Tesco 2015 Annual Report Download - page 45

Compliance with the UK Corporate Governance Code
The UK Corporate Governance Code (the ‘Code’) sets out principles and specific provisions on how a company should be directed and
controlled to achieve standards of good corporate governance. In September 2014 the Financial Reporting Council made changes to
the Code. The 2012 version of the Code applies to the Company for the year ended 28 February 2015. A copy of the Code is available
at www.frc.org.uk.
The Board considers that the Company complied in all material respects with the Code for the whole of the year ended 28 February 2015
except with regards to Code provisions B.6.2 (External evaluation of the Board), B.6.3 ( Performance evaluation of the Chairman) and C.3.7
(Tender of external audit contract every ten years), as explained on page 32.
The notes below are intended to facilitate the assessment of the Company’s compliance with the Code for the year ended 28 February 2015
but they should be read in conjunction with the Corporate Governance Report as a whole.
A. Leadership
A.1 The Board’s role
The Board is the custodian of the Company’s values and of its long-term vision, and provides strategic direction and guidance for the Company. The matters reserved
to the Board for its decisions are detailed in a formal schedule. Matters which must be considered by the Board include: the Group’s strategy; annual budgets; oversight
of risk management processes; changes to the capital structure; and material transactions or litigation.
The Board held seven scheduled meetings in the year ended 28 February 2015 and ad hoc meetings were also arranged to deal with matters between scheduled meetings
as appropriate. It is expected that all Directors attend scheduled Board and relevant Committee meetings and the Annual General Meeting. Details of Board and Committee
membership and attendance can be found on pages 35 to 37 and 40 to 41.
All Directors are covered by the Group’s Directors’ and Officers’ Insurance policy.
A.2 A clear division of responsibilities
There is a clear delineation between the role of the Chairman and CEO. Their role descriptions were agreed by the Board in 2012 and are summarised below:
Chairman’s responsibilities:
• ensuring the Directors receive accurate, timely and clear information;
• facilitating the effective contribution of Non-executive Directors and engagement between Executive and Non-executive Directors;
• ensuring an annual evaluation of the Board is conducted and leading the performance evaluation of the CEO and Non-executive Directors;
plus ensuring that the Committee Chairmen conduct evaluations of their Committees;
• building an effective Board;
• the induction of new Directors and further training for all Directors as required; and
• communicating effectively with shareholders and other stakeholders and ensuring the Board develops an understanding of the views of the stakeholders.
Group CEO’s responsibilities:
• leading the development of the Company’s strategic direction and implementing the agreed strategy;
• identifying and executing new business opportunities;
• managing the Group’s risk profile and implementing and maintaining an effective framework of internal controls;
• building and maintaining an effective top management team; and
• ensuring effective communication with shareholders and key stakeholders andregularly updating institutional shareholders on the business strategy andperformance.
A.3 Role of the Chairman
The Chairman was independent upon his appointment to the Board. The Chairman leads the Board, ensuring its effectiveness while taking account of the interests
of the Group’s various stakeholders, and promoting high standards of corporate governance.
A.4 Non-executive Directors
Patrick Cescau was the Senior Independent Director (‘SID’) throughout the year ending 28 February 2015. He stepped down as a Board member on 7 April 2015
and was succeeded by Richard Cousins. Richard was selected for the role because of his experience and expertise, both as an Executive and Non-executive Director
with retail and international experience. A biography is available on page 28. In his role as SID, Richard Cousins provides a sounding board for the Chairman and is available
to assist in resolving shareholder concerns should alternative channels be exhausted. The SID’s role also includes responsibility for the Chairman’s appraisal and succession;
and to hold at least one meeting each year with the Non-executive Directors without the Chairman present.
The Chairman also has one-to-one and group meetings with the Non-executive Directors without the Executive Directors being present.
B. Effectiveness
B.1 The Board’s composition
The Board reviewed the overall balance of skills, experience, independence and knowledge of the Board and Committee members. A number of changes have been made
to the Non-executive representation as detailed on page 35.
During the year the Board comprised a majority of Non-executive Directors. At the year end the Board comprised the Non-executive Chairman, two Executive Directors
and 10 Non-executive Directors. All the Non-executive Directors are considered to be independent under the criteria set out in the Code.
B.2 Board appointments
The appointment of new Directors is led by the Nominations Committee. Further details of the appointments process can be found in the Nominations Committee section on page 41
and biographies of our Directors can be found on pages 28 and 29. The appointment of the Chairman was led by the SID with support from the Non-executive Directors.
B.3 Time commitments
The Board makes a careful assessment of the time commitments required from the Chairman and Non-executive Directors to discharge their roles properly. This is discussed
with candidates as part of the recruitment process and a commitment tothe appropriate time requirements is included in engagement letters which are available for inspection
at the Company’s registered office. Executive Directors are permitted to hold one Non-executive Directorship in a FTSE 100 company.
B.4 Training and development
All new Directors receive a personalised induction programme, tailored to their experience, background and particular area of focus, which is designed to develop their
knowledge and understanding of the Group’s culture and operations. The programme has evolved over time to take into account feedback from new Directors and
the development of best practice, and incorporates a wide-ranging programme of meetings with the senior management across the Group, attending results and broker
briefings, comprehensive briefing materials and opportunities to visit the Group’s operations across the world, including spending time in-store and in our distribution
network. The Chairman agrees a personalised induction plan with each new Director and ensures that it meets the individual needs of that Director.
The Chairman reviews each Director’s development needs as part of the annual performance evaluation process and puts appropriate arrangements in place for specific
training. The Nominations Committee reviews the Directors’ skills and experience as a group against those needed to continue to enable the Board to oversee and support
the Group’s diverse operations in the future, and identifies anygaps. This informs the approach to ongoing refreshment of the Board as well asthe training plan for the current
Board. Training is arranged to help develop theknowledge and skills of the Directors in a variety of areas relevant to the Group’sbusiness. All Directors have the opportunity
to refresh and increase their knowledge of the Group through visits to Group operations and meeting with senior executives across the business.
43Tesco PLC Annual Report and Financial Statements 2015
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