure, treasury policies,
risk management, Group governance policies and succession
plans for senior executives.
All Directors have access to the services of the Company
Secretary and may take independent professional advice at the
Company’s expense in conducting their duties. The Company
provided insurance cover and indemnities for its Directors and
officers this year.
New Directors receive a personalised induction programme
designed to develop their knowledge and understanding of
the Group. On appointment the Director will liaise with the
Company Secretary and Chairman to ensure the programme
is appropriately tailored to their experience, background and
particular areas of focus. It usually includes an overview of the
business model, Board processes, one-to-one meetings with
the Executive team and briefings with senior managers, an
introduction to Board Committees that the new appointee will
serve on, a briefing on social, ethical and environmental (SEE)
issues for the business, and site visits at home and abroad. The
need for Director training is regularly assessed by the Board.
Board processes
The Board governs through clearly identified Board
Committees to which we delegate powers. These are the
Executive Committee, Audit Committee, Remuneration
Committee and Nominations Committee. They are properly
authorised under the constitution of the Company to take
decisions and act on behalf of the Board within the guidelines
and delegations laid down by the Board. The Board is kept
fully informed of the work of these Committees. Any issues
requiring resolution will be referred to the full Board.
A summary of the operations of these Committees is set out
below. The three statutory Committees (Audit, Remuneration
and Nominations) are underpinned by their Non-executive
Director membership providing independent insight to
governance. Copies of each of the Committee’s Terms
of Reference are available on the website
www.tesco.com/corporate or at the AGM.
Executive Committee The Board delegates responsibility
for determining and implementing the strategic plan and for
management of the Group to the Executive Committee. This
Committee meets formally every week and its decisions are
communicated throughout the Group on a regular basis. The
Executive Committee is chaired by the Chief Executive and
comprises the Executive Directors and Ms L Neville-Rolfe, the
Company Secretary. It has authority for decision making in all
areas except those set out in the Schedule of Matters Reserved
for Board Decision. The Executive Committee is responsible for
implementing Group strategy and policy, for monitoring the
performance of the business and reporting on these matters
in full to the Board.
The Executive Committee has also set up further operational
groups or boards aimed at seeing through the key elements
of the strategic plan and managing the UK and International
operations, joint ventures, property acquisitions, finance,
funding and people management. These groups are heavily
populated with Executive Directors and senior management
from relevant functions.