Tesco 2013 Annual Report Download - page 47

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Tesco PLC Annual Report and Financial Statements 2013
OVERVIEW BUSINESS REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTS
Internal Audit
The Internal Audit function is independent of business operations and
has a Group-wide mandate. It undertakes a continuous programme to
address internal control and risk management processes with particular
reference to the Code. It operates a risk-based methodology, ensuring
that the Group’s key risks receive appropriate regular examination. Its
responsibilities include:
• maintaining the Key Risk Register;
• facilitating oversight of risk and controls across the Group through
risk committees in Asia, Europe and a number of our businesses
and joint ventures; and
• reviewing and reporting on the effectiveness of risk management
systems and internal control with the Executive Committee, the
Audit Committee and ultimately to the Board.
External Audit
PwC, the Company’s external auditors, contributes a further
independent perspective on certain aspects of our internal financial
control systems arising from its work, and reports to both the Board
and the Audit Committee. The engagement and independence of the
external auditors is considered annually by the Audit Committee before
it recommends its selection to the Board.
The Company has a Non-audit Services Policy for work carried out by
PwC. This is split into three categories as explained below:
• pre-approved for the external auditors – is predominantly the audit
of subsidiary undertakings’ statutory accounts and is audit-related
in nature;
• work for which Committee approval is specifically required –
transaction work and corporate tax services, and certain advisory
services; and
• work from which the external auditors are prohibited.
The Audit Committee concluded that it was in the best interests
of the Company for the external auditors to provide a number of
non-audit services during the year due to their experience, expertise,
and knowledge of the Group’s operation. Auditor objectivity and
independence was achieved by ensuring that personnel involved in the
non-audit work were not involved in the audit, and by ensuring that
management took responsibility for all decisions made. PwC follows its
own ethical guidelines and continually reviews its audit team to ensure
its independence is not compromised. PwC’s independence is also
considered by the Audit Committee regularly.
The fees paid to the auditors in the year are disclosed in Note 3 to the
Group financial statements.
Engagement
Relations with shareholders
We are committed to having a constructive dialogue with shareholders
to ensure that we understand what is important to them and enable
clear communication of our position. The Chairman, CEO and CFO
hold regular meetings with shareholders and update the Board on
the outcomes of those meetings. Investor Relations keep the Board
informed of broker and analyst views and reports and present formally
to the Board twice each year. In addition we carry out a survey each
year of a cross section of shareholders in order to assess shareholder
perceptions of the Company. The results of this survey are reviewed
by the Board.
We support greater engagement with institutional shareholders
as envisaged by the Stewardship Code. We are also keen to develop
our engagement with private shareholders through various channels
of communication, including the AGM; the Company’s website; and
social media.
Stakeholder engagement
We engage regularly with our colleagues to invite them to give us their
thoughts on how the business is run and how they feel about working
for Tesco. We also engage with unions in the UK and our other markets
to discuss employee matters and business developments. During the
year we also carried out over 50 high-level stakeholder interviews –
including supranational organisations, NGOs, charities, leading
academics, politicians and activists. They gave us valuable insight into
how we are currently perceived, what they think of our ambition to
use our scale for good and their future expectations of Tesco. Further
information is available in our Tesco and Society Report 2013, which
is available on our website at www.tescoplc.com.
Corporate governance discussions and consultations
We take an active part in the debate on corporate governance and
remuneration issues and during the year we responded to a number
of consultations, including those carried out by the Department of
Business, Innovation and Skills in relation to Revised Remuneration
Reporting Regulations and Enhanced Shareholder Voting Rights
and the Financial Reporting Council consultation on revisions to the
UK Corporate Governance Code and Guidance on Audit Committees.
Our Annual General Meeting
The AGM is seen as a good opportunity for the Board to communicate
the Company’s progress directly to shareholders. Our 2013 AGM will be
held in London at 11am on 28 June 2013.
The whole Board is expected to attend the AGM and be available
to answer questions from shareholders present. To encourage
shareholder participation, we offer electronic proxy voting and voting
through the CREST electronic proxy appointment service. At our AGM
all resolutions are proposed and voted upon individually by shareholders
or their proxies. All votes taken during the AGM are by way of electronic
poll. This follows best practice guidelines and allows the Company to
count all votes, not just those of shareholders attending the meeting.
The Chairman announces the provisional voting results at the meeting,
and the final results are announced the same day through a Regulatory
Information Service and the Tesco PLC website. In 2012 shareholders
supported all of the resolutions put to them by the Board with votes
of over 90% in favour on all resolutions. Full details of the votes are
available on our website www.tescoplc.com.