Tesco 2008 Annual Report Download - page 22

Tesco PLC Annual Report and
Financial Statements 2008
20
Corporate governance
Directors’ report on corporate governance
Tesco PLC recognises that good governance helps the business to deliver
strategy, generate shareholder value and safeguard shareholders’ long-term
interests, and we are committed to the highest standards of corporate
governance. The Board considers that Tesco PLC complied in all respects
with the Combined Code Principles of Corporate Governance and Code
of Best Practice for the year ended 23 February 2008.
This section describes the Board’s approach to corporate governance.
Board composition and independence
As at 23 February 2008, the Board of Tesco PLC comprised seven 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.
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. New Directors are submitted for election by shareholders
in their first year following appointment.
Both Mr C L Allen and Dr H Einsmann have served on the Board for
nine years. The Chairman has conducted a thorough review with each
Director to assess his independence and contributions to the Board
and confirmed that they both continue to be effective independent
Non-executive Directors. Mr Allen brings extensive corporate operational
experience and knowledge of the media industry and provides leadership
for the Remuneration Committee. Through his wealth of business
experience Dr Einsmann contributes a valued dimension to the Board
in terms of international marketing, brand building and human resource
development. Both Mr Allen and Dr Einsmann will retire and offer
themselves for re-election at this year’s Annual General Meeting and
annually thereafter.
The Chairman has primary responsibility for running the Board. The Chief
Executive, Sir Terry Leahy, has executive responsibilities for the operations
and results of the Group and making proposals to the Board for the
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 single individual or group dominates
the decision-making process.
Biographies for the Directors can be found on pages 26 and 27 of the
Annual Review and Summary Financial Statement 2008.
Board responsibilities
The Board normally meets eight times a year, as well as annually devoting
two days to a Board strategy conference. The Board has set out a clear
Schedule of Matters Reserved for Board Decision in order to ensure its
overall control of the Group’s affairs. These include the determination
of strategy, the approval of financial statements, major acquisitions and
disposals, authority levels for expenditure, treasury policies, risk management,
Group governance policies and succession planning 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 provides insurance cover and
indemnities for its Directors and officers.
All new Directors receive a personalised induction programme, tailored
to their experience, background and particular areas of focus, which is
designed to develop their knowledge and understanding of the Group’s
culture and operations. The programme will usually include an overview
of the business model and Board processes, meetings with the Executive
team and senior managers, site visits at home and abroad and briefings
on key issues (including social, ethical and environmental (SEE) issues).
Directors will also receive an induction to those Board Committees he or
she will serve on.
The need for Director training is regularly assessed by the Board and regular
training sessions are arranged to provide an opportunity for upskilling
of the Directors on a variety of areas relevant to the Group’s business,
including SEE issues. In the coming year the Board proposes to hold
training sessions focusing, inter alia, on the Tesco Operating Model and
the implications of climate change on the business.
The Board usually holds at least one meeting overseas each year to facilitate
the Directors’ understanding of the Group’s international operations.
Board processes
The Board governs through a number of statutory Board Committees –
the Audit, Remuneration and Nominations Committees – to which certain
responsibilities and duties are delegated. These Committees are properly
authorised under the constitution of the Company to take decisions and
act on behalf of the Board within the parameters laid down by the Board.
The Board is kept fully informed of the work of these Committees and any
issues requiring resolution will be referred to the full Board as appropriate.
A summary of the operations of these Committees is set out below.
The effectiveness of the Audit, Remuneration and Nominations
Committees is underpinned by their Non-executive Director membership,
which provides independent insight on governance matters. Copies
of each Committee’s Terms of Reference are available on our website
www.tesco.com/annualreport08/boardprocess. The Board is serviced by
the Company Secretary, who reports to the Chairman in respect of his
core duties to the Board.
Nominations Committee The Nominations Committee leads the process
for Board appointments and the re-election and succession of Directors,
as well as making recommendations for the membership of statutory
committees. The Committee is chaired by Mr Reid and its members
during the year were Mr Allen, Mr Chase, Mrs Cook, Mr Davies,
Dr Einsmann, Mr Hydon, Ms McCall and SirTerry Leahy. The Company
Secretary also attends in his capacity as Secretary of the Committee.
Where matters discussed relate to the Chairman, the Senior Independent
Non-executive Director chairs the meeting. The Nominations Committee
met in April 2008 to discuss the ongoing shape and capability of the
Board. As well as reviewing the performance and development of the
Executive Directors and the senior executive levels below the Board,
the Committee also regularly reviews board structure, size, composition,
working arrangements and capability, and considers succession plans
for Executive and Non-executive Directors.
www.tesco.com/annualreport08