Marks and Spencer 1998 Annual Report Download - page 39

THE COMPANY COMPLIES WITH ALL THE PROVISIONS OF THE
CADBURY COMMITTEEÕS CODE OF BEST PRACTICE
The Hampel Committee published its repor t on Corporate Governance
in Januar y 1998. The Stock Ex change has since published a Code of
Practice embracing the principles of the Cadbur y, Greenbury and
Hampel Committees for implementation in the Listing Rules after a
period of consultation. The Board will therefore report on compliance
with the Combined Code in its report to shareholders next year.
BOARD OF DIRECTORS
At 31 March 1998 the Board of Directors comprised 16 ex ecutive
and six non-ex ecutive directors. With effect from that date
Mr D G Trangmar retired from the Board.
The Board meets monthly, and has adopted a schedule of matters
specifically reserved to it for decision. In relation to non-reserved
matters it is assisted by a number of committees with delegated
authority. In addition to the formal monthly Board meetings, the
ex ecutive directors meet weekly to monitor and guide the CompanyÕs
per formance.
All directors have access to the advice and ser vices of the Company
Secretary and the Board has established a procedure whereby any
director, wishing to do so in the fur therance of his or her duties, may
take independent professional advice at the CompanyÕs ex pense.
As recommended by the Cadbur y Code in cases where the roles of
Chairman and Chief Ex ecutive are not separated, the Board includes
non-ex ecutive directors who bring strong independent judgement and
considerable knowledge and ex perience to the BoardÕs deliberations.
They are not invited to par ticipate in the CompanyÕs Share Option
Schemes or Senior Bonus Scheme; and their service is
non-pensionable.
No director has a Service Contract with the Company or any of its
subsidiaries.
PRINCIPAL BOARD COMMITTEES:
Audit Committee
comprises the non-ex ecutive directors. It is chaired by Sir Mar tin
Jacomb and meets three times a year. The external auditors and the
Chief Internal A uditor attend all meetings. All executive directors have
the right to attend. The minutes of these meetings are circulated to all
directors.
Remuneration Committee
comprises five non-ex ecutive directors. It is chaired by Mr B F Baldock
and meets four times a year. The Hon David Sieff retired as ex ecutive
director on 31 March 1997 and was appointed a non-executive
director from 1 A pril 1997. In view of this change of status, it was
considered inappropriate for him to be a member of the Remuneration
Committee. The CommitteeÕs report to shareholders appears on pages
38 to 44.
Non-Executive Directors’ Remuneration Committee
comprises the Chairman, Deputy Chairman and Joint Managing
Directors. It is chaired by Sir Richard Greenbury and meets as required
to determine non-ex ecutive directorsÕ remuneration.
Nomination Committee
comprises the Chairman, the Deputy Chairman, the Managing Director
with Personnel responsibilities, Sir Martin Jacomb, Mr B F Baldock
and Sir Ralph Robins. It is chaired by Sir Richard Greenbur y and meets
as required to select and propose to the Board suitable candidates for
appointment as ex ecutive and non-executive directors.
Capital Expenditure Committee
comprises the Deputy Chairman, the Joint Managing Directors and four
ex ecutive directors. It is chaired by Mr J K Oates and meets monthly.
It ex ercises a delegated authority within financial parameters set by
the Board.
Information Technology Review Committee
comprises the Deputy Chairman, the Joint Managing Directors and five
ex ecutive directors. It is chaired by Mr J K Oates and meets five times
a year.
Community Involvement Committee
comprises four ex ecutive directors, two non-ex ecutive directors and
one senior employee of the Company. It is chaired by Mr P G
McCracken and meets three times a year.
INTERNAL FINANCIAL CONTROL
The Board of Directors has overall responsibility for the GroupÕs systems
of internal financial control and for monitoring their effectiveness.
On behalf of the Board, the A udit Committee ex amines the
effectiveness of these systems. This is achieved primarily through
agreeing the scope of the internal audit programme and reviewing its
findings; reviews of the half year and annual financial statements, and a
review of the nature and scope of the ex ternal audit. A ny significant
findings or identified risks are closely examined so that appropriate
action can be taken.
The annual operating and budgetary plans for each operating area of
the Group are reviewed by the relevant Managing Directors prior to
submission to the Board for approval. This process includes the
identification and assessment of the business and financial risks
inherent in each operating area. The process is repeated quarterly and
compared with actual results for the previous periods and latest
forecasts for the balance of the year. The four-year Group Capital Plan
is similarly reviewed and updated by the Capital Ex penditure
Committee and then the Board. Treasur y and risk management
policies are reviewed by the Finance Director quarterly and policy
changes are approved by the Board.
The Board maintains full control and direction over appropriate
strategic, financial, organisational and compliance issues, and has put
in place an organisational structure with formally defined lines of
responsibility and delegation of authority. There are established
procedures for planning and capital ex penditure, for information and
reporting systems, and for monitoring the GroupÕs businesses and their
per formances. The Board has delegated to executive management the
implementation of the systems of internal financial control within an
established framework that applies throughout the Group; these
systems are monitored and supported by an independent Internal A udit
function which operates internationally.
The systems of internal financial control are designed to provide
reasonable, but not absolute, assurance against material
misstatement or loss. They include:
Ð Comprehensive budgeting systems with an annual budget
approved by the Board,
Ð Regular consideration by the Board of actual results compared
with budgets and forecasts,
Ð Quarterly reviews by the Board of year-end forecasts,
Ð Half-yearly reviews by the Board of the Group Capital Plan,
Ð Clearly defined capital investment control guidelines and
procedures set by the Board,
Ð Regular repor ting of legal and accounting developments to the
Board.
The GroupÕs control systems address key business and financial risks.
The work of the Internal Audit Department is focused on areas of
greatest risk as identified by risk analysis and in accordance with an
annual audit plan approved each year by the A udit Committee and by
the Board. The Board receives a full report from the Chief Internal
Auditor each year on the Depar tmentÕs work and findings. The ex ternal
auditors are engaged to express an opinion on the financial
statements. They review and test the systems of internal financial
control and the data contained in the financial statements to the
ex tent necessar y to ex press their audit opinion. They discuss with
management the reporting of operational results and the financial
condition of the Group.
The directors, through the A udit Committee, have reviewed the
effectiveness of the GroupÕs systems of internal financial control.
The A uditorsÕ Report on Corporate Governance is set out on page 45.
CO RPO RATE GO VERN AN CE
MA RKS A ND SPENCER p.l.c. 37