Tesco 2015 Annual Report Download - page 34

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John Allan
Chairman
Introduction from the Chairman
On behalf of the Board, I am pleased to introduce our corporate governance report. The Board
believes that how we do business is as important as what we do and is committed to delivering
the highest standard of corporate governance. Ensuring we have the right approach to governance
and that the Board works effectively will be my key focus in my first year.
Commercial income issue
The overstatement of expected profit was identified in the second half of the 2014/15 year.
The Board sincerely regrets what has happened but moved swiftly and decisively to address
these serious matters. As this subject is of such major importance, a statement addressing
this matter is set out on the following page.
Board changes
The Board has seen significant change over the last year. As well as my own appointment
as Chairman, we have appointed a new CEO, Dave Lewis, and a new CFO, Alan Stewart,
to lead the turnaround of this great business. Four of our Non-executive Directors retired
and a further two Non-executive Directors will not put themselves forward for re-election at
this year’s Annual General Meeting (‘AGM’). I would like to thank these Directors for their
commitment and contribution to the Company. We have also appointed three new
Non-executive Directors, Richard Cousins, Mikael Olsson and Byron Grote, and I would like
to welcome them to the Board. Ensuring we have the right skills and experience is a key
priority and the Board will continue to evolve to best meet the needs of the business.
The UK Corporate Governance Code
We recognise and support the principles of the UK Corporate Governance Code. This year
we complied with the relevant provisions of this Code except for the areas described below:
Board evaluation and Chairman’s performance evaluation
The Board had previously agreed a three-year cycle whereby they would conduct
an externally-led review in one year, followed by internally-led reviews in the subsequent
two years, one led by the Chairman and one led by the Senior Independent Director. The
externally-led evaluation was due in 2014/15 as the last one was conducted in 2011/12.
However, given the number of changes to the Board, including my own appointment,
the Board agreed that an external review would be of more value if carried out during
2015/16. An internal review of the Board and its Committees was conducted and further
details about this can be found on page 36.
Sir Richard Broadbent was Chairman throughout the 2014/15 year but stepped down on
1 March 2015. Given his planned departure, the Board agreed that there would be no
benefit in conducting a performance review. My performance as Chairman in 2015/16
will be assessed by the Non-executive Directors, led by our Senior Independent Director,
Richard Cousins.
Audit tender
On the recommendation of the Audit Committee, the Board decided to put the Company’s
external audit out for tender this year. After 32 years we and PricewaterhouseCoopers LLP
mutually agreed that they would not take part in the tender. They will therefore step down as
the Company’s Auditor at the conclusion of the 2015 AGM. A resolution to appoint the
Company’s new Auditor will be proposed at the Company’s AGM in June, and this is set out
within the separate Notice of Annual General Meeting.
It was a challenging year for the business and putting things right will take time but I believe
we are on the right road to success and I am looking forward to playing my part in this.
John Allan
Chairman
In this section
This corporate governance report is
intended to provide shareholders with
a clear and comprehensive view of the
Group’s governance arrangements and
how it has operated during the year.
We have structured the report as follows:
p33 Commercial income issue
p34 Our corporate governance framework
p34 Corporate governance highlights
p37 Audit Committee report
p40 Corporate Responsibility Committee report
p41 Nominations Committee report
p43 Compliance with the UK
Corporate Governance Code
32 Tesco PLC Annual Report and Financial Statements 2015
Corporate governance report